by Robert Kagan
It is conventional wisdom today that the liberal economic order is in everyone’s interest and that all nations in positions of power would support it. As a historical matter, however, very nearly the opposite has been true. Few powerful nations have ever perceived their well-being as intimately tied to a liberal free-trade international economy and had the will and power to create and sustain it. Indeed, in the modern era of nation-states, there have only been two: Great Britain in the nineteenth century and the United States in the twentieth.31 Other great and hegemonic powers of recent centuries—the sixteenth-century Ottomans and Philip II’s Spain, France in the seventeenth and eighteenth centuries, nineteenth- and twentieth-century Germany, and the Soviet Union—had little if any interest in free markets, free trade, and a liberal economic order. Not surprisingly, none of these powers ever attempted to create such an order.
The global free-market economy we know today was created by British power in the nineteenth century, and when Britain faltered between the two world wars, that liberal economic order was not passed smoothly on to a new group of supporters. It collapsed. The only power that might have had the capacity, the interest, and the desire to uphold the global free-market order in the interwar years was the United States, but Americans were not interested in playing that role in the 1920s and 1930s. It was only when the United States took on the task of creating and sustaining a liberal economic order after World War II that it took hold, and then only in those parts of the world not controlled by the Soviet Union or China. The liberal economic order is a choice, not the inevitable product of evolution.
In the case of both Britain and the United States, an order dominated by free markets and free trade reflected the special characteristics and needs of two unusual powers—both advanced industrial democratic capitalist nations and both, crucially, “island” powers with dominant navies. Even Britain and the United States did not always favor a free-trade system. Britain was a mercantilist power from the seventeenth to the early nineteenth century. Both nations went through long periods of protectionism before embracing free trade. But at the height of their power—Britain in the mid-nineteenth century, the United States in the twentieth—both nations stood the most to gain from open markets and free trade. Their advanced industries were dominant. Their dynamic economies benefited from the export of goods and capital. Their powerful navies controlled the seas and dominated the trade routes, while their competitors were generally land powers that depended on them to keep the lanes open.
These two qualities, dominance of the seas and free-market capitalism, made Britain and the United States the fathers of the present globalized economy. For not only did these countries uniquely benefit from an open economic system in which they were dominant, but they also had a profound interest in the economic development of other nations and peoples. Capitalists cannot profit overseas from peoples who neither need nor can afford their goods. Both Britain and the United States had a potent, self-interested motive to aid other peoples, and even to make temporary sacrifices on their behalf, for the long-term goal of creating lucrative markets for exports and investment. This was more true for the United States even than for Great Britain, because the latter came into this phase of economic development still in possession of a vast colonial empire. The United States was, in the Marxist argot, a “neocolonialist” economy that enjoyed the advantages of dominance and access to open markets but without the burdens, costs, and limitations of actually maintaining colonies. The American solution, best employed in the Marshall Plan and in Japan, was to help the postwar economies of Europe and Asia get back on their feet. Americans “provided the public goods necessary for the functioning of efficient world markets because it was profitable for them to do so.”32
It was convenient that Americans’ economic interests blended so seamlessly with their preferred global security strategy. By resuscitating the economies of Europe and Japan, the United States strengthened both as bulwarks against the Soviet Union without an excessive commitment of American forces. It was the perfect capitalist solution to a problem that was strategic as well as economic.
The side effect of this essentially self-interested behavior was a period of unprecedented global economic growth, not only in the transatlantic West but in the developing world, too. As John Kenneth Galbraith once observed, “The experience of nations with well-being is exceedingly brief. Nearly all, throughout history, have been very poor.”33 During the period of American hegemony, the global economy produced the greatest and most prolonged era of prosperity in history. Between 1950 and 2000, annual GDP growth for the entire world was 3.9 percent, as compared with 1.6 percent between 1820 and 1950 and an estimated 0.3 percent between 1500 and 1820. This increasing prosperity was also much more widely distributed around the world than in the past. Even in the late nineteenth and early twentieth centuries, when Britain and other European colonial powers were investing and trading with their growing colonial empires, the principal beneficiaries of economic growth were the Europeans. For the peoples of India, China, and the rest of Asia during the age of British and European colonialism, growth rates were flat (0.03 between 1820 and 1870; 0.94 between 1870 and 1913; 0.9 between 1913 and 1950). After 1950, however, growth rates in Asia matched or exceeded those in Europe and the United States (5.18 between 1950 and 1973; 5.46 between 1973 and 1998).34 Between 1980 and 2002 alone, world trade more than tripled.35
The result was a dramatic improvement in the economic condition of non-European peoples. As the economist Paul Collier has noted, the world at the beginning of this era of prosperity had been roughly divided between one billion rich people and five billion poor, with the great majority of the poor living outside the transatlantic world.36 By the beginning of the twenty-first century, four billion of those poor had begun climbing their way out of poverty. This period of global prosperity has benefited an enormous number of the world’s poor and produced rising economic powers like China, Brazil, Turkey, India, and South Africa in parts of the world that had once known mostly poverty. The United States was not directly responsible for this burst of economic growth. National policies undertaken by Deng Xiaoping in China and by governments in other countries, as well as the hard work and entrepreneurial skills of their peoples, created the new prosperity. But these economic successes took place within an overall environment that was favorable to such efforts, an international system of relative peace in which trade was increasingly free and secure and in which the dominant power had a selfish interest in the economic growth of other nations.
