170 ERIK GARTZKE between economic freedom and interstate peace has deep The chief challenge to the arguments of Angell and intellectual roots,though the liberal political economy other political economists is that they turned out to be tradition has received little attention in recent decades.22 wrong(Carr 1939;Morgenthau 1948).Two world wars Enlightenment figures like Montesquieu and Smith ar- and associated economic upheaval reversed the trend to- gued that market interests abominate war.Paine wrote ward globalization and dissolved optimism about a capi- that"commerce diminishes the spirit,both of patriotism talist peace.24 Cold war tensions ensured that scholarship and military defense"(cited in Walker 2000,59).Cob- was preoccupied with balancing and deterrence (Jervis den called trade "the grand panacea"([1867]1903,36). 1978;Richardson 1960;Snyder 1961;Waltz 1959,1979), Mill saw market forces as"rapidly rendering war obsolete" and that subsequent generations of researchers remained (1902,390).Angell argued that it had become "impossi- skepticalabout the prospects for liberal peace(Waltz 1970, ble for one nation to seize by force the wealth or trade 1999,2000).These same events led to the long hiatus of another...war,even when victorious,can no longer in democratic peace research.However,when interest in achieve those aims for which peoples strive"(1933,60). liberal peace returned,attention centered on democracy. Angell (1933)serves as a useful point of departure Kantian theory was given a thorough rewrite in an attempt in attempting to identify how capitalism contributes to to conform to the evolving evidence,while the capitalist interstate peace.Angell highlights two processes thought peace received little attention. to diminish the appeal of conquest among countries with Of the factors emphasized by liberal political modern industrial economies.First,changes in the na- economists,trade has been by far the most closely evalu- ture of production make it difficult to cheaply subdue and ated in contemporary scholarship(Bliss and Russett 1998; to profitably manage modern economies through force. Keohane and Nye 1989;Oneal and Ray 1997;Oneal et al. Industrial economies are increasingly dependent on in- 1996;Onealand Russett 1997,1999a;Polachek 1980,1997; puts that are more easily and cheaply obtained through Polachek,Robst,and Chang 1999).25 Yet,of the elements commerce than through coercion.Relating tales of Viking of global capitalism,trade is arguably the least impor- raids on the English countryside,Angell asks why,now tant in terms of mitigating warfare.Classical political that the tables have turned,he did not see "our navy economists had yet to consider the strategic nature of con- loading up a goodly part of our mercantile marine with flict(Schelling 1966).Iftrade makes one partner more pli- the agricultural and industrial wealth of the Scandina- ant,it should allow other states to become more aggressive vian peninsular"(1933,103).Governments,like individ- (Morrow 1999;Wagner 1988),so that the overall decline uals,choose between trade and theft in obtaining needed in warfare is small or nonexistent(Beck,Katz,and Tucker goods and services.Modernity made it easier to profit 1998;Gartzke,Li,and Boehmer 2001).Economic devel- from production and trade,and harder to draw wealth opment,financial markets,and monetary policy coordi- from conquered lands or confiscated loot.23 nation all arguably play a more critical role in promoting The second process Angell outlines involves eco- peace(Gartzke and Li 2003).Much of the impact of free nomic globalization.The integration of world markets markets on peace will be missed if much of what com- not only facilitates commerce,but also creates new inter- prises capitalism is omitted or ignored. ests inimical to war.Financial interdependence ensures What are the "aims for which peoples strive,"which that damage inflicted on one economy travels through Angell mentions?Much like realists,classical political the global system,afflicting even aggressors.Angell imag- economists assumed that warfare results from resource ines a Teutonic army descending on London:"the German competition.If there are other reasons why nations fight, General,while trying to sack the Bank of England,might then some wars will occur,despite the basic validity of capi- find his own balance in the Bank of Germany had van- talist peace arguments.It is then necessary to revise,rather ished,and the value of even the best of his investments than reject out of hand,economic explanations for lib- reduced"(1933,106-7).As wealth becomes less tangible, eral peace.This article next offers the outlines of a revised more mobile,distributed,and more dependent on the theory of capitalist peace. good will of investors,it also becomes more difficult to coerce (Brooks 1999;Rosecrance 1985) 24Kant himselfis pessimistic about human nature:"the natural state 2Notable exceptions include,but are not limited to,Mousseau is one of war."Citizens curb the warlike tendencies of leaders,the (2000),Tures(2004),and Weede(2003,2004,2005). same citizens that are in turn constrained by government.Kant 2The first edition appears in 1909 under the title Europe's Optical explicitly rejects the notion that individuals or nations are able to cooperate spontaneously."A state of peace,therefore,must be Illusion.Subsequent printings appeared in 1910/1912 as The Great established"(Kant [1795]1957,10). Illusion.The world wars are widely viewed as having repudiated Angell's capitalist peace thesis,along with the claims of Kant and 25See McMillan(1997)and Mansfield and Pollins(2001)for reviews Wilson (see Gartzke 2007). of the literature on interdependence and conflict.170 ERIK GARTZKE between economic freedom and interstate