Global trade and it's peace dividend- Part 1

The world which we are living today is the most peaceful one in the history of human civilization where in which wars, violence and homicide rates are extremely low when we compare the same with any other period in the human history. According to Steven Pinker, an Evolutionary psychologist at Harvard University, this was due to the pacification  and civilization processes that happened over the last few of centuries, owing to various social, economic, political and technological transformation. In the last few decades, this transformation been accelerated by the Human rights movement which further brought down violence again by a substantial degree
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According to Emmanual Kant, 18 th century French philosopher, the triad of pacifying force that makes the world a peaceful one was

1) Democratic government, 

2) Engagement with International community  and

3) Open economies and global trade. 

There is a high degree of positive correlation between global trade and global peace. You can read a paper in this regard by Patrick J MacDonald here. Conventional wisdom says that, more the trade happens; more would be it's peace dividend. As per that view, this happens mainly because the trade create a large network of inter-dependencies and economic linkages amongst various stakeholders in different countries. These beneficiary stakeholders act as natural buffers against any kind violent aggression and wars. In other words, it assumes that if goods, services and capital flows freely across the state boundaries, its armies and navies are less likely march across those borders.

However, this explanation seems to be inadequate and not fully convincing. Global trade by itself did not prevent wars. European countries were much globalized and international trade as percentage of national GDP was much higher in the first decade of last century. Despite this, it could not prevent World Wars from happening. Similarly, India and China have nearly seventy billion US $ trade happening annually which did not lead to any easing of border tensions. Interestingly China – Taiwan trade exists despite China not even recognising Taiwan as a sovereign nation.

How then the Trade- Peace paradox be explained? Is there is causal relationship amongst the two? And if yes, in which direction the causality runs? Whether the Global trade happening owing to absence of war or the war does not happen because the trade is flourishing? To understand this in perspective, we need to go in to motives and incentives of the leaders and the elites who control the national narrative.

National leaders of modern times and princes of medieval periods alike, have an insatiable ambition for greater honor and prestige by expanding their power and influence. In pre-modern times, the easiest and perhaps the only way to achieve the glory were to annex a foreign land and expropriate its natural resources. National prestige and honor was associated with the physical resources which a country was endowed with. Control and physical possessions of agricultural lands, mines, forest and water resources, etc were the assets with which a Nation was turned in to a powerful one. So, countries fought against each other to posses it, hence the wars were a natural state of affairs and peace was an interim arrangement between two wars. Primary motive was not the land in itself, but the honor, social prestige and recognition associated with its possession. Honor was the most valuable and precious commodity for which every king was ready to send their army to the battlefields, whether it was Napoleon Bonaparte or William Kaiser.  

In medieval times, economic growth was a Zero-sum game and productivity was static. Wars and predations were the primary means to add wealth. In other words, the general belief was ‘I will be prospering only if someone else were doomed’. Trade were happening even in those times as well. However, it was not more than an exchange of surplus and not recognized as an engine of growth. Larger philosophy of it was to appropriate maximum foreign goods and gold from others so to equip own army so that wars can be fought better.

Trade during colonial times were more of exploitery in nature where colonial powers dictated the terms and nature of the trade. It was essentially between colonies and their 'mother' countries and not between two sovereign nations. There were no international bodies to regulate and promote trade and global finance system was not matured enough to fund it. Instead of promoting peace, it created trade wars and violent competition for annexing colonies and expropriating its wealth.

In the 20 th century as well, national leaders had an irresistible urge, but certainly to a lesser degree, to go for war against other countries mainly for economic gains. Increasing democratization had a softening impact on these kinds of impulses. However, Autocrats and fascist leaders were showing the same medieval age mentality for self gratification and establishment of ‘honor’ through national wars and annexing territories for ‘growing population and food’ which resulted in 2 world wars. Meanwhile on the second half of 20 th century, an ideologically polarised world had triggered a large number of conflicts in many parts of the world, both international and intra-national. Communism put the centuries old phenomenon of pacification in to a reverse gear. Global trade got much disrupted and distorted not just by tariff walls but also by  ideological walls and ‘iron curtains’.

