Manual Making Peace Possible. The Promise of Economic Conversion

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Embetsverket i EF - kampen [Unfaithful Servants. Technical Intelligence in Norway] Oslo: Pax. Also as volume 7 of Pax Leksikon. Mot en demokratisk og fredelig verden [The New Security Picture. Reprinted in: Koritzinsky, Theo Ed. Reprinted in: Blalock, Hubert M. In: Vesa, Unto Ed. Reprinted as Chap. NPG; Singer, J. Originally published in Finnish in Ulkopolitiikka.

Reprinted in: Alker, Hayward Ed. German version in: Wulf, Herbert Ed. World Report London: Library Association : — The Peace Dividend. Contributions to Economic Analysis. In revised form as Chap. Reprinted in: Diehl, Paul F. Revised and shortened version in: Diehl, Paul F. Revised version in second edition , — Enfield, NH: Science Publishers : 39— Spanish version: Cambio medioambiental, seguridad y conflicto.

Nato Science Series 2. Environmental Security, 78 Dordrecht: Kluwer : 53— Library of International Relations, vol. V London: Sage : — Festskrift til Hilde Bojer Oslo: Emilia : — Et forsvar for globaliseringen Oslo: Civita : — Second edition Oslo: Abstrakt : — Audio version, Norsk lyd- og blindeskriftbibliotek Revised version with Halvard Buhaug , — Shorter version as Implications of climate change for armed conflict.

En vurdering av det faglige grunnlaget [Climate Wars? Revised version, second edition , in press. Globalization can be understood as a process of market expansion and market integration, as the universalization of capitalism. After a short discussion of the political economy of globalization, I turn to the frequently overlooked security benefits of globalization. The diffusion of prosperity, free trade, and democratization is part of the story. Quantitative studies provide a great deal of evidence for a causal chain running from free trade via prosperity and democracy to the avoidance of military conflict, as well as for another causal relationship between trade or economic openness and conflict avoidance.

After a review of the quantitative literature and a discussion of some methodological issues, I illustrate the capitalist peace by historical examples and contemporary applications. The process of globalization had already begun in the late nineteenth century. Before World War I, trade and foreign investment were fairly globalized. Because of low political obstacles to international migration, labor markets actually were more globalized at the beginning of the twentieth century than at its end.

The two world wars and the Great Depression between them interrupted the process of global market integration for about half a century. Thereafter, the process regained force and speed. Now, inexpensive, fast, and reliable communication and transportation enable producers of goods and some service providers in low-wage countries to challenge high-cost producers in rich countries on their home turf, but technological innovation resulting in falling prices and rising speed of intercontinental communication and transportation is not the only determinant of globalization.

Political decisions in rich and poor countries alike contribute strongly to globalization, too. Tariffs and, to a lesser degree, nontariff barriers to trade have been reduced. Many countries try to find and exploit their comparative advantage, to realize economies of scale and gains from trade by looking for buyers and sellers everywhere. If trade between countries is truly free, then it promises to enrich all nations. In principle, globalization is the logical endpoint of the economic evolution that began when families switched from subsistence farming and household production to production for the market.

As long as globalization is not yet completed-and it certainly is not yet-gains from trade remain to be realized by further market expansion. Because globalization adds to competitive pressure, however, it causes resentment, and because globalization springs from technological innovation and political decisions that promote free trade, these innovations and decisions attract resentment, too.

The world is already globalized enough that national resistance does limited damage. Free trade is vulnerable. If foreigners are perceived as a cause of the need to adjust, then attacking free trade becomes politically attractive. After all, no politician benefits from the affection of foreigners who cannot vote. Of course, economists who insist on the benefits of free trade even if your trading partner does not practice free trade are right. Benefits include serving customers better at lower prices, but also faster growth of total factor productivity Edwards ; OECD , The benefits of free trade, however, tend to be dispersed widely, whereas its costs for example, certain bankruptcies and job losses tend to be concentrated and more visible.

Therefore, the political case against free trade may become very strong despite the weakness of the economic argument. Who in rich Western societies is affected most by globalization? Although unskilled labor is much less expensive in poor countries than in rich countries, this difference does not necessarily provide poor countries and poorly paid labor there with a competitive advantage. Frequently, even unskilled labor is much more productive in rich countries than in poor ones. If the wage gap is neutralized by a countervailing productivity gap, unit labor costs are not affected by international differences in pay.

