Thursday, December 23, 2010

Capitalism And World Peace

Here is a wonderful Christmas gift for humanity: World peace!

Citing a study from the Human Security Center at the University of British Columbia, the Democratic Leadership Council (DLC) notes that the world has become more peaceful


Their observations (from DLC): (italics original)

Wars are less frequent: The Center's 2009/2010 report group finds 34 conflicts, including 5 international wars in Afghanistan, Iraq, and the Congo Basin. This is a lower total than at any time since the 1970s, reflecting the fact that warfare in Europe has almost vanished, with exceptions in the Caucasus; and that the numbers of wars in East Asia, Southeast Asia, and Latin America have also plummeted. And despite the Iraq, Afghan, Somalia and Yemen conflicts, the Center argues that wars in the Muslim world are rarer too, reporting a decline of 70 percent in the scale of conflict in these regions.

Great-power wars are rare: No war has pitted great powers -- meaning any of the world's 10 biggest economies -- against one another since the Sino-Soviet clashes of 1969. No war among Asian states has broken out since the Sino-Vietnamese war of 1979; the last war among European big powers is now 65 years in the past. All three intervals -- the great-power, the European, and the Asian -- are the longest periods of peace in the historical record.

Wars are less bloody: The report, reviewing the grimmest statistics, finds that the average war in the 1950s killed 20,000 soldiers and/or guerrillas each year, with war deaths averaging 155,000 in each year of the decade. Figures for the 1960s, 1970s and 1980s were similar. In the new millennium's first decade, the casualty rate was about 3,000 per war; the average for all wars combined, having fallen to 95,000 by the 1990s, has been 27,000 (and 17,000 annually since 2002, with an all-time low of 11,000 in 2005.)

The identified socio-political reasons: (all bold emphasis mine)

Some are political and military: (a) decolonization and the end of the Cold War mean there are fewer nationalistic or ideological reasons to fight, (b) the spread of democracy may produce less belligerent governments, (c) today's great powers are both less bellicose and less vulnerable than they used to be, with armies, air forces and navies strong enough to deter potential aggressors, (d) lots of international activism, from peacekeeping missions to sanctions on potentially aggressive states; and (e) with notable exceptions in East and South Asia, fewer border and land disputes.

And importantly, the economic driver...(all bold emphasis mine)

Economic issues too may play a part: lower trade barriers, more open economic policies, more efficient logistics industries and better communications technology speed up and deepen integration across borders through trade and investment, strengthening mutual interests and reducing reasons for conflict. The report suggests that a 10 percent increase in FDI reduces a nation's chance of international or civil war by about 3 percent, and that globalization reduces the reasons a country might want to fight:

"[T]he most effective path to prosperity in modern economies is through increasing productivity and international trade, not through seizing land and raw materials. In addition, the existence of an open global trading regime means it is nearly always cheaper to buy resources from overseas than to use force to acquire them."

Since politics is ultimately about economics (allocation of scarce resources), where the great Bastiat once said if goods don’t cross borders then armies will, then the improvements in the economic sphere has preceded the marked progress in the socio-economic dimensions. This has been manifested by the apparent lesser degree of political interest towards nationalism, and conversely, a greater tolerance for democracy.

[As an aside, it would be greatly misplaced to suggest that markets operates under the auspices or the graces of governments as markets have existed even prior to the advent of governments. The fact that markets also exists in spite of manifold government regulations, or what is known as as regulatory arbitrage, or circumventing (going around) regulations, is a testament to the innate dominance of markets over politics.]

Of course, technology has also played an important role by vastly enhancing social connectivity. Yet the innovation in technology front has likewise been a product of free market forces.

In short, the deepening trends of free markets (globalization) buttressed by technology has influenced the evolving geopolitical institutional framework, in spite of the recent crisis.

Importantly, the market economy (or capitalism) and war represents as two antipodal forces from which mankind can only choose one.

As the great Ludwig von Mises wrote in Omnipotent Government, (bold highlights mine)

Social co√∂peration and war are in the long run incompatible. Self-sufficient individuals may fight each other without destroying the foundations of their existence. But within the social system of co√∂peration and division of labor war means disintegration. The progressive evolution of society requires the progressive elimina­tion of war. Under present conditions of international division of labor there is no room left for wars. The great society of world-embracing mutual exchange of commodities and services demands a peaceful coexistence of states and nations. Several hundred years ago it was necessary to eliminate the wars between the noblemen ruling various countries and districts, in order to pave the way for a peaceful development of domestic production. Today it is in­dispensable to achieve the same for the world community. To abolish international war is not more unnatural than it was five hundred years ago to prevent the barons from fighting each other, or two thousand years ago to prevent a man from robbing and kill­ing his neighbor. If men do not now succeed in abolishing war, civilization and mankind are doomed.

Bottom line: The world appears to be on the path to a deepening degree of acceptance of the politics of free trade (capitalism) than from militant (nationalistic) politics, as Professor von Mises predicted. The only major counterbalance to this is inflationism.

Merry Christmas!

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