International Relations through the Prism of Economics. Does Economics Contribute to Peace?
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International Relations through the Prism of Economics. Does Economics Contribute to Peace?

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International relations: does economics contribute to peace? With international tensions running high, Claude Revel argues in her Preface for “La Revue Diplomatique” that this is by no means a given. She calls for a return to politics and diplomacy to create a more peaceful world.

This piece was originally published in French by the Institute for Applied Geopolitical Studies. It constitutes the Preface for La Revue Diplomatique n°19.

Economics Is Never Far from Either War or Peace

International relations and economics have had an interactive relationship since the dawn of time. We can see it in Ancient Greece and Rome, and then in the Europe of the 16th and 17th centuries, when bankers and merchants held sway over the princes, who used them well, and then with the birth of globalisation in the late 19th and early 20th centuries. The link grew stronger after the second world war, and the upsurge in the early 1990s of what we now sweepingly call globalisation – first and foremost an economic phenomenon. It goes hand in hand with developments in technology and communications, giving transnational entities (both multilateral bodies and major private organisations) an increased degree of importance compared to governments.

In our opinion, it is highly relevant today for us to ask ourselves whether the growing importance of economics as a focus for international relations since the post-war period has made these relationships more peaceful, and what we can expect the future to hold.

In the early 17th century, the Dutch diplomat and jurist Hugo Grotius put forward the theory that the development of trade and treaties securing the freedom to trade were a factor in more peaceful international relations. On a completely different note, Clausewitz suggested that with war being a continuation of politics by another means, its outcome depends on both a State’s military capabilities and also its economic resources. In fact, economics is never far away, either from war or from peace.

“Our” globalisation is – or perhaps was – marked by the idea that law, democracy and free trade facilitate cooperation between States and in doing so pacify international relations, that competition can be pursued peacefully if it is regulated on an international level and that interdependence between States helps to reduce nationalism-related tensions. It is clear that these systems do place limits on the sovereignty of nations, but when all is said and done this is the price to be paid for world peace.

All the post-war economic institutions were created on these tenets (the United Nations’ economic and financial agencies, the OECD and then the WTO that followed on from the GATT in 1996). The number of bilateral and multilateral free trade agreements has increased continually ever since. Most States are bound by one or more of these agreements, which therefore influence their international relations, and are financially dependent, to a greater or lesser degree, on their relationships with the major multilateral financial players.

In parallel, conceptual (or ideological, depending on your standpoint) frameworks have grown up aiming to bring a degree of standardisation to international economic relations. One example of this, which is unfortunately rarely quoted, was the Washington Consensus, a set of liberal policies written by experts and economists from the IMF and the World Bank in the 1980s. In the 1990s, its success was boosted by the fall of the USSR and communist systems, and it has therefore become a sort of international handbook, seemingly universally accepted.

Another set of documents grew up in the mid-1970s in relation to sustainable development, a notion that was first mentioned within the Rockefeller Center and then popularised by the UN’s Brundtland report, named after the former Norwegian prime minister who chaired the discussions. Today, we are all aware of the phenomenal success of this concept, with its multiple, global applications in terms of social and environmental responsibility. Beyond the concrete business of saving the planet, it is also noteworthy in that it divides up responsibilities because all stakeholders, not only States and but also businesses and private non-governmental organisations, were in charge of implementing it directly, under the direction of major multilateral texts. The traditional distinctions between the public and private sectors were blown apart, resulting in interconnections between, and some degree of confusion regarding, the roles of governments and the private sector in defining global regulations. The two frameworks worked well together, with stringent liberalism being theoretically tempered by these practices which have become more and more obligatory as soft law has increasingly taken the place of positive law. At that point, international relations were dominated by the power of the USA, which some had naively judged in the 1970s to have weakened.

Finally, a new force emerged, and then grew exponentially: global interdependence of opinions and communication. We can pinpoint the birth of global public opinion to Seattle in 1999, during the curtailed WTO summit and the major protests that surrounded it. Today, social media and live news, with all the deformation it suffers, together with observers and analysts in all areas, undoubtedly have a major influence on how international relations are conducted. States and international private entities use them in all sorts of strategies. Other players are also involved. Although not lawful, they are unfortunately highly developed. Examples include mafias, terrorist groups and criminal organisations of all types. In some cases, in addition to traditional weapons they also have access to the latest technology, powerful lobbyists and highly developed corruption strategies.