It did not have to be this way. The Soviet Union certainly had no interest in free markets, and neither did China before its turn to market capitalism in the late 1970s. Continental powers lacking great naval capacity in general tend to favor closed markets that they can dominate with their superior land forces. The Chinese Empire effectively closed itself to foreign trade for centuries, until forcibly opened by Western powers. But even modern European land powers have frequently sought closed economic orders. That was the goal of Napoléon, with his Continental System, which aimed to bring Britain, the island power, to its knees by turning the continent of Europe into a closed trading system. It was Germany’s consistent aim, from the late nineteenth century through the time of Hitler, to conquer and control territories in eastern Europe and in France from which it could extract raw materials and labor. Even imperial Japan, though an island power with a dominant navy, sought to set up a closed Asian economic zone, the so-called Greater East Asia Co-prosperity Sphere, which it could dominate and from which it could exclude other great powers.
In the years following World War II, many nations in the developing world did not choose the capitalist market model, partly because they did not believe they could compete effectively with the dominant capitalist powers. The world’s growing wealth did not address the problem of rising income inequality within and between nations. On the contrary, it often exacerbated it. So the free-market, free-trade economy was not adopted willin
gly and gratefully everywhere. Americans, and Britons before them, might believe that the free-market, free-trade system provided developing nations with the opportunity to get richer. But as one scholar has observed, those “opportunities” nevertheless often had to be “imposed upon the reluctant partners … Free trade is the policy of the strong.”37
Americans generally believe that the free market ought always to win out over any alternative simply because it is better. In fact, capitalism can also lose. It periodically discredits itself with its seemingly unavoidable cycles of boom and bust. Capitalist entrepreneurs seeking clever ways to game the system occasionally bring the system itself crashing down. In the 1920s and 1930s, many people in Europe, and even some in the United States, decided that capitalism was, as Marx predicted, doomed to destroy itself. In the 1970s era of high oil prices and stagflation, various statist models, like that of the Japanese, appeared to be more successful. Today, the sub-prime mortgage crisis and the Great Recession, combined with the financial crisis in the European Union, have again raised doubts across the world and led many to ask whether the Chinese model of heavy state involvement may be preferable.
Sometimes the better idea doesn’t win even when it is obviously better. That was the lesson of the early twentieth century. The decade prior to World War I saw economic growth in Europe rise to a remarkable 5 percent a year as the naval “sole superpower” of the day, Great Britain, expanded trade and investment both on the Continent and around the world. “Globalization,” spurred by two new inventions, the wireless telegraph and the oceangoing steamship, was as much a miracle to the people of the late nineteenth century as our own technologically driven globalization has been to us. And it had a similarly stimulating effect on the global economy. John Maynard Keynes called it an “economic Eldorado,” and for a while, as he observed, this remarkable international economic boom was not disrupted by the “projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion.”38
But then, suddenly, it was disrupted. First came World War I, with its tens of millions of casualties and its vast, nation-crippling expense. Then came the turn to state-dominated economies in the fascist countries and the Soviet Union. The new dictatorships that succeeded the failed democracies of the immediate postwar years adapted government-directed war economies for peacetime. The final straw came in the 1920s, with the turn away from free trade toward high-tariff protectionism among the advanced economies and the ensuing prolonged global depression. World War I and the postwar economic and trade policies destroyed the liberal economic order of Europe.
The lesson is that while technological advances, communications and transportation revolutions, and other factors may facilitate freer trade and freer markets, they neither guarantee them nor provide reliable safeguards against the will of powerful nations or against human folly. Many nations may benefit from the liberal economic order and wish to see it preserved. But as World War I demonstrated, nations have interests besides economics.
Wars among great powers, of course, have always been catalysts for international systemic change, obliterating old world orders and giving bloody birth to new ones. They also devastate global economies, reshape norms and ideologies, and transform the way people think, how they live, and what they believe. This was the effect of the Napoleonic Wars and the two world wars, which not only reshaped the international system but produced revolutions in Russia and China that just as significantly shaped the international order. Even more limited great-power conflicts can change the nature of the international system fundamentally: the Franco-Prussian War gave birth to a new, unified Germany, with all that entailed for the future of European peace; the Russo-Japanese War heralded the arrival of Japan as a great power capable of dominating East Asia, with all that entailed for the future of peace in that part of the world.