The wages of low-skilled Western workers may suffer from downward pressure because their services have become more easily substitutable than previously Rodrik This process might result in growing volatility of earnings and income inequality, as in the United States, or high unemployment, as in much of Continental Europe. Of course, unemployment is most likely to result from a combination of fierce international competition and rigid labor markets at home. Otherwise, trade is more likely to affect the composition of employment than its amount Irwin , Analysts dispute the degree to which either trade or technological progress has caused the predicament of unskilled labor in the West.

Although the majority view for example, Krugman blames most of it on technological progress, this conclusion is not entirely satisfying because technological progress is frequently inferred from estimated production-function residuals rather than from direct measurement. An outspoken minority for example, Wood , puts most of the blame on free trade and estimates that approximately 9 million manufacturing jobs might have been lost in rich countries by and many more by now.

The complementary gain of 23 million jobs in poor countries may satisfy humanitarian impulses, but it does not help Western politicians to win elections. Although trade is almost certainly not the primary determinant of this job loss or of increased wage inequality Irwin , 99 , some Americans look for scapegoats. Because China has a larger trade surplus with the United States than even Japan does, China bashing has become popular in America. With regard to the expansion of economic freedom and secure property rights, globalization provides reason for hope.

Where markets are significantly larger than political units, stifling the markets by political controls and by undermining economic freedom becomes more difficult than elsewhere. In my view Weede , chap. Capital and even labor to a lesser degree could exit from oppressive rule in the West, thereby mitigating its incidence. By contrast, Asian emperors or sultans were not forced to respect the property rights of merchants and producers.

Because globalization may require Western welfare states to accept either widening income inequality or high unemployment given their fairly rigid labor markets , protectionism remains a politically attractive cure. In politics, competition does not guarantee a movement toward greater efficiency or economic freedom. Protectionism harms consumers, reduces the speed of wealth-enhancing structural change, and diminishes opportunities for employees to move to better-paid jobs producing for global markets.

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In my view, the economic benefits of globalization and free trade are much less important than the international security benefits. The quantitative literature summarized by Weede , chap. First, democracies rarely fight each other Russett ; Russett and Oneal This finding does not necessarily imply that democracies fight fewer wars than do other regimes.

It is even compatible with the view widely shared until recently that the risk of war between democracies and autocracies might be even higher than the risk of war between autocracies. I agree with critics of the democratic peace that we do not yet understand fully why democracies rarely fight each other and whether normative or institutional characteristics of democracies matter most. Admittedly, I held this view thirty years ago Weede Then I explained peace among U.

Later, however, I discovered that autocratic U. Thus, I became a convert to the democratic-peace proposition. John Oneal, in unpublished analyses carried out in Bonn in , found that although the democratic-peace proposition consistently calls the imperial-peace proposition into question, controlling for an imperial peace does not subvert the democratic-peace proposition. Second, prosperity, or high income per capita, promotes democracy Burkhart and Lewis-Beck ; Lipset ; Przeworski et al.

Third, export orientation in poor countries and open markets in rich countries that is, trade between rich and poor countries promote growth and prosperity where they are needed most, in poor countries Greenaway and Nam ; Dollar ; Edwards ; Lindert and Williamson , 37; Dollar and Kraay ; Rajapatirana Fourth, bilateral trade reduces the risk of war between dyads of nations Oneal and Russett , ; Russett and Oneal As to why trade contributes to the prevention of war, two ideas come to mind.

First, war is likely to disrupt trade. The higher the level of trade in a pair dyad of nations is, the greater the costs of trade disruption are likely to be. Second, commerce might contribute to the establishment or maintenance of moral capital Ratnapala , which has a civilizing and pacifying effect on citizens and statesmen.

In the context of this article, however, answering the question of why trade affects conflict-proneness or providing the answer with some microfoundation is less important than establishing the effect itself in empirical research. Beck, Katz, and Tucker raised the serious technical issue of time dependence in the time-series cross-section data, but Russett and Oneal ; see also Oneal and Oneal and Russett b responded to the objections raised against their earlier work and demonstrated that those objections do not affect their substantive conclusions.

He found that the pacifying effect of trade is stronger among developed countries than among less-developed countries. Gelpi and Grieco suggested another qualification. In their view, trade no longer pacifies relations between autocratic states. The institutional setting, such as preferential trade agreements, matters. It is even conceivable that other forms of economic interdependence, such as cross-border investments, exercise some pacifying impact.