                                                                               Continued in Part 2

Global trade and it's peace dividend- Part 2

Idea of ‘Gentle commerce’ or commerce as a positive sum, wealth creating enterprise is an idea of European Enlightenment. However, that idea went in to various trials and tribulations and finally blossomed to its fully matured meaning only by the end of 20 th century. Interestingly, too many related and simultaneous phenomenon happened in the last two decades of the 20 th century. One was the end of communism and the march of capitalism which lead to demise of an ideologically polarised world. Secondly, knowledge based economy was taking center stage of the global economic order. Thirdly, WTO platform was created to give an institutional framework to regulate and promote global trade. Besides, a large number of technological leapfrogs happened which lead to faster and cheaper movement of goods, service, capital and human beings which resulted in a more connected world than ever before.

 With the rise of knowledge economy, human brains became the most valuable commodity in this planet. Much of the wealth creation in today's world is happening owing to the human ingenuity, technical and scientific know-how, best organisational and management practices and less due to mines and oil wells. Trade among-st the nations became the ’cheapest’ way to gain a valuable product rather than raiding or conquering. Meanwhile, cost of war increased and it ceased to be a profitable enterprise. Gains from peaceful pursuits began to far outweigh any likely gains from wars and raids.

In the modern, post-Soviet world, recognition and honor comes largely from the economic gains that an individual makes out of peaceful pursuits by engaging in economic activities. Countries ceased to debate on ideological pathways, withdrew from war and channelized their aspiration to strive to be a commercial power.  National elites are now being recognized and honored not just by the size of their army they command or the territories they control, but more by the leverage they possess in global economy, the technical know-how and patent they hoards and the standard of living its citizen enjoy. Entrepreneurs and technology czars became new popular icons in place of star studded Generals and medal heavy veterans. Ambitious young men and women channelized their desire for honor and social mobility by pursuing commerce and entrepreneurship. Unlike their forefathers, now they are not required to go to battle fields and die for protecting their ‘honor’.

Knowledge economy also leads us to come out of the Malthusian mentality of scarcity and resource constraints. Primary resources for economic development in today’s world are neither land nor mines underneath, but practically inexhaustible resources in the form of human brains. Hence no country will be deprived of fruits of development and prosperity just by not having enough natural resources within it. In today’s world, all and every country has an opportunity to prosper, if the national government build right kind of institutions and pursue right kind of policies and programmes that are necessary for economic growth.

Global trade in modern times played a catalytic role in propagating this idea of ‘Peaceful emergence’. Trade became a Positive sum gain where both and all the partners involved in it gets prosper. This positive sum gain dynamics alters the incentive for violence. The central idea is 'your trading partner is more valuable when he is alive and exchange goods with you than he is dead and you expropriating his wealth'.  Those nations which opened its borders, not only exchanged goods and services but also ideas, attitudes, and dreams. Trade hence allow people to know more about ‘others’ and their cultures, values and so to respect his life, limbs, property and dignity. In other words, a free market put premium on empathy.

Such a network of inter-dependencies are not just economic changes but also are accompanied by change in attitude. French philosopher Samual Ricards named this phenomenon as ‘Gentle commerce’ where in which society engaged in commerce develops an attitude of ‘Reciprocal altruism’. This reciprocal altruism enables people to be altruistic, at least to extent it is being well rewarded by the market forces and other similar economic actors.

However, this ‘Gentle commerce’ would work effectively only if the trade is happening on account of human ingenuity and entrepreneurial efforts in an open economy and free market setting. If goods can simply mined and sell off to others without having to do any value addition, (for example, rough diamonds, crude oil etc) it will have an entirely opposite effect. Again, if ideas and free thoughts can’t be imported along with consumer goods, it is unlikely to create any positive impacts on society. (For ex, countries like Saudi Arabia). These insular societies starved of ideas from rest of the world will always remain a threat to a pacified world despite having exports and imports of gigantic size.

As a concluding remark, my whole argument can be summarized here. Global trade by itself do not bring peace. However, it has a catalyzing effect in generating certain political, economical and ideological forces that incentivise peace and peaceful resolution of conflicts. Whenever and wherever it’s catalyzing effect does not get effective, or the incentives for peace are outwitted by primordial notions of honor, faith etc, conflicts may happen and wars can erupt. However, even under these circumstances, a web of inter-dependencies and forces of economic integration created by global trade can reduce and contain any such conflicts to a manageable limit. So is the role of global trade in fostering and promoting global peace.