Emerging Trends in The Social and Behavioral Sciences

Interdependence, Development, and Interstate Conflict

Item

Title

Interdependence, Development, and Interstate Conflict

Author

Gartzke, Erik

Research Area

Class, Status and Power

Topic

Violence, Conflict and Conflict Resolution

Abstract

A nation's economy is the engine that powers, produces, and procures the weapons of war. Economic interests may benefit from war through increased production or they may oppose contests that promise to interfere with profits from trade and investment. Punitive raids, a major invasion, or an attack from the air may also hamper the productive potential of a nation, encouraging its leaders to think twice before using force.

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Identifier

etrds0190

extracted text

Interdependence, Development,
and Interstate Conflict
ERIK GARTZKE

Abstract
A nation’s economy is the engine that powers, produces, and procures the weapons
of war. Economic interests may benefit from war through increased production or
they may oppose contests that promise to interfere with profits from trade and investment. Punitive raids, a major invasion, or an attack from the air may also hamper the
productive potential of a nation, encouraging its leaders to think twice before using
force.
What relationships link economics and interstate conflict? How can a better understanding of these relationships help limit bloodshed in war and potentially bring
peace? The many ways in which economic processes are tied to the development
and use of military force would seem to support almost any speculation about the
causes and implications of each for the other. Indeed, the literature on war would
appear to have detailed just about every such possibility. Economics may be good
or bad for peace depending on which sets of connections one prefers to emphasize.
Part of this confusion stems from the inherent complexity of interacting two complex
social phenomena in multiple possible ways. Confusion may also arise if the causes
of either or both processes are not well understood. Indeed, the origins and nature of
warfare have only recently begun to reveal themselves, despite centuries of interest
and inquiry.
Simply understanding why nations fight will go a long way to whittling down the
number of ways that economic forces are likely to impact decisions of war and
peace. It will also prove useful to distinguish the effects of different features of
national economies, once a framework is in place (a model) to adequately represent
war, the basic process whose functioning is said to be affected in various ways.
This essay focuses on two economic processes, development and interdependence,
explains why these two are especially worthy of attention, and attempts to lay out
possible avenues for the extension of research into linkages between and among
economic interdependence, development, and interstate conflict.

A LITTLE INTELLECTUAL HISTORY
War has been pondered over for almost as long as it has been practiced.
The Greek general and military historian Thucydides famously attributed
the Peloponnesian War to the rise of Athens as a major power and the threat
Emerging Trends in the Social and Behavioral Sciences. Edited by Robert Scott and Stephen Kosslyn.
© 2015 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

this posed to Sparta. In doing so, Thucydides was really blaming economics,
because it was growing prosperity that made it possible for Athens to create
a powerful navy, intervene in the affairs of neighboring states, and engage
in other actions that drew Spartan ire.1 Thucydides’ decision to indirectly
blame commerce for political instability established an intellectual trend that
persists to this day.
Traditional theories of interstate conflict often possess a core of economic
determinism.2 Politics certainly matters, but only within the boundaries
imposed by sovereign wealth, which itself depends on national economic
prosperity. The most prominent perspective is certainly realism, in which
war is the product of some juxtaposition of national power. Specific claims
about power and war span the possible, from preponderance to parity,
from unipolarity to bipolar and multipolar systems, and both dynamic and
static conceptions of these relationships.3 Attempts to identify a winning
combination through empirical analysis has not proved definitive (c.f.,
Bueno de Mesquita & Lalman, 1988, Wohlforth et al., 2007).4
Regardless of its individual national or collective consequences, power
must originate from some source, and the realist fondness for materialism
makes it clear that power is largely a function of the size of a nation’s economy.5 Waltz (1959, 1979) refined the framework put forward by Morgenthau
(1948) and others, noting that states may generate parity with their enemies
either through internal or external balancing, where the latter involves
aggregating capabilities through alliances and the former consists of arms
racing. Arms racing, and to some extent the availability of capable allies,
depend on an economy to fund military organizations that protect societies
or allow countries to prosecute their greed or grievances against others.6
Poor states cannot conquer and have relatively little ability to project power.
1. “The growth of the power of Athens, and the alarm which it inspired in Lacedaemon, made war
inevitable”. Athenian power of course derived from maritime commerce.
2. Kennedy makes this connection explicit. “The historical record suggests that there is a very clear
connection in the long run between an individual Great Power’s economic rise and fall and its growth
and decline as an important military power (or world empire)” (Kennedy, 1989, p. xxii). Italics from the
original.
3. I do not discuss this literature here. See Nexon (2009) for a recent review. For an argument about the
connection between economic interdependence and the balance of power, see Papayoanou (1996, 1999).
4. Faults Wohlforth et al. for testing a hypothesis that does not actually follow from balance of power
theory and for relying on a historical approach that makes inferences problematic.
5. The close connection between economics and power is reflected in empirical efforts to operationalize the latter in terms of the former. GDP is one of the most common indicators of power, although
researchers have regularly sought to construct more subtle and varied indices. Singer (1987), for example,
develops the Composite Index of National Capabilties (CINC) containing six components measuring
demographic, economic, and military variables. It is not clear, however, that the resulting composite is
meaningfully different from the economic components by themselves. Economic size would also appear
to account for military capabilities (directly) and even population (indirectly. Organski (1958) critiques
unthinking use of GDP to represent power, but his calculations eventually lead him to derive the very
same measure. See Sullivan (1990) and Rothgeb (1993) for an additional discussion of the conceptualization of national power.
6. “Greed and grievance” refer to the motives for conflict, as laid out by Collier and Hoeffler (2004).