The fact that no European company can dominate the internet like their American counterparts is no coincidence. The USA successfully planned ahead for this new world order. From the 1980s, Al Gore, a senator who later became the country’s vice president, pushed for the development of “information superhighways”. Even today, most of the immense multinational companies that own our energy sources – tangible (oil, gas and renewable energy), financial (funds) and intangible (information) – are American. They are increasingly monopolistic and powerful, and yield to very few national powers.

Conversely, their competitors in China are entirely linked to the public authorities. Since it joined the WTO, China has demonstrated its ability to use the forces of international trade, rebutting the theories of those who believed that the instruments of liberalism and international capitalism were only available to democracies, or better still, that using them always transformed a regime eventually.

From the 1970s, not wanting to give more power than they had to international organisations and conscious of the need to maintain their own places, the dominant States also created fora for international cooperation with which to solve the world’s problems. These took the form of groups: the G7, G8, G20 and the Group of 24 (established as a chapter of the Group of 77 to counter the G8) and other ad hoc formations.

Economic Conflicts and Power Strategies

In the light of these structures designed to safeguard peace and prosperity, what is the role of reality, in the sense of what is known as the realism school of thought in industrial relations? In other words, have these structures actually served to weaken military and economic power within industrial relations?

This lattice of international agreements has not prevented economic conflicts, the logical consequences of power strategies, from arising.

One example is the “economic war” which undermined international relations, between western countries in the first instance, and then between each of them individually and the then-emerging countries of China, South Korea and Brazil, and later the new Asian tigers. We should note that the application of the word “war” to the economy is debateable, as is the trivialisation of the word itself. The economic competition which has marked our history of international relations since the end of the Second World War, and in particular since the 1980s, is clearly unscrupulous and very tough. Its aim is to acquire the wealth of competitors, and not necessarily by fair means. When it resorts to theft or other unfair methods it is more like piracy or privateering, sponsored as it often is by States. Measures such as trade embargos, for example, which can deprive populations of essential goods, are not economic warfare, but rather economic strategies used for political aims, a stage aimed at avoiding “real” war.

Almost all countries seek to secure competitive advantage for their economic players and their research, and support them, either openly or more discreetly. Since the 1980s, the most powerful country on the planet, the USA, has developed a legal arsenal that aims to uphold its economic and political power, sometimes in overt contradiction with the tenets of free trade advocated elsewhere.

Within the country, freedom of investment has since 1975 been controlled by a committee, CFIUS (Committee on Foreign Investment in the United States). It has been systematically strengthened over the years, most recently in September 2022. Outside the country, extraterritorial laws on embargos and on criminal sanctions for corruption have expanded continuously. Legal action against foreign companies considered on any basis, however tenuous, to fall under US jurisdiction has seen major groups such as France Technip, Alstom, Alcatel-Lucent, BNP Paribas and many others found to be in breach of the law, leading in some cases to companies passed over to competitors. Other countries have set up similar systems, but they have never shown the same strength. This demonstrates that the law is dependent on real power.

The USA has maintained and reinforced its real power within global financial institutions such as the IMF and the World Bank. This power is reinforced by the stellar development of the country’s private funds and its companies with internet and networks capabilities.

Public- and private-sector standards have also become instruments of power on the markets. In Europe, Germany has always set particular store by standards when competing at an international level. China understood this as soon as it joined the WTO, and sought successfully to control the committees that are important for its economy.

At this stage, it is appropriate to take a closer look at law. Beyond its logical role in the signing of international agreements, it has been a major instrument of strategies to secure economic power and dominate international relations. It is an influencing tool that conveys modes of economic organisation, types of social relations and ways of thinking via national and international rules and standards, so establishes what we known as soft power – which is first and foremost a power. For States and private entities such as the big NGOs, major companies and their organisations, the most emblematic of which is the World Economic Forum, influencing law is an important part of the intense competition in trade and political models playing out globally.