peace has deep intellectual roots, though the liberal political economy tradition has received little attention in recent decades.22 Enlightenment figures like Montesquieu and Smith ar￾gued that market interests abominate war. Paine wrote that “commerce diminishes the spirit, both of patriotism and military defense” (cited in Walker 2000, 59). Cob￾den called trade “the grand panacea” ([1867] 1903, 36). Mill saw market forces as “rapidly rendering war obsolete” (1902, 390). Angell argued that it had become “impossi￾ble for one nation to seize by force the wealth or trade of another ... war, even when victorious, can no longer achieve those aims for which peoples strive” (1933, 60). Angell (1933) serves as a useful point of departure in attempting to identify how capitalism contributes to interstate peace. Angell highlights two processes thought to diminish the appeal of conquest among countries with modern industrial economies. First, changes in the na￾ture of production make it difficult to cheaply subdue and to profitably manage modern economies through force. Industrial economies are increasingly dependent on in￾puts that are more easily and cheaply obtained through commerce than through coercion. Relating tales of Viking raids on the English countryside, Angell asks why, now that the tables have turned, he did not see “our navy loading up a goodly part of our mercantile marine with the agricultural and industrial wealth of the Scandina￾vian peninsular” (1933, 103). Governments, like individ￾uals, choose between trade and theft in obtaining needed goods and services. Modernity made it easier to profit from production and trade, and harder to draw wealth from conquered lands or confiscated loot.23 The second process Angell outlines involves eco￾nomic globalization. The integration of world markets not only facilitates commerce, but also creates new inter￾ests inimical to war. Financial interdependence ensures that damage inflicted on one economy travels through the global system, afflicting even aggressors. Angell imag￾ines a Teutonic army descending on London: “the German General, while trying to sack the Bank of England, might find his own balance in the Bank of Germany had van￾ished, and the value of even the best of his investments reduced” (1933, 106–7). As wealth becomes less tangible, more mobile, distributed, and more dependent on the good will of investors, it also becomes more difficult to coerce (Brooks 1999; Rosecrance 1985). 22Notable exceptions include, but are not limited to, Mousseau (2000), Tures (2004), and Weede (2003, 2004, 2005). 23The first edition appears in 1909 under the title Europe’s Optical Illusion. Subsequent printings appeared in 1910/1912 as The Great Illusion. The world wars are widely viewed as having repudiated Angell’s capitalist peace thesis, along with the claims of Kant and Wilson (see Gartzke 2007). The chief challenge to the arguments of Angell and other political economists is that they turned out to be wrong (Carr 1939; Morgenthau 1948). Two world wars and associated economic upheaval reversed the trend to￾ward globalization and dissolved optimism about a capi￾talist peace.24 Cold war tensions ensured that scholarship was preoccupied with balancing and deterrence (Jervis 1978; Richardson 1960; Snyder 1961; Waltz 1959, 1979), and that subsequent generations of researchers remained skeptical about the prospects for liberal peace (Waltz 1970, 1999, 2000). These same events led to the long hiatus in democratic peace research. However, when interest in liberal peace returned, attention centered on democracy. Kantian theory was given a thorough rewrite in an attempt to conform to the evolving evidence, while the capitalist peace received little attention. Of the factors emphasized by liberal political economists, trade has been by far the most closely evalu￾ated in contemporary scholarship (Bliss and Russett 1998; Keohane and Nye 1989; Oneal and Ray 1997; Oneal et al. 1996; Oneal and Russett 1997, 1999a; Polachek 1980, 1997; Polachek, Robst, and Chang 1999).25 Yet, of the elements of global capitalism, trade is arguably the least impor￾tant in terms of mitigating warfare. Classical political economists had yet to consider the strategic nature of con￾flict (Schelling 1966). If trade makes one partner more pli￾ant, it should allow other states to become more aggressive (Morrow 1999; Wagner 1988), so that the overall decline in warfare is small or nonexistent (Beck, Katz, and Tucker 1998; Gartzke, Li, and Boehmer 2001). Economic devel￾opment, financial markets, and monetary policy coordi￾nation all arguably play a more critical role in promoting peace (Gartzke and Li 2003). Much of the impact of free markets on peace will be missed if much of what com￾prises capitalism is omitted or ignored. What are the “aims for which peoples strive,” which Angell mentions? Much like realists, classical political economists assumed that warfare results from resource competition. If there are other reasons why nations fight, then some wars will occur, despite the basic validity of capi￾talist peace arguments. It is then necessary to revise, rather than reject out of hand, economic explanations for lib￾eral peace. This article next offers the outlines of a revised theory of capitalist peace. 24Kant himself is pessimistic about human nature: “the natural state is one of war.” Citizens curb the warlike tendencies of leaders, the same citizens that are in turn constrained by government. Kant explicitly rejects the notion that individuals or nations are able to cooperate spontaneously. “A state of peace, therefore, must be established” (Kant [1795] 1957, 10). 25See McMillan (1997) and Mansfield and Pollins (2001) for reviews of the literature on interdependence and conflict