Interdependence, Development, and Interstate Conflict

3

At the same time, the weak are easy pickings for the powerful. Rough
military parity, either bilaterally via arming or through coalitions of allies,
creates stability among countries. This “balance of power” forms the basis
of a virtuous kind of political stalemate that again depends heavily for its
origins on economic production.7
If, for realists, the relationship between economic production and conflict is
indirect—connected through the medium of power—for others the effects of
commerce on conflict are much more intrinsic. Optimism about the impact of
economic processes on interstate peace sprang from the rise of the early modern trading state (c.f., Kant, 1957; Montesquieu, 1989). Commerce requires
cooperation, if not exactly amity. Enlightenment thinkers such as Rousseau
and Smith and pamphleteers like Payne were convinced of the pacifying
effects of commerce on human psychology. Trade ensured that nations eventually become populated with commercial interests who prevail on leaders to
rein in conflicts (Angell, 1933; Bentham, 1781; Cobden, 1903). Examples such
as the Concert of Europe and what Karl Deutsch (1957) termed the “North
Atlantic Security Community” serve for many liberal scholars to illustrate
this phenomenon.
More aware of the drawbacks of laissez faire commercial liberalism and
armed with ideologies that emphasized the effects of economic inequality,
socialists (c.f., Hobson, 1938), Marxists (c.f., Lenin, 1970) and others in the
nineteenth and early twentieth centuries were equally persuaded that markets propelled class warfare at home and literal warfare abroad. European
colonialism began with commercial outposts. Firms armed and fought wars
to consolidate markets, protect their profits, and prevent foreign competition. These efforts were then augmented by hybrid “crown companies”
that drew states directly into private enterprise, and were later eclipsed by
sovereigns that had grown rich on commerce. Nations of Europe spent a
considerable portion of the sixteenth through eighteenth centuries fighting
over the very lucrative East Asia trade, or fighting with indigenous groups
to impose mercantilist commercial systems.
It is also possible that trade has no net effect on whether states fight (Gartzke
et al., 2001; Gartzke & Li, 2003), or that net effects are ambiguous, given contrasting incentives and the role of rational expectations in conditioning trade
levels before a conflict (Morrow, 1999). This ambiguity can stem from the
very forces emphasized by competing perspectives in the literature. Nations
in competition have some motive to fight, while trade provides a potential
rationale for restraint, or at least moderation in dealing with international
tensions. The net effect of these contrasting effects is difficult to determine.
Some nations will have intense trading relationships that could present a
7. For discussions of the balance of power, see Bull (1995), Mearsheimer (2001), and Little (2007). For
criticism of the concepts of BOP theory and key deductions, see Haas (1953) and Niou et al. (1989).

