Copeland: Economic Interdependence and War

Copeland, DC. 1996. “Economic Interdependence and War: A Theory of Trade Expectations.” International Security 20:5-41.

“The prolonged debate between realists and liberals on the causes of war has been largely a debate about the relative salience of different causal variables. Realists stress such factors as relative power, while liberals focus on the absence or presence of collective security regimes and the pervasiveness of democratic communities” (5).

“Liberals argue that economic interdependence lowers the likelihood of war by increasing the value of trading over the alternative of aggression…Realists dismiss the liberal argument, arguing that high interdependence increases rather than decreases the probability of war” (5-6). Different periods in time can be used as supports for either theory, and the results appear to be problematically correlated.

Copeland presents a theory of trade relations that tries to overcome these problems. “The theory starts b y clarifying the notion of economic interdependence, fusing the liberal insight that the benefits of trade give states an incentive to avoid war with the realist view that the potential costs of being cut off can push states to war to secure vital goods. The total of the benefits and potential costs of trade versus autarchy reveals the true level of dependence a state faces, for if trade is completely severed, the state not only loses the gains from trade but also suffers the costs of adjusting its economy to the new situation” (6). “Trade expectations theory introduces a new causal variable, the expectatt4ions of future trade, examining its impact on the overall expected value of the trading option if a state decides to forgo war” (6). “Levels of interdependence and expectations of future trade, considered simultaneously, lead to new predictions” (7). “Interdependence can foster peace, as liberals argue, but this will only be so when states expect that trade levels will be high into the foreseeable future” (7).

The liberal argument that free trade incentivises nations towards making peaceful decisions was first made popular in the 1850s by Richard Cobden. “Realists turn the liberal argument on its head, arguing that economic interdependence not only fails to promote peace, but in fact heightens the likelihood of war” (10). This realist logic is most clearly made by Waltz and Mearsheimer, though it has its roots in mercantilist thinking of the 1800s. “Mercantilists saw states as locked in a competition for relative power and for the wealth that underpins that power” (11).

“While the liberal and the realist arguments display critical differences, they possess one important similarity: the causal logic of both perspectives is founded on an individual state’s decision-making process. That is, while the two camps freely use the term ‘interdependence,’ both derive predictions from how particular decision-making units—states—deal with their own specific dependence” (12).

“The main difference between liberals and realists has to do with their emphasis on the benefits versus the costs of interdependence” (12).

“…these theories [realism and liberalis] lack an understanding of how rational decision-makers incorporate the future trading environment into their choice between peace and war” (16).

“For the purposes of forging strong theories, however, trading patterns cannot be simply assumed a priori to match the stipulations of either liberalism or of realism. Trade levels fluctuate significantly over time, both for the system as a whole and particularly between specific trading partners, as the last two centuries demonstrate” (16-7).

“From consideration of the expectations-of-future-trade variable along with a state’s level of dependence, one can derive a consistent deductive theory of state decision-making showing the conditions under which high interdependence will lead to peace or to war” (17).

On page 24 there is a very nice overview of the difference between liberal, realist and trade expectations theory.

The theory is then applied to Germany and WWI and Germany and WWII.