Foreign direct investment FDI certainly promotes prosperity, growth, and democracy de Soysa and Oneal ; de Soysa , but the conceivable pacifying impact of FDI still lacks sufficient empirical investigation. The most radical criticism comes from Barbieri , according to whom bilateral trade increases the risk of conflict. Should we really proceed on the presumption that war between Argentina and Iraq is as conceivable as between the United States and Iraq or between Iran and Iraq?

Of course, trade has no pacifying effect on international relations wherever the risk of conflict is extremely close to zero to begin with. Even this inadequate handling of the power and distance issue by itself does not suffice to support her conclusions. If the military-conflict variable is restricted to those conflicts that resulted in at least one fatality, then trade is pacifying, whether power and distance are adequately controlled or not. Moreover, Barbieri herself found some pacifying effect of economic freedom and openness to trade on the war involvement of nations.

Another issue also must be considered. Nations may concentrate most of their trade on a few partners and remain rather closed economies. If one is interested in finding out whether more trade is better or worse for the avoidance of military conflict, then it seems more meaningful to focus on a measure that is related to openness at the national level of analysis, as Oneal and Russett , , a, b; Russett and Oneal have done, than on a measure that may be high for fairly closed economies, as Barbieri has done.

Actually, the pacifying effect of trade might be even stronger than the pacifying effect of democracy Oneal and Russett , 29, and a, ; Gartzke , , especially among contiguous pairs of nations, where conflict-proneness is greater than elsewhere. Moreover, trade seems to play a pivotal role in the prevention of war because it exerts direct and indirect pacifying effects.

In addition to the direct effect, there is the indirect effect of free trade as the consequent growth, prosperity, and democracy reduce the risk of militarized disputes and war. For that reason, I Weede , chap. An Asian statesman understood the capitalist peace intuitively even before it was scientifically documented and established. My survey of the literature may appear vulnerable to a powerful and simple charge.

In essence, the quantitative evidence referred to seems to consist of associations between variables and an arbitrary causal interpretation of them. Certainly, one should not infer causation from association or correlation, but this generally accepted insight does not mean that causation and correlation are independent of each other.

Hypothetical causal propositions provide the starting point of empirical research. Empirical evidence may either support or contradict our expectations. Although certitude about possession of the truth seems beyond the capabilities of human inquiry, growth of knowledge is conceivable by the successive elimination of errors. In general, estimation of partial effects on X and on Y presuppose controlling some other determinants of X that do not affect Y and some other determinants of Y that do not affect X.

Taking a partial effect of X on Y as evidence that there is likely to be an equally strong effect of Y on X is not permissible. Of course, the specification of regression equations assumes a causal structure without proving its existence, but final proofs and certainty are not characteristics of empirical science. What is possible is to demonstrate a better or worse fit of propositions and observable reality.

Although the evidence adduced in the literature cannot and does not prove that prosperity causes democracy or that dyadic democracy or trade causes peace, this evidence does not support reverse causality, such as democracy causing prosperity or growth, or peace causing democracy or trade. These questions require different research designs from the ones applied in the studies discussed earlier. Therefore, these issues are beyond the scope of this review.

There is also another complication. As illustrated by the debate about the effects of trade and economic interdependence on the avoidance of military conflict, full accordance of empirical studies and verdicts with theories is the exception rather than the rule, if it ever happens at all. So the claim advanced in this review of the literature cannot be that the empirical evidence fits the capitalist-peace idea perfectly, but merely that the evidence fits it much better than it fits competing explanations of military conflict and notions about the negative effect of capitalism or the irrelevance of democracy on the avoidance of conflict and war.

Admittedly, the nonexperimental evidence referred to here provides weaker support than experimental evidence in the natural sciences does. In the experimental sciences, two things are under much better control than in the nonexperimental sciences, including econometrics: first, the temporal precedence of presumed causes before their hypothesized effects; and, second, other determinants of the phenomenon under study and their possibly distorting effects.

Moreover, certain precautions are possible and routinely applied in the research discussed here. An association between an independent variable X observed at a certain time and a dependent variable Y observed later provides some support for the proposition that X causes Y, but none for Y causing X.

Before discussing illustrations of the capitalist peace, I should consider a standard historical objection against it. Certainly, economic interdependence, including trade, between the Western powers and the central European powers before World War I was quite strong. Nevertheless, World War I occurred. We should always expect exceptions. By contemporary standards, even the democratic character of the United Kingdom before World War I is not beyond suspicion because of franchise limitations.

So World War I is not a clear exception to the democratic component of the capitalist peace. Third, no one should believe that trade and democracy, or the capitalist peace, suffice to explain the presence or absence of military disputes and war. As quantitative researchers documenting the pacifying effects of democracy and trade have found again and again for example, Oneal and Russett , ; Russett and Oneal , power balances matter, too. Before World War I, the balance of power between the opposing coalitions was fairly even. There were no pacifying preponderance effects. Although one cannot claim World War I to be a case demonstrating the value of capitalist-peace theory, neither does it undermine the theory seriously.

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It may be argued that the different long-term effects of the settlements of World Wars I and II derive from failure or success in applying a capitalist-peace strategy to the losers of the war. After World War I, France, which determined the peace settlement more than any other nation, failed to promote a capitalist peace.

After World War II, the United States pursued a capitalist-peace strategy toward the vanquished and succeeded in making allies out of Germany and Japan. Protectionism in the West would condemn many non-Westerners to poverty for longer than unavoidable. Peace by trade is at least as important as peace by democracy. Trade because of its contribution to prosperity underwrites democracy and thereby the democratic peace where it prevails.

Moreover, it does not suffer from a geopolitical complication that affects peace by democratization. According to the best research, the risk of war between democracies is much lower than elsewhere, but the risk of war between a democracy and an autocracy is higher than elsewhere, at least in recent decades.

Although Russett and Oneal , no longer accept this view, I am not convinced that they are correct.

The Security Benefits of Globalization

To me, findings from a separate analysis of disputes in the Cold War period Oneal and Russett look more persuasive than an analysis of data beginning in that combines relationships from the multipolar pre-World War II period, the bipolar Cold War period, and the beginning of the unipolar period thereafter. If we accept, as I do, the idea that democracy causes peace only among democracies, then democratization does not contribute everywhere to peace.

Imagine the democratization of a nation located in the middle of a deeply autocratic area. Its democratization would generate a number of autocratic-democratic dyads and thereby increase the risk of war. By contrast, the democratization of a nation surrounded by democracies would certainly be desirable. The democratic peace should first be extended from its North Atlantic core area to contiguous areas.

Geographical compactness of the democratic bloc is a prerequisite for the pacifying effects of democracy to apply. Promoting democracy in Poland first and in Uzbekistan much later is not only more desirable, but also more feasible than the reverse order would be. Furthermore, an imposition of democracy in poor and politically unstable countries, as currently being attempted in Afghanistan and Iraq, is at least as likely to produce hostility as democratization and stability.

Israel and Taiwan illustrate the ambivalence of democratization as a tool of pacification. Israel is democratic, but it has been surrounded by autocratic regimes for a long time. Or, consider Taiwan. Until recently the mainland and Taiwan considered themselves to be parts of China.

Now Taiwan is a democracy, and the mainland remains an autocracy. The democratization of Taiwan certainly raised obstacles against an elite deal on unification between two ruling classes. Fortunately, however, the democratization of Taiwan has already refuted the idea that Confucian or Sinic civilization is incompatible with democracy. If the Chinese economy prospers, if China outgrows poverty, then mainland China may become a democracy in two or three decades.

Some promising developments are already observable. Villages elections have been held for about a decade Rowen Some cadres already have been voted out of office. Moreover, China trains more lawyers than before, and the Chinese are beginning to perceive the economic benefits of the rule of law Pei By contrast, post-Soviet Russia provides a vivid illustration of the limited value of electoral democracy without the rule of law.

Moreover, the democratic-peace component of the capitalist peace is constrained by the geopolitical need to avoid leapfrogging in the extension of democracy or tiger-coat patterns of democracy and autocracy. It seems to be a rare case of a desirable end that is attainable by a desirable means.

By contrast, protectionism engenders less wealth and more war. Although one might argue that globalization or the resulting inequality destabilizes democracies and promotes internal conflict and violence, there is little empirical evidence to support this view de Soysa ; Fearon and Laitin ; Hegre, Gissinger, and Gleditsch ; Weede ; World Bank Because the empirical studies discussed earlier have demonstrated some fairly strong effects of democracy on the avoidance of war between democracies, and because the pacifying effects of democracy on rebellion and civil war within states can also be documented Muller and Weede ; Hegre et al.

According to Lipset or Boix and Stokes , the viability of democratic regimes and the likelihood of transitions to democracy depend on the level of economic development. The more prosperous a country is, the more likely it is to become and to remain a democracy. Because this proposition has been supported strongly by cross-national studies, much better than any other conceivable determinant or prerequisite of democracy, we may argue that the promotion of democracy necessitates providing a helping hand to poor countries.

This help can be provided in different ways. First, prosperous countries influence the legal foundations for capitalism or economic policies elsewhere. How much this influence matters was demonstrated during the Cold War by the divided nations, where one part was influenced by the Soviet Union and the other part by the United States. Economies benefiting from U. After China began to abandon socialist practices and converted to creeping capitalism in the late s, it quadrupled its income per capita in two decades and almost closed a sixteen-to-one gap in income per capita with Russia Weede The idea of advice should not be conceived too narrowly.

By providing a model for emulation, successful countries implicitly provide advice to others. Second, prosperous and democratic countries may provide open markets for exports from poor countries. Without a fairly open U. South Korea and Taiwan might still be poor and ruled by autocrats instead of being fairly prosperous and democratic.

Third, rich and democratic countries may provide FDI to poor countries. Moreover, FDI not only promotes growth and prosperity, but also directly contributes to democratization de Soysa and Oneal ; Burkhart and de Soysa ; de Soysa Fourth, rich and democratic countries may provide economic aid.

By and large, big economies, such as the United States or Japan, provide relatively much less aid than small Scandinavian economies, such as Norway or Sweden. But barriers to imports from poor countries are the lowest in the United States and the highest in Norway.

Whereas European assistance to poor countries is provided by governments for the most part, U. Rich-country subsidies to agricultural producers, which harm poor countries, are much greater than development aid. The theoretical case for aid, however, has always been weak Bauer Aid may strengthen governments and undermine free markets. This risk is much greater with government-to-government aid than with private giving, which rarely selects the state as recipient. Certainly, foreign aid does not promote democracy Knack Econometric studies have not demonstrated that aid generally increases growth rates.

In recent studies, one finds either a curvilinear relationship between aid and growth Hansen and Tarp , which suggests that some aid may be useful but too much of it may be harmful, or a conditional effect, which suggests that positive aid effects depend on a proper policy environment in the recipient nation and that otherwise aid is simply wasted Burnside and Dollar Or one finds that the effectiveness of aid depends on its bilateral rather than multilateral character Ram Both the ambivalent findings about the effectiveness of aid and the poor record of official aid giving from the biggest Western economies underline that economic development depends above all on domestic efforts, institutions, and policies.

Still, there is some room for beneficial outside influences. The mere existence of prosperous and developed countries generates advantages of backwardness and opportunities for faster growth of less-developed countries Barro and Sala-i-Martin ; Olson ; Bleany and Nishiyama They can borrow technology from the more developed countries and thereby grow faster than the Western pioneers of economic development grew. Japan until the s and the East Asian tiger economies thereafter used these advantages of backwardness effectively. Currently, China, India, and parts of Southeast Asia do so.

European and Japanese agricultural markets and Western textile and garment markets demonstrate the most persistent unwillingness of rich countries to provide a helping hand to poor countries. As important as the provision of models for emulation is the avoidance of pressure from rich countries on poor countries to commit themselves to bad policies.

Global labor standards are an important example of such pressure. Concerning the minimum-wage component of labor standards, the World Bank recognized this effect years ago:. Those affected by minimum wage provisions in low- and middle-income countries are rarely the most needy. Most of the real poor operate in rural and informal markets in such countries and are not protected by minimum wages. The workers whom minimum wage legislation tries to protect- urban formal workers-already earn much more than the less favored majority.

And inasmuch as minimum wage and other regulations discourage formal employment by increasing wage and nonwage costs, they hurt the poor who aspire to formal employment. World Bank , It has been estimated Mitra , 6 that in India less than 10 percent of the workforce is employed in the formal and privileged sector of the economy. More than 90 percent of the workforce stand no chance of benefiting from minimum wages or other labor standards.

A country achieves prosperity by economic growth. FDI is one helpful background condition for growth that also seems to promote democratization Burkhart and de Soysa Export orientation, active foreign trade, FDI inflows, and economic openness are other useful determinants of economic growth Dollar ; Edwards ; de Soysa and Oneal ; Bleany and Nishiyama As argued earlier, international trade by itself reduces the risk of war between trading nations.

Thus, a beneficial means namely, free trade directly and indirectly via prosperity and democracy contributes to a desirable end: the avoidance of war between nations.

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Moreover, economic openness also reduces the risk of civil violence de Soysa and of genocides or other political mass murders Harff , and the intervening variable of prosperity-in-between trade and war avoidance-also happens to reduce the risk of domestic instability and violence Henderson and Singer ; World Bank The policy implications of the capitalist-peace strategy are simple: promote economic freedom and globalization. If the policy succeeds, one gets more prosperity, more democracy, less civil war, and less interstate war.

Ultimately, the capitalist-peace strategy rests on a policy of depoliticization. Under capitalism, material well-being depends less on political affiliations and more on market success. The capitalist peace depends on a universalistic ethic and its acceptance Giersch Free trade and the principle of nondiscrimination between peoples or races and between domestic and foreign producers guide consumers to buy from the best and cheapest producers.

Often, the cheapest producers in poor countries need their customers more than richer producers in rich countries, who can fall back on either capital income or social-security transfer payments, need theirs. In applying the capitalist-peace strategy to contemporary problems, three conditions must be recognized. First, a capitalist-peace strategy presupposes a minimal degree of state effectiveness.

Moreover, the democratization component of the capitalist-peace strategy requires overcoming arbitrary and autocratic rule.

Conflict Transformation | Beyond Intractability

This statement obviously points to another difficulty. Overcoming chaos, warlords, and state failure appears to be a prerequisite for the applicability of the capitalist-peace strategy. Analyzing how this prerequisite might be established is beyond the scope of this article. Second, we have few reasons for optimism about the applicability of the capitalist-peace strategy to the Muslim world.

My pessimism about the Muslim world derives from two sources. Muslim civilization so far has resisted democratization more consistently and persistently than other non-Western civilizations. Turkey is still the best example of a Muslim democracy, but Turkish democracy is strongly guided by the secularist armed forces, which makes the democratic character of the regime dubious. Besides, some Muslim countries are rich in oil or other natural resources.

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Superficially, natural wealth might seem to facilitate the achievement of prosperity and growth, but it does not do so in these cases. Perhaps rich resource endowments reinforce elite predatory behavior and rent seeking and thereby make institutional and economic development more difficult. In any event, the capitalist-peace strategy seems least likely to prevent violence and war within the Islamic civilization or between it and the rest of the world.

Still, it might work elsewhere, in particular Asia. As Bhalla has argued in more detail and more convincingly than anybody else, inequality among human beings has probably fallen since the s. More important, global poverty has been reduced, too. At the turn of the millennium the percentage was This progress has been spread unevenly across the globe.

Africa has done the worst. Asia was involved most in globalization and therefore has done best. Within Asia, the demographic giants China and India, where nearly 40 percent of humankind live, have been most important. As they opened up, they grew much faster than in previous decades. Only 6 percent of it was Asian. At the turn of the millennium, 52 percent of the global middle class was Asian, and its share is still growing. The crucial question for the applicability of the capitalist peace is China.

Taiwan and South Korea have recently demonstrated that Confucian civilization by itself is no permanent obstacle to democratization. The strong economic-growth record of China promises that even the economic prerequisite for democratization might be achieved within two decades or so. If so, then the capitalist peace might spread to much of Asia. Third, the typical limitations of social science analyses have to be kept in mind. Although I argue in favor of co-opting China into a peaceful democratic and capitalist world order, nobody can guarantee that the policy will work. Certainly, an incomplete transition to democracy and its attendant risks Mansfield and Snyder cannot be ruled out in a country where democratization has not yet been seriously set in train.

Still, even though in principle a capitalist-peace strategy may be risky, given the magnitude of American preponderance and the absence of powerful challengers, the opportunity to build a better world based on free trade, prosperity, democracy, and peace vastly outweighs the associated risks.

For the next few decades, the United States will be so strong that it can easily concede greater relative gains to China, where hundreds of millions still have to survive on a dollar per day. On the one hand, globalization promises to enlarge the market and therefore to increase the division of labor and to speed productivity gains and economic growth. On the other hand, it remains under attack from special-interest groups and misguided political activists.

Critics of globalization not only forget both the benefits of free trade and globalization for developing countries and for their poor and underemployed workers and the benefits of free trade to consumers everywhere, but they know almost nothing about the international-security benefits of free trade. Quantitative research has established the viability and prospect of a capitalist peace based on the following causal links between free trade and the avoidance of war: first, there is an indirect link running from free trade or economic openness to prosperity and democracy and ultimately to the democratic peace; second, trade and economic interdependence by themselves reduce the risk of military conflict.

By promoting capitalism, economic freedom, trade, and prosperity, we simultaneously promote peace. Conceivable instruments to promote capitalism, economic freedom, free trade, and prosperity include advice about the institutional and legal foundations of capitalism and economic policies. Such advice is more likely to be persuasive if Western societies provide models for emulation to poor and conflict-prone countries.