Capitalizing on the Capitalist Peace

If Americans have learned anything from their well-intentioned, costly efforts in the unforgiving lands of Iraq and Afghanistan, it’s that democratic elections do not ensure freedom. Nor do democratic elections necessarily promote stability, as the post-Arab Spring chaos reminds us. But a new Fraser Institute study helps quantify how building up free-market institutions and promoting economic freedom can strengthen societies by increasing social trust and reducing the risk of war.

Starting from the premise that “adequate finance is a key ingredient for organizing violence against a state,” Indra de Soysa and Krishna Chaitanya Vadlamannati argue that “economic repression and market distortions create conditions that make armed conflict feasible.” These factors “supply the means, motive and opportunity for groups to challenge states because economic distortions spawn underground economies that form the organizational bases of insurgency.” The expansion of free markets and free economic exchange, on the other hand, “marginalizes violence because it binds people meaningfully in a way suited to addressing the collective dilemmas stemming from violence.”

“With economic freedom, people gain when they produce goods and services others desire in mutually beneficial exchange,” the report concludes. “People from other groups become customers, employees, employers, suppliers.” Together, they lay the building blocks for social trust and become essential ingredients in economic expansion — rather than enemies in a zero-sum struggle over scarce resources. In other words, economic freedom raises the costs of violence — and helps remove the incentives and benefits of civil disorder.

Read the full article at The American.