Many believe that wars among the great powers are no longer possible. The great-power peace that has characterized the era of American dominance is not a temporary respite but a new permanent condition of humankind, a next phase in the progressive advancement of the species that cannot be reversed. A democratic peace theory holds that because democracies rarely go to war with other democracies, the spread of democracy substantially limits the possibility of war. Many believe that economic interdependence also discourages war: nations that trade with one another and depend on each other’s prosperity have no incentive to fight. If the main cause of war throughout history was the struggle to control territory, today many assume that possessing territory is not as important as possessing markets and technology. So why would nations fight for territory?
Some even argue that human beings have abandoned their historic proclivity for violence. They have become “socialized” to prefer peace and nonviolence. The evolutionary psychologist Steven Pinker, noting the dramatic decline in the number of deaths from war, ethnic conflict, and military coups since 1945, argues that man’s traditional inhumanity to man has been driven “dramatically down.” People have greater empathy for one another; they have learned that peaceful cooperation is more rewarding than conflict and competition; they place a higher value on human life.39 With all these mutually reinforcing characteristics of the modern world, it is not surprising that political scientists have concluded that war among the leading powers is not only unlikely but “literally unthinkable.”40
It is a seductive argument. Americans, Europeans, and other children of the Enlightenment tend to believe history has a direction, progressively upward, either in a straight line or as a product of dialectic, as the human species learns to control and shape both the natural world and human nature. The philosophes of the Enlightenment three centuries ago foresaw reason gradually triumphing over the animal instincts of men. In the international realm, they saw the rise of commercial republics as an eventual antidote to war. Increasing commerce among nations, they believed, would soften manners and tame humans’ atavistic, violent impulses. They looked forward to the day when nations would be governed by laws and institutions based on reason.
The heyday of this way of thinking came almost exactly a century ago. “The day of nations is passing,” declared progressive leaders at the dawn of the twentieth century. The “needs of commerce” were “stronger than the will of nations.”41 The British essayist Norman Angell, in his 1910 book, The Great Illusion, noted that the object of war had always been the conquest of territory but that in the modern, commercial era wealth rested “upon credit and commercial contract,” not on control of land. War between the advanced nations would destroy both the aggressor and the victim. Even the conqueror could not benefit from decimated lands and destroyed industries. Therefore war between great powers would be the height of irrationality. In an increasingly democratic and commercial world, neither the people nor the bankers would allow it.42
Angell’s book sold two million copies a century ago, and it was not just pacifists who found the case persuasive. Winston Churchill, as a young member of Parliament, argued that “those powers that have become interdependent upon others, interwoven by commerce with other States,” would never “threaten the tranquility of the modern world.” As for the Germans, “Why, they are among our very best customers, and, if anything were to happen to them, I don’t know what we would do in this country for a market.”43 At the dawn of the twentieth century, even Theodore Roosevelt believed war “between the great civilized powers [had] become less and less frequent” thanks to “the increasing interdependence and complexity of international political and economic relations.”44
There were other reasons to be hopeful then. Many believed that modern weaponry had become so destructive and modern warfare so horrible that nations would never willingly choose to fight.45 The world’s great powers were “losing the psychological impulse to war.”46 The wireless telegraph, the ocean liner, and the vast network of trains were allowing peoples of different nations to learn more about one another. Nationalism and xenophobia
were giving way to a cosmopolitan consciousness. The dawn of the twentieth century also saw a blossoming of international treaties and peace conferences. Dozens of arbitration agreements were signed in which nations promised to submit disputes to tribunals rather than go to war. Peace conferences at The Hague produced treaties limiting certain kinds of weapons and methods of warfare deemed inhumane—the bombing of cities from zeppelins, for instance, and the use of mustard gas.
What gave such weight to all the arguments for a new and permanent peace was the fact that by the first decade of the twentieth century, there had been no war between great powers for almost four decades.47 To those who recalled the nearly constant great-power warfare of previous centuries, this was an astonishingly long era of peace. Instead of viewing it as an interlude, people naturally came to see it as a permanent condition. Something had changed fundamentally. Humankind had evolved and reached a new plateau.
We now know this judgment, which seemed so sensible at the time, was mistaken. The outbreak of World War I, the most deadly and destructive war in history, a mere four years after Angell’s best seller, revealed a failure of imagination on the part of an entire generation. They simply were not able to imagine that national leaders would behave irrationally, that they would sacrifice economic interests, even bankrupt their treasuries, out of a combination of ambition and fear, that they would view territory as a worthy object of war, that they would use all the horrible weapons at their disposal without a second thought—in violation of international agreements whose ink had barely dried—and that in all this they would have behind them the enthusiastic support of their people stirred by a very un-cosmopolitan nationalist pride.
Today we suffer from a similar lack of imagination. Once again the conventional wisdom is that great-power conflict is “literally unthinkable.” Even the arguments are the same: economic interdependence, globalization, the irrelevance of territory, the spread of democracy, the unthinkable destructiveness of war in the nuclear age, the belief that nations and peoples have become “socialized” to favor peace over war, that they value life more and feel greater empathy for others—all these have made great-power war irrational and therefore impossible. And, adding force to these arguments, once again, is the long peace we have enjoyed, the remarkable six decades without great-power conflict.