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Free markets key to peace Bandow, fellow at Cato Institute, 05 (Doug Bandow, fellow at Cato Institute, 11/10/05, In a world that seems constantly aflame, one naturally asks: What causes peace? Many people, including U.S. President George W. Bush, hope that spreading democracy will discourage war. But new research suggests that expanding free markets is a far more important factor, leading to what Columbia University's Erik Gartzke calls a "capitalist peace." It's a reason for even the left to support free markets.
The capitalist peace theory isn't new: Montesquieu and Adam Smith believed in it. Many of Britain's classical liberals, such as Richard Cobden, pushed free markets while opposing imperialism. But World War I demonstrated that increased trade was not enough. The prospect of economic ruin did not prevent rampant nationalism, ethnic hatred, and security fears from trumping the power of markets. An even greater conflict followed a generation later. Thankfully, World War II left war essentially unthinkable among leading industrialized - and democratic - states. Support grew for the argument, going back to Immanual Kant, that republics are less warlike than other systems. Today's corollary is that creating democracies out of dictatorships will reduce conflict. This contention animated some support outside as well as inside the United States for the invasion of Iraq. But Gartzke argues that "the 'democratic peace' is a mirage created by the overlap between economic and political freedom." That is, democracies typically have freer economies than do authoritarian states. Thus, while "democracy is desirable for many reasons," he notes in a chapter in the latest volume of Economic Freedom in the World, created by the Fraser Institute, "representative governments are unlikely to contribute directly to international peace." Capitalism is by far the more important factor.

The shift from statist mercantilism to high-tech capitalism has transformed the economics behind war. Markets generate economic opportunities that make war less desirable. Territorial aggrandizement no longer provides the best path to riches. Free-flowing capital markets and other aspects of globalization simultaneously draw nations together and raise the economic price of military conflict. Moreover, sanctions, which interfere with economic prosperity, provides a coercive step short of war to achieve foreign policy ends.
Positive economic trends are not enough to prevent war, but then, neither is democracy. It long has been obvious that democracies are willing to fight, just usually not each other. Contends Gartzke, "liberal political systems, in and of themselves, have no impact on whether states fight." In particular, poorer democracies perform like non-democracies. He explains: "Democracy does not have a measurable impact, while nations with very low levels of economic freedom are 14 times more prone to conflict than those with very high levels." Gartzke considers other variables, including alliance memberships, nuclear deterrence, and regional differences. Although the causes of conflict vary, the relationship between economic liberty and peace remains. His conclusion hasn't gone unchallenged. Author R.J. Rummel, an avid proponent of the democratic peace theory, challenges Gartzke's methodology and worries that it "may well lead intelligent and policy-wise analysts and commentators to draw the wrong conclusions about the importance of democratization." Gartzke responds in detail, noting that he relied on the same data as most democratic peace theorists. If it is true that democratic states don't go to war, then it also is true that "states with advanced free market economies never go to war with each other, either." The point is not that democracy is valueless. Free political systems naturally entail free elections and are more likely to protect other forms of liberty - civil and economic, for instance. However, democracy alone doesn't yield peace. To believe is does is dangerous: There's no panacea for creating a conflictfree world. That doesn't mean that nothing can be done. But promoting open international markets - that is, spreading capitalism - is the best means to encourage peace as well as prosperity. Notes Gartzke: "Warfare among developing nations will remain unaffected by the capitalist peace as long as the economies of many developing countries remain fettered by governmental control." Freeing those economies is critical. It's a particularly important lesson for the anti-capitalist left. For the most part, the enemies of economic liberty also most

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increasing the cost of war.prosperity and freedom . Trade encourages prosperity and stability. often in near-pacifist terms.doc Dartmouth 2K9 2 stridently denounce war.137230248. and people are motivated by far more than economics. If market critics don't realize the obvious economic and philosophical value of markets . Last printed 2 . Yet they oppose the very economic policies most likely to encourage peace. technological innovation reduces the financial value of conquest. But it turns out that peace is good business. And capitalism is good for peace. Nothing is certain in life. globalization creates economic interdependence.they should appreciate the unintended peace dividend.