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

costly or informative barrier to conflict. Other nations may fight, despite trading ties, if the issues at stake are of sufficient importance. Still other nations
will find that trade, while valuable, is seldom valuable enough to interfere
with the path to war. In the next section, I lay out a logic of war and then
use this logic to discipline and prune available arguments about economic
interdependence, development, and interstate conflict.
A THEORY OF WAR
The problem uniting conceptions of the connections between commerce and
conflict of all stripes is the general weakness of accounts underlying the basic
nature of warfare. Theories that purport to explain how various processes
modify conflict behavior must function by interacting with the underlying
conflict process. Strangely, students of international security have chosen to
operate with very loose conceptions of this underlying process. In large part,
this may be because criticism has been leveled at other portions of established
theory. For example, realism’s many detractors have debated various claims
about relative power or to challenge the ubiquity of motives for war, but few
identify the inadequacy of the basic realist logic of conflict. This is odd given
that this logic does not in fact do very much to explain actual warfare.
If nations fight because of an imbalance of power, then presumably balances
are necessary to end fighting, as balance of power theory implies. However,
this is an unusual disposition of relative power at the end of a war, as Blainey
(1973) and others point out. Indeed, the problem with situational variables
as determinants of war and peace is that the conflicts they produce should
be resolvable through negotiation; materialist theories fall short if they fail
to take into consideration the effects of endogenous bargaining as a more
efficient way of resolving who gets what (Powell, 1999). Warfare is only one
way in which states can pursue their interests. If the distribution of benefits
or prerogatives does not conform with the relative ability to compel or constrain, then countries that negotiate and obtain the bargains that are likely
to result from fighting in lieu of costly warfare will do better in the competitive game of international politics than nations that can only resolve their
differences through force (Wagner, 2007). It is thus not simply the distribution of power that determines war and peace, but the congruence or incongruence between power and benefits of the global system. Nations compete
incessantly not because of power imbalances, but because actors perceive
an incongruence between “haves” and “have-nots” and the distribution of
power.
Even then, it is not power relations per se that lead to conflict, but the
incompatibility of actors’ perceptions of the same. Fearon (1995) places
Blainey’s basic insight that the causes of war reside not in disparities of

Interdependence, Development, and Interstate Conflict

5

power but in incompatible beliefs about power in a rational framework.
Reasoning leaders can find themselves at war for three reasons: First, war can
occur as competitors mistake relative resolve or capabilities, and because
competition generates incentives for actors to conceal true information
about these variables. This “asymmetric information” argument encourages
researchers to find ways that states or other competitors can communicate
more credibly (Schultz, 2001a, 2001b). Second, actors can fight because of a
time–status inconsistency described as a “commitment problem.” If power
relations are shifting over time, so that one actor is declining relative to
another, then agreements between them are unstable, as the rising power
always has an incentive to insist on better terms in the future as it becomes
more capable. The declining power thus has incentives to blunt the relative
power of the rising state, which could lead to war. Commitment problems
appear especially relevant today both internationally (United States and
China) and at the domestic level (rebel groups and governments). Finally,
it is technically possible for nations to fight over issues that are not readily
divisible. The “indivisibility problem” appears to be an infrequent cause of
war as it is often possible to fashion bargains through side payments that
then resolve this motive for war.
DIFFERENTIATING DEVELOPMENT AND INTERDEPENDENCE
Thucydides’ conception of the causes of war highlights two basic ambiguities in studying the relationship between interdependence, development,
and interstate conflict. On the one hand, the causes of war are not clearly
delineated and justified either in deductive or inductive terms. Without an
explicit rationale for the origins of violent conflict, it is impossible to determine whether economic processes are helping or hindering the forces of stability and peace. At the same time, with so many economic processes, who is
to say which ones are causal and which are simply along for the ride? Was it
Athenian affluence (as a steady state), the relatively rapid rise in wealth, the
origins of wealth in the form of foreign trade, or none of these factors that
are to blame for the Peloponnesian War? Could commerce or its effects in
the form of development at times impel and on other occasions deter nations
from going to war?
Development involves at least three processes, each of which impact conflict differently. First, development consists of the accumulation of capital. At
its simplest, wealth facilitates aggression; richer states should be better able to
fund militaries and to provide them with the training, arms, and equipment
to win on the battlefield. This is in fact what we observe. Affluent countries
are able to project power farther, and more effectively than poor countries.
In the first blush of prosperity, this first effect of wealth may be the one that

