The Free Market's Path to Peace

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It is the season of “Peace on earth, good will to men,” though wars continue to occur and peace is far from established. While mankind should prefer peace we have nonetheless chosen war again and again. Excepting the Pax Romana from 27 BC to 180 AD, ancient history presents us with one war after another. If we read the Roman historian Tacitus, even the Pax Romana appears to have been a series of military operations. All the tribes of the earth make war, or prepare for war. It is therefore of special interest when a scholar shows that the free market may have already reduced the number of wars that otherwise would have been fought. Professor Patrick J. McDonald has offered exactly such a thesis in a book titled The Invisible Hand of Peace: Capitalism, the War Machine, and International Relations Theory.

Under the rule of law, with private property and “competitive market structures,” modernity has arguably found a greater incentive to peace than to war. As McDonald explains in his book, “states that possess liberal political and economic institutions do not go to war with each other….” What does liberalism signify in this context? According to Austrian economist Ludwig von Mises, “The essential teaching of liberalism is that social cooperation and the division of labor can be achieved only in a system of private ownership of the means of production, i.e., within a market society, or capitalism.” Mises and McDonald would both argue that economic freedom, and the institutions which make this freedom possible, tend to promote peace. McDonald offers a caveat, however. He warns that democracy is not the guarantor of peace some have asserted it to be.

The free market and free trade are much stronger guarantors of peace. In the case of China today, McDonald argues that an autocratic Chinese regime has adopted a policy of peace for the sake of economic development. “Because conflict or even the threat of it tends to disrupt normal trading patterns, potentially large economic costs will deter dependent states from using military force to solve their political conflicts.” McDonald also noted: “As commerce grows, the incentives for plunder or conquest decrease simply because it is a more costly means of generating economic growth.” Not only does free market cooperation bring wealth to all the parties involved, it displaces national loyalties and state rivalries.

Of course, McDonald is well aware that free trade and free markets can be overridden by democratic ideological imperatives. Simply put, if economic liberalism signifies the disutility of war, democratic liberalism does no such thing. According to McDonald, “Even democratic leaders can exploit domestic institutional instability and public fears of insecurity to construct broad swaths of public support for war.” It is not the ballot box that assures peace, says McDonald. It is private property and free trade which binds nations and peoples to the cause of peace, despite cultural and political differences.

The controversial German revisionist, Udo Walendy, summed up democracy’s readiness to start a global war when he wrote, “On September 3, 1939, England and France declared war on Germany. In so doing they transformed a limited territorial dispute between Poland and Germany into a world war over the city of Danzig, a matter that could easily have been resolved through negotiation.” Patrick Buchanan offered a similar judgment in his book Churchill, Hitler, and the Unnecessary War: How Britain Lost Its Empire and the West Lost the World. Arguably, in both world wars the democracies fought when they didn’t have to. About this idea George Kennan wrote: “When you total up the score of two [world] wars, in terms of their ostensible objective, you find that if there has been any gain at all, it is pretty hard to discern.”

Imagine if the politicians of 1914 and 1939 had consulted market priorities instead of ideology? What argument, in the end, is more likely to transform tyranny into freedom? Starting a world war to advance the cause of democracy is not practical as the Allies learned when Josef Stalin got hold of Eastern Europe in 1945 (hardly a democratic outcome). Hitler was gone, it is true, but he was replaced with somebody equally bad – or worse. Imagine if the win-win formula of the free market had displaced the “everyone loses” syndrome of world war. Sixty million lives might have been saved and material progress might have advanced at a faster pace. Who on earth would’ve been worse off in this case? Since the bloodiest dictatorship in history, located in Communist China, has come to grasp the advantages of respecting private property, is not the victory of the free market inevitable in the teeth of the most recalcitrant despot? McDonald seems to suggest something of the kind. The truth of the proposition is not proven, of course. Men are not the “rational actors” of political economy. They do not live “by bread alone.” And yet, having an economic incentive for embracing peace on earth must count for something.

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About JR Nyquist

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