everyone is driven by his own ambitions for wealth and success. the venture loses money and its product goes out of existence. manufacturers and distributors.137230248. not only in solving these problems. 08. 08 (Robert W. That is precisely what capitalism does.doc Dartmouth 2K9 3 Capitalism protects freedom of thought and allows for human growth Tracinski. such as fertilization and crop rotation. Government regulation. operates by thwarting the businessman's thinking." It is common to condemn this approach as selfish—yet to say that people are acting selfishly is to say that they take their own lives seriously. Every product that sustains and improves human life is made possible by the thinking of the world's creators and producers. We enjoy a lifespan double that of the pre-industrial era thanks to advances in medical technology. employers and employees. By contrast. he takes their ideas off the chalkboards and out of the laboratories and puts them onto the store shelves. by contrast. The essence of capitalism is that it bans the use of physical force and fraud in men's economic he has to discover how to cut costs to make the product affordable. These officials do not have to consider the long-term results—only what is politically expedient. We enjoy an abundance of food because scientists have discovered more efficient methods of agriculture. That's what "free trade" means: that no one may demand the work.capitalismcenter. Most people recognize the right of scientists and engineers to be free to ask questions. or money of another without offering to trade something of value in return. and he has to figure out how to finance his venture in a way that will best feed future growth. If he cannot. and the suppliers will give preference to more credit-worthy customers. In Adam Smith's famous formulation. to the un-coerced decisions of buyers and sellers. not by reason.htm) What no one has grasped yet is that capitalism is not just practical but also moral. And most important. discovered by doctors and medical researchers. http://www. the easy access to information made possible by the World Wide Web—because scientists and inventors have made the crucial mental connections necessary to create these products. The businessman's dedication to thought. The only way to respect this virtue is to leave the businessman free to act on his own judgment. The government regulator does not merely show contempt for the minds of his victims. The first rule of capitalism is that everyone has a right to dispose of his own life and property according to his own judgment. It is the only system that safeguards the freedom of the independent mind and recognizes the sanctity of the individual. Behind the activities of the businessman there is a process of rational inquiry every bit as important as that of the scientist or inventor. employees. effort. and to create new innovations. they are free to go elsewhere. and suppliers that his venture is a profitable one. In a free-market economy. that they are exercising their right to pursue their own happiness. Tracinski. The businessman is the one who takes the achievements of the scientists and engineers out of the realm of theory and turns them into reality. the best employees leave for better opportunities. project what it would mean to exterminate self-interest and force everyone to Last printed 3 . They do not have to back their decisions with their own money or effort—they dispose of the lives and property of others. But at the same time. he also shows contempt for their personal goals and values. persuasion. to pursue new ideas. If both partners to the trade don't expect to gain. editor of the Intellectual Activist. and reason is a virtue—a virtue that our lives and prosperity depend on. they do not have to persuade their victims—they impose their will. We enjoy the comfort of air conditioning. He has to use reason to persuade investors. but by physical force. from antibiotics to X-rays to biotechnology. All of these issues—and many others—depend on the mind of the businessman. If he is not left free to think. The businessman has to figure out how to find and train workers who will produce a quality product. most people ignore the third man who is essential to human progress: the businessman. Capitalism is the only system that fully allows and encourages the virtues necessary for human life. the investors take their money elsewhere. he has to determine how best to market and distribute his product so that it reaches its potential buyers. The businessman has to have an unwavering dedication to thinking. but also in dealing with others. the rule of capitalism is that every trade occurs "by mutual consent and to mutual advantage. subordinating his judgment to the decrees of government officials. editor of the Intellectual Activist. the speed of airline transportation. All decisions are to be left to the "free market"—that is.

For examples. for example." And since "society" consists of nothing more than a group of individuals. Only when these ideals are once again taken seriously will we be able to recognize capitalism.137230248. Such a system is based on the premise that no one owns his own life. liberty. Only capitalism renounces these evils entirely. A system that sacrifices the self to "society" is a system of slavery—and a system that sacrifices thinking to coercion is a system of brutality. Last printed 4 . that a young student's goal to have a career as a neurosurgeon must be sacrificed because some bureaucrat decrees that there are "too many" specialists in that field. and the pursuit of happiness. It would mean.doc Dartmouth 2K9 4 work for goals mandated by the state. see the history of the Soviet Union. that the individual is merely a tool to be exploited for the ends of "society. such as today's regulatory and welfare state." Only capitalism protects the individual's freedom of thought and his right to his own life. This is the essence of any anti-capitalist system." but as a moral ideal. Only capitalism is fully true to the moral ideal stated in the Declaration of Independence: the individual's right to "life. not as a "necessary evil. this means that some men are to be sacrificed for the sake of others—those who claim to be "society's" representatives. merely unleash the same evils on a smaller scale. And "mixed" systems. whether communist or fascist.

boots. a great many well-intentioned people are allowing themselves to be drawn is very dangerous: capitalism isn't really an "ism" which is why the term "free market economics" is so much more capitalism is not a system in the ideological sense. political and philosophical expert. however.) It is in the interests of the Left to talk as if capitalism and socialism were precisely analogous because then they can be seen as competitors and in bad times. "Queen Elizabeth owned silk stockings." Webber also tells us: "Think of it as capitalism with a human face" ("Giving the poor the business. the command economy as opposed to the market-based one can win the popularity contest. Chairman. it has no power.doc Dartmouth 2K9 5 Capitalism key to solving poverty Boudreaux. suppress. 5/29/09 (Janet of a tyranny. there are lots of things than can be done to " capitalism" – it can be undermined. I do. 5/27/08. sabotaged. 5/29/09. Well. It is. The fundamental disagreement between the United States and Europe amounts to nothing less than the question of whether the great 200 year old experiment in national democracy – government of the people. the cheap cotton and rayon fabric. we are defending the political principle of freedom. and for the people – Last printed 5 . Department of Economics. So the idea that the arguments which will dominate the summit are purely economic is quite wrong: this is about politics. political and philosophical expert. and not as a rule improvements that would mean much to a rich man. when in reality.html) Some of the demonstrators in this week's G20 protest jamboree are demanding the "overthrow" of capitalism. but a political principle of freedom Daley. suppressed.usatoday. The question we are wrestling with now – and which the G20 will certainly fail to resolve – is how much the bodies which actually do have power should undermine. Those who talk of "overthrowing" capitalism are determined to depict it as a system of government in a precise parallel with socialism." Capitalism is not a system. When we make the case for capitalism. No other economic system but capitalism has lifted billions of people so decisively out of poverty. It is the very opposite.html) Capitalism has moved billions out of poverty Commentary writer Alan Webber applauds the idea of the so-called social business — one that "has a social "It is the cheap cloth. question his hackneyed suggestion that the face of for-profit capitalism is inhuman. Wednesday). even outlawed – but it cannot be "overthrown" because in itself. in fact. not arguing for one kind of rigid economic organisation over another. The debate is being hopelessly muddied by those late converts to free enterprise – politicians like Mr Brown who believe that markets should only survive if they can be made to serve Left-wing purposes. http://blogs.telegraph. It can be described in anthropomorphic terms. But this fallacious argument into which. http://www. Department of Economics. such as "ruthless" or "benign" but of itself has no motives and no objectives. It is simply the conglomeration of all the transactions made between individual and corporate players in an open market. George Mason University. sabotage or even outlaw the practice of capitalist exchange. George Mason University. I don't question Webber's uncritical assumption that social businesses will work. Chairman. 08 (Donald J. methods of exchange do not." The Forum.137230248. an anti-system: the aggregation of human behaviour as it goes about fulfilling particular wants and needs. motorcars and so on that are the typical achievements of capitalist production. not just a financial goal. if anything. by the people. I am sorry to say. Some people may gain power through those transactions but that power is transient and contingent on their own financial success: they are not installed in immutable positions from which they can be forcibly removed in a coup d'etat. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort. Boudreaux. Economist Joseph Schumpeter noted this fact in 1942: "Electric lighting is no great boon to anyone who has money enough to buy a sufficient number of candles and to pay servants to attend them. (Gordon Brown is more than usually fatuous when he insists that markets need to have "values": only people have values.

People must not be bullied into believing that economic security must be bought at the price of their political birthright. you can say goodbye to it forever. Main Street would go with it before they agreed to stump up: they were much more inclined to believe that the banks should be allowed to go under than that the hard-earned money of ordinary people should be given to support them. Europe may as well get this straight now: Barack Obama will not subject the United States to policing by an international regulatory authority. You take the consequences of your own stupidity: that's the price of freedom. The major dispute over the American preference for fiscal stimulus as opposed to the European priority of global regulation is at the heart of this. no) going to be pulled out of the tank by taxpayer dollars. the overwhelming majority of Americans were vehemently opposed to any bank bail-out. When the crisis first hit. "who needs to be in charge of our future?" The answer is always. comes first and last. Everybody is telling them that global cooperation (which sounds so nice) is necessary for survival. Because people are as disgusted by politicians who have spent their money unwisely as by bankers who have lent it unwisely. The US population had to be painstakingly persuaded that if Wall Street went down. Unlike in Europe – where the historical commitment to democracy has been patchy – America has little difficulty with the question. for all our overheated arguments about the future of capitalism. But they are not at all sure how this notion of international regulation will affect them. but nobody is saying what that will actually mean in terms of sacrificing the power they have over their own government – even in the attenuated form in which it still exists in the EU. that power of restraint over your elected government. not just because he puts the economic recovery of his own nation above all other concerns (and from the point of view of the rest of the world. By all means.doc Dartmouth 2K9 6 will survive. When people are worried about their survival. too. we must continue to make the moral case for capitalism. but I suspect that many still believe they could have rebuilt their lives and economy again from scratch through their own industry and resilience. But once you have given up. as citizens. it is quite easy to persuade them to suspend what seems like the abstract concept of democracy.137230248. there seems little appetite for a command economy to replace it. The good news is that even in Britain. "we the people". they distrust the state as much as they dislike the banks. The operative word in the phrase "free market economics" is "free". but it seems that we have to make the case for democracy. Faced with the damage that such bank failures would have done to the mass of the population. Americans relented. That was why Hank Paulsen's first rescue package was thrown out by Congress: the bankers had screwed up and they were not (hell. Last printed 6 . and the concept of personal freedom that underpins it. Democratic self-governance. Which is why the anger in America about bankers (and the recent furore about AIG bonuses) was more personal than political: the rage was against individuals who had abused the freedom of the market and who needed to be punished as individuals. this is no bad thing since American recovery is essential to the future of the global economy) but because to do so would be to sign away the democratic accountability of his and all future US governments to a body in which American voters had no say.