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

matters most. Nations newly arrived from poverty, such as was the case with
ancient Athens, may be prone at first to seek to right old wrongs, often with
an expansion of military might.
However, winning battles and holding enemy territory are two different
things. As development makes it possible to field militaries more effective in
combat with other regular military forces, it may also make it more expensive and unrewarding to plunder populations and sit as occupiers in foreign lands. Specialization, which makes possible the increased productivity
that lies behind development, increasingly also affects the organization and
performance of modern militaries. Armies optimized for victory in complex
combined arms operations are not ideally suited to policing hostile civilians,
as we have all seen.
The second component of development is an increase in productivity. An
accumulation of wealth encourages increased investment, especially if the
origins of prosperity reside in previous investment. In addition to encouraging specialization, competition for labor should tend to concentrate its use
in the most productive economic sectors. If predation is labor intensive, then
rising productivity should tend to shift labor usage away from this activity;
workers can be more effectively used in production than in predation.
A third element of development related to the second involves a secular
rise in labor prices. With capital abundant, labor is relatively scarce and
real wages tend to increase. The effect is to make labor-intensive processes,
such as most military organizations and particularly foreign occupation,
expensive. Prosperity brings with it the temptation to substitute labor for
capital in military organizations, creating force structures poorly suited to
conquest. Alternately, development can encourage the recruitment of new,
more marginal labor sources to substitute for existing personnel. Rome
recruited “barbarians” along its frontier until its legions became hollow
shells. Much later, European imperialists did essentially the same thing,
relying on indigenous peoples to staff colonial bureaucracies and the
military. The need to substitute away from reliable, but increasingly costly
labor from the metropole is a key factor behind the decline of territorial
empire (Gartzke & Rohner, 2011). Today, the costs involved in subjugating
local territories are such for modern armies that conquest and occupation
have basically become prohibitive. Development has made it impractical to
persist with empire, even if there remain other uses for warfare.
Researchers have argued that development creates “bitter pills,” economies
that are difficult to rule externally (Brooks, 2005; Rosecrance, 1985). However, there is both qualitative (Lieberman, 1996) and quantitative (Gartzke
& Rohner, 2013a) evidence contradicting this assertion. In general, developed countries field powerful, well-equipped militaries that protect their
countries against many threats. Not only would this be unnecessary if there

Interdependence, Development, and Interstate Conflict

7

were no advantage to conquest but it also makes the independent effect
of development on the appeal of conquest for a foreign state difficult to
identify in isolation. The fact that prosperous states are able to engage in
conquest, and have done so eagerly in the past, suggests that a more critical
test of the effects of development is in reducing the appeal of territorial
aggression.
Nor does it follow from the absence of an interest in conquest that development removes motives for all types of warfare. Development leads to a
secular shift in the kinds of fighting nations pursue. One objective for conflict is to capture scarce tangible goods (resources, territory, populations). A
second goal involves dictating behavior to others. Development increases
the value states should have for controlling the terms under which world
politics is conducted. Making other countries behave in certain ways, or dictating their form of government, can have value, especially for states that are
actively engaged internationally and thus experience externalities of other
nations’ policies (Gartzke & Rohner, 2013b).
Finally, one must consider differences between development as a static feature and growth as the first difference of development. Is it the level of prosperity or the trend that matters most? Either story may be told. However, the
most compelling claim about the rapid change in development in the context
of conflict is a pessimistic one. Change matters most in its tendency to generate uncertainty. The greater the difficulty of predicting the future, the more
likely it is that one or more potential adversaries will get things wrong. War
can then occur because at least one side underestimates the development of
an enemy.
At the same time, rapid growth in development threatens stability because
it creates commitment problems. As discussed, nations can fight when they
are unable to fashion durable bargains. A state that anticipates its relative
decline against an adversary has incentives to fight today, rather than lose
tomorrow. Even if an opponent offers generous terms for a bargain, the temptation for the rising power is to renege on disadvantageous offers once conditions favor the challenger. Thus, rapid economic growth can give rise to
warfare that can better be avoided if the change in economic fortunes is not
so precipitous.
The story for economic interdependence is even more complex than for
development. First, the effects of interdependence may operate indirectly,
through development; cross-border trade and other international commercial ties may influence conflict exclusively by encouraging growth, provided
that growth itself either removes motives for fighting or informs the bargaining process. Because commercial ties between economies are disproportionately associated with development, the effects of development on conflict
can easily be mistaken for interdependence, and vice versa. Indeed, the role

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

of development in conflict and peace is probably underappreciated because
these processes are often conflated or confused.
The second, more direct reason for complexity is simply inherent to the process. Interdependence is fundamentally international (dyadic while development can readily be studied monadically). Pairs of countries can vary in
both the size and distribution of their dependence, with some dyads exhibiting large, symmetric trade and others asymmetric trade relationships. The
most popular conception of the effect of trade on conflict involves the idea of
opportunity costs. States that share something of value might be less likely to
fight each other if conflict can be expected to disrupt trade (c.f., Levy, 2003).
However, the loss of trade only occasionally adds more than a marginal value
to the cost of fighting (already very large). Marginal changes in the cost or risk
of conflict are most likely to appear as different offers and demands in bargaining, leaving trading states about as likely to fight as nontrading nations.
Indeed, systemic empirical evidence for the effect of trade on conflict is decidedly tepid (c.f., Beck, Katz, & Tucker, 1998).
Trