Economic Interdependence between States is the Number One Facilitator of Peace

In the field of international relations, peace and cooperation are two key research elements. The countries, and especially the so-called nation-states who receive their legitimization from their citizens, constantly strive towards peace as it’s the most crucial condition facilitating the economic growth and prosperity.

Many politicians and political analysts have dreamed about establishing the international community that would be based on shared goals and principles. This community would unite states that respected each other’s sovereignty and independence and wouldn’t interfere in their internal or external policy.

However, before WWII, this seemed quite impossible as states pursued their shallow political and economic interests. It was like they loved being at war with each other. But after the most disastrous war in the history of mankind, people realized that pursuing only one’s own national interests at the expense of others would do nothing good other than bringing states face-to-face at the battlefield one more time. And mankind wouldn’t endure the third global war.

So, the 1950s marked the beginning of Western integration which brought the United Nations, NATO, and EU to the world stage. Now, we wouldn’t say for sure that these organizations were 100% successful in their efforts to impose universal peace - it just wouldn’t be true. However, they still have been crucial in solving many heated conflicts in different parts of the world.

Globalization - a catalyst of peace

And if there’s one particular form of integration that’s more important to global peace than anything else, it’s definitely economic. In today’s increasingly globalized world, where international trade reaches the never-before-seen scale and the countries are boosting their direct or indirect investments in other countries’ industries, the economic cooperation goes to a whole new level and the geographic distances and barriers between the states lose their relevance.

And when they become ever-more intertwined economic-wise, they find more common grounds in other areas of cooperation as well, be it politics, culture, or military. Even the differences become less prevalent.

According to Robert Paehlke of Trent University, Canada, the economic interdependence between the countries has significantly increased as a result of globalization. In his article, “Globalization, Interdependence and Sustainability”, he argues that for the last one hundred years, precluding the two bloody wars, the share of trade and investment significantly increased in the international economic relations.

As Paehlke argues, the number of the richest US corporations in 1971 was 280, while in 1991, that same number came down to 157 which indicates the increased diversification of the international business. These corporations have always strived towards penetrating new environments and reaping new resources. This, in turn, interlinked the source and host countries and decreased the chances of a conflict.

And today, transnational corporations that play outside the national boundaries control a significant portion of the global economy. Just the fact that 69 from 100 richest economies are corporations will suffice to prove this point.

Exit Model Approach

Another pretty influential literature in this field is Mark Crescenzi’s “Economic Exit, Interdependence, and Conflict” in which the more detailed connection between conflicts and economic interdependence is showcased.

Economic interdependence is somewhat of a vague term which leaves room for quite a lot of interpretation. Depending on the scope and context of the cooperation, it can be local, regional, global, uni-dimensional, and more. One approach that has an alternative take on this issue is Crescenzi’s Exit Model Approach (EMA). Using EMA, researchers and politicians can actually measure the interdependence and its influence by measuring how saying no to the cooperation would affect the countries.

Now, this is quite a complicated topic and goes deep into the theoretical world. The bottom line of Crescenzi’s approach is discarding all the uni-dimensional approaches towards the relationship between economic interdependence and conflict and provide the intrinsically new hypothesis.

Challengers vs. Targets

As Crescenzi argues, everyone who thinks that economic interdependence will either bring universal peace or contribute to the further destruction of the world, or even have no impact whatsoever are somewhat wrong. This issue is well beyond those simple explanations. To provide a deeper understanding, Crescenzi introduces this Exit Model Approach where the “Economic Exit” phenomenon governs political and economic actions.

If a country wants to get certain concessions from another country, it uses coercion. Now, before the economic interdependence became universal, the countries mainly used force, that is, military aggression. But after the Second World War, this approach changed at some point. Now, in the era of globalization and economic cooperation, the governments opt for economic sanctions, quotas, and tariffs to reap the preferable concessions from their counterparts.

To provide a better understanding of the subject, the author introduces various terms and a certain connection between them: there are “challenger” and “target” countries. “Challengers” use economic coercion against the “targets”. Then there’s exit cost threshold - the boundary beyond which no country can tolerate the costs of the disintegrated economic relations.

So, the first part of the theory goes like this: if the “challenger’s” exit cost threshold is lower than the actual exit cost, then it’d be unreasonable to challenge the “target” country. On the flip side, if the “target’s” exit cost threshold is lower than the actual exit cost, then it has to concede with the terms and conditions of the “challenger”.

And when it comes to the relevance of military aggression, here’s what Crescenzi has to say: he provides three hypotheses for what happens when the countries use the Economic Exit method to coerce other countries. According to the first hypothesis, if the “target” country’s exit cost is greater than the exit cost threshold, then the chances of lower intensity conflict increase. For the “challenger”, on the other hand, greater exit costs will have no effect on the low-intensity conflict.

The next hypothesis states that if the exit costs are greater for both countries, it definitely lowers the probability of high-intensity conflict. Now, the low-intensity conflict is different from the conventional conflict that we know of. Instead of using military arsenal, armies, and hi-tech weaponry, the countries use economic tools like sanctions, embargo, and tariffs to “punish” their enemies.

Globalization gets rid of high-intensity conflicts

In conclusion, the economic interdependence and the use of economic coercion don’t necessarily mean that conflict won’t arise. As Crescenzi states, the economic cooperation between the countries makes it more costly for the members to exit the agreement and violate the terms. And when the interests collide, either

• The low-intensity conflict arises;
• The probability of high-intensity conflict slim down;
• Nothing significant happens.

While this theory doesn’t outright claim that globalization and deeper economic partnership gets rid of all the conflicts, it explicitly states that the high-intensity clashes between the nations, the one which uses military power and takes away people’s lives, certainly goes out of the picture. And for that, the economic interdependence is to be thanked.