As a response to the Washington Consensus in particular and to, in their view, establish more balanced international relations than the social order essentially focused on the West, in 2001 the new powers such as China, Russia and their allies founded the Shanghai Cooperation Organisation. We are seeing this strengthen significantly at the present time, in particular in relation to the war in Ukraine. From the start, this organisation’s reach was more than just economic. It aimed, and today aims more than ever, to bring together around the founders developing countries, especially former colonies, and to create a new world order centred on Shanghai, to challenge the current Washington-focused one. At the same time, the countries of the Arabian Peninsula were putting in place their own international power strategies, based on their own resources and any influence they may have in the Muslim world.

Alongside competitions relating solely to trade, underlying conflicts linked to battles for power have multiplied as the world population has grown and technology has developed. These relate to water, traditional and alternative energy sources, ores, rare metals and innovation developed through R&D – not to mention weapons of course. And these are only examples. This always has and still does affect international relations, with western, Chinese, Russian, Turkish and other strategies operated in developing countries rich in these natural resources. The aim is to eject competitors, and even predation is not off-limits. This can be seen in numerous African countries.

Politico-economic alliances grow up. Some of them are improbable, signed between States with completely different, or even opposing, legal norms, such as those on the Arabian Peninsula. Strong and compelling economic links, in particular where national debt is held by foreign States or funds, have led to public or more discreet political alliances in complete contrast to the values promoted through other channels. Regional political organisations such as NATO, which some saw as weaker for a time, have found a new lease of life.

There has been no lack of actual wars, and these accelerated from the 1980s, with the Falklands war and wars in Afghanistan, Yugoslavia, Iraq, Libya, Yemen and others, and of course currently in Ukraine. There have been multiple “local” wars between nearby countries, resulting from territorial claims over land or sea, languages, religions, etc. Often, these have historical bases, sometimes they can be used “by chance” for other ends, in particular economic. Although the causes are invariably complex and always different, and although these seemingly national conflicts are often fuelled by external agents, there is always some economic factor involved. And the post-conflict reconstruction always calls for colossal projects.

We can clearly see that neither the network of international economic treaties and agreements, nor the work of multilateral economic and financial entities, nor the development of a common position now voiced by almost all countries on saving the environment, sustainable development and the climate has avoided conflicts since the 1980s. In fact, they have intensified over the last few years. Grotius’s theory looks doubtful. Might Marx’s theory under which international capitalism would develop until it finally collapsed, littered with wars, be more accurate?

Fortunately, we can see exceptions to this sad observation. States which are geographically close and have often been in conflict over the centuries have seen peaceful relations develop thanks to very solid regional economic agreements and the growth that has followed. Strong economic integration appears to be a factor in lasting peace. This can of course be seen in the case of European countries, united within the European Union, whose history is familiar to us. The same phenomenon can be seen within the ASEAN (Association of Southeast Asian Nations), created in 1967. The question remains as to where the cursor should be placed between economic and political integration in order to ensure success.

With the new world order being put forward by China, its allies and countries with no other option, the “international community” may well no longer be solely a western one. The war in Ukraine and the fate of Ukraine itself, Russia and Europe will be major turning points in these developments.

Towards a New World Order?

Has the move away from sovereignty and national identities and towards economic and financial interdependence eroded international relations? Has the reality of harsh conflicts between national powers suddenly caught up with us? It is clear that, at the very least, the structures of the international system created during the post-war era of 1945 need to be completely adapted. Let us hope that the world will find new ways of cooperating, within which the economic and political aspirations of the new powers cannot be swept aside. The major challenge for international relations today is to satisfy the clamour for a “new world order”. A major nonaligned movement emerged from the 1955 Bandung Conference but fell away. Could this movement rise up again, renewed, to balance a world that is too uni- or bi-polar? France and Europe could stand to benefit. In any case, it is urgent for them to establish their conceptual positions in order to influence the burgeoning new world order, if they wish to keep their places on the list of global powers.

Regardless, it appears that the global interdependence of trade under the aegis of the existing multilateral organisations is no longer sufficient to pacify international relations on its own. It is important that more intense economic rivalry is not allowed to have the very opposite effect. Even if, contrary to the beliefs of Carl von Clausewitz and to quote Michel Foucault, “politics is a continuation of war by other means,” it is always preferable to it, in particular for managing the economy on any level. In any case, politics is making a major comeback, and diplomacy, its peaceful corollary on the international stage, is more indispensable than ever.