Integrative Peace

Economic Integration and its Contribution to World Peace

J. A. McCreery

Your car, your phone, your medicine, your machines – all integral to daily life, let alone one’s health or business profits. What would we do without them? You would hope we can produce and control them ourselves. It will remain a hope, though, as these products all rank in Australia’s top 10 imports, our dependency on the profit seeking and grace of other nations immense. 

Australia is not alone in its dependency, as globalization continues on its fiery path economies have become evermore interlinked, world trade increasing momentously since World War II – from 17.8% of worldwide GDP in 1960 to 47.4% in 2005 – levels of imports all around the world jumping sky high. The reliance occurs when the process of international division of labour takes hold. Essentially, if one nation is better at producing something it does so and doesn’t bother producing as much of anything else, it simply trades with other specialised countries to get said item. Australia provides the mines, China and Japan provide the cars. If this were to be taken to the extreme, the result is a host of nations which only create a few things and, as such, are incredibly good at doing so, efficiency increases, prices lower and quality rises. 

Yet each nation becomes highly invested in the other and their economic prosperity, they need each other for the staples of life. So, is this a precursor for peace or a tragic loss of sovereignty?

The most aggressive, expansionist states of both WWI and WW2 were heavily motivated by the need to become an autarchy (economically self reliant), both Facist Italy and Germany sought independence as a means of asserting their independence. These nations’ commitment to achieving such a testament of the deep seated desire for self-sufficiency which embodies the human fear of reliance on others, especially the foreign, for life and growth. 

Would such a rebellion be possible if the Axis powers production base were to only cover a few industries, dependent on other economies for the rest?  The logic follows that if states are dependent on each other for goods and services they would be unable to wage a war without experiencing significant repercussions, those repercussions increased by the following sanctions likely to be incurred from other trading partners. Such a theory is labeled as the liberal peace view and in political science emphasizes that mutual economic interdependence can be a conduit of peace.

Yet the homogenous, fully integrated extreme being considered is far from the reality. Economies are all at different stages of integration, yet more prominently, intra-regional integration and isolation is prevalent. Organisations such as the EU and the CFA Franc bring geographically close countries together, providing mass trade privileges and exclusions to those outside. Such a system could result in a series of independent blocks, amalgamations of economic might. How would conflict between these powers look?

This grouping of nations again echoes back to WWII and the commonly cited reason for both its instigation and its scale, the Alliance system. When a dispute between countries in different alliance blocks occurs, all other nations become involved, leading to a more global, intense war than would otherwise have occured. 

It is unclear which of these two scenarios will happen, or if they will occur in turn. An empirical assessment on the impact of trade integration on military conflict (CATO – NO. 211) showed that an increase in bilateral trade interdependence and global trade integration significantly promotes peace between countries. Yet, studies have also investigated whether interstate reliance increases or reduces the likelihood of military conflict and the results are highly ambiguous, just like the theoretical literature. Perhaps war, perhaps peace – regardless the ever changing dynamic role of economics and global integration is unmistakable.