Globalization and likelihood of war

Let's look at the two graphs by "Long run trends in world trade and Income", by Douglas Irwin of Dartmouth (accessible charts here), but I am going to use his data to demonstrate something else.

First graphs shows trade growth suffered some setback in the 1929 recession. Even though it grew in mid-1930s, export volume/output ratio of 1938 is lower than that in 1919 (reading from the graphs (95/145) / (65/90) = 0.91, i.e., 9% decrease). The trade did not become more interwined between the two wars. 25 years have elapsed.

Now look at the trade growth vs output growth after WWII. Export/output increased by 14/5.5=2.55 times. 44 years have elapsed. (for 25 years from 1950-75 (reading from the graphs (1250/100) / (650/100) = 1.92, i.e., 92% decrease)

  • Over the period from 1950 (when the process of trade liberalization through the early GATT Rounds got under way) to 1994 the volume of world merchandise trade increased at an annual rate of slightly more than 6 per cent and world output by close to 4 per cent. Thus, during those 45 years world merchandise trade multiplied 14 times and output 5 1/2 times.” - WTO

If we ignore minor regional conflicts, which in most cases are related to trade isolation

  • Trade growth = -9%/25 years: war
  • Trade growth = +92%/25 years: no war

This is not a conclusive evidence that globalization would stop war. But this certainly dispels the myth that the world was as interwined in 1914 as it is today (This is inspired by a comment made by Michael Thurton in Cominganarchy)

We have enjoyed (relative) peace for 60 years now (vs 25 years between 1914-1918). There have certainly been many factors and efforts contributing to our peace.

  • Is globalization one of them?
  • Does continuing globalization mean we are going to enjoy more peace?
  • Would the power of globalization interest parties (i.e. multinational), strong enough to sway votes in the powerful democracies to prevent war?
  • Can we quantify the numbers below (Guisinger on Rubenstein's bargain game) ? Certainly CA and CB are much larger than p-x for WWI and WWII, even for the winners; and the gap is only going to increase as a result of globalization
    • p is the present situation; 'favorite outcomes' are the idealized pre-war expectation which never realized in practice, even if one can predict and win a quick war (example, Iraq); CA and CB are the actually costs of war for A and B; x is the outcome of a negotiation.
    • For cost of conflict data and analysis see this


Anonymous said...

Imbalance of trade or high growth would not lead to war. Globalization should prevent war instead of leading to one. It's hard to imagine one nations want to ruin its "buyer country". And if the enemy is not a buyer, the third party - a seller to the potential targeted victim, would stand out to prevent the war.

I guess imbalance of wealth would bring instability.

Red A said...

Also there is a question of democratization that occurs with 'gloablization' or are you only speaking in trade terms?

Sun Bin said...

I focused on isolating one factor, economic integration, where I used trade as an indicator/proxy to quantify economic integration.

Democratization is another factor, which may reinforce economic factor. Because corporations are strong lobbying powers in a democracy, and war hurts corporate interests (except for weapon dealers/contractors/etc). So one need to ensure all corporations have equal or similar influence on the governments.

Curzon said...

# Is globalization one of them?

# Does continuing globalization mean we are going to enjoy more peace?
Not necessarily, no.

# Would the power of globalization interest parties (i.e. multinational), strong enough to sway votes in the powerful democracies to prevent war?
Sway votes, yes. Sway enough votes? Perhaps.

# Can we quantify the numbers below

Sun Bin said...


i agree with you. this is just one of the many measures we can look at.

to add to that, MNC can only sway vote in a democracy. and arms dealer and halliburton sway votes to the other side.

Anonymous said...

Sun bin,
can you clarify your comment that the data in your post dispel the illusion that the world (or more to the point, Europe) was integrated pre-1914? I don't see anything about the world pre-1914 in your post.

Sun Bin said...


The 2 charts only show there had been no growth in world trading between the 2 great wars.

as for pre-1914, i believe there was growth in trading (i think Irwin has a graph showing that, but the indices are broken between 1914 and 1920, which makes it impossible to compare), mainly between europe and ex-europe. but the numbers in absolute terms is smaller or comparable to that of 1920.

again, these charts are for illustrative purpose. they do not constitute a conclusive proof. so we should be careful in drawing conclusion, even though i believe this is a pretty strong evidence that trade relationship is one of the major drivers for not acting stupidly.