University of Delhi. The extra production was consumed during the 1980s. say by 1931. Still. the world economy coughed for a couple of years. but at an unprecedented level of debt. 95 (SouthernBanking. Still.html) Where Marxist theory breaks down is in terms of predicting how the two general classes would react and how the politics would work.137230248. human rights organization. University Delhi. how this would have finished playing out in America and Britain without the intervention of World War ll. (2) Last printed 7 . Towards a Just Social Order.doc Dartmouth 2K9 7 Collapse of capitalism leads to transition wars during the 1930s. I have not seen an analysis of how the Federal Reserve might have righted the economy. is so much speculation. http://www. The royal family of Britain played footsy with local fascists. human rights organization. the capitalist class around the world made deals with anti-communists. encouraging regional conflagrations and setting the stage for eventual global holocaust. distortions or not. I have seen no realistic economic analysis which indicates a way out of the depression. Both America as well as Great Britain had fascist parties. a greater sense of insecurity among the major centres of power – and hence to a further tightening of the structures of domination and domestic repression – producing in their wake an intensification of the old arms race and militarization of regimes. (1) The war did occur and the capitalist system returned to vibrant levels of production with the war and once war ceased. 1982. And the working class rallied around its own representatives. True. 82 (Kathari. apart from what actually occurred. Our own Charles 'Lucky Lindy' Lindberg was an ardent admirer of the German Luftwaffe. 571) Attempts at global economic reform could also lead to a world racked by increasing turbulence. Collapse of capitalism will only lead to transition wars that restore capitalism – empirically proven SouthernBanking. but production soon returned to pre-depression levels of growth and stayed that high for almost two decades. p. usually labor union. Again. some monetarists continue to claim that only a bad monetary policy by the Federal Reserve caused the market crash of 1929 to deteriorate into the Great Depression. In fact. these conservatives could not refute the labor theory of value and as production escalated beyond all purchasing power of the working and middle classes during the early 1980s. once the damage had been done. as well as with their German associates across the Channel. prof political science. more than sufficient time for conservative economists and political conservatives to distort the actual history of the 1920s and 1930s. 11/28/95.based political groupings. Professor of political science. from the Fascists of Italy and later in Spain to the Nazi Party in Germany.southerndomains. America went on a debt boom.

The reduced income of the workers and of the unemployed reduces still further the demand for goods. soon reach the degree of over-development shown by the older industries.137230248. actually aggravate the crisis instead of relieving it. wholesalers and manufacturers are driven to sell their stocks at lower and lower prices—often at a price less than the original cost price. http://www. in the accumulation of stocks of goods in the hands of retail stores. Last printed 8 . The actual events show us why this is and why it must be so. despite crises and riots World Socialist Movement. While trade is relatively good each concern tries to produce as much as possible in order to make a large profit. The economies that are made in a time of depression—whether voluntary ones. but that the rich who have it can find no profitable field for investment. Plans for extending production by constructing new buildings.worldsocialism. are forced to offer to work for lower wages. Quite young industries like artificial silk. Here is a situation that always causes grave are cancelled and the workers are laid off. retailers. 09. Workers. socialist organization. every few years. ships. 09 (World Socialist Movement. Capitalism still continues. plant.doc Dartmouth 2K9 8 Capitalism inevitable.. Bourne in 1876. In desperate need of ready money to pay their bills. referred to earlier in this pamphlet. It is not that there is any lack of money. Yet “economise” is the advice given by public men now. It is nobody's business under Capitalism to find out how much of each article is required. In spite of riots and agitations. But it does not work out like that. naturally tend to accumulate to a greater extent than those produced only to order—such as railway engines.pdf) The depression shows itself. or economies enforced on the workers by wage reductions. they reduce their orders to the wholesalers. as it was by Mr. It is from this discontent that the believers in the theory of the collapse of Capitalism think that they can draw the force which will overthrow the capitalist system. farmers and others. etc. but with the expectation of finding a buyer eventually. wholesalers and manufacturers. for the same reason. so that industries quickly expand to the point at which their total output is far larger than can be sold at a profit. As traders find it more difficult to sell. Goods such as farm crops. that are ordinarily not produced to order. socialist organization. who in turn stop buying from the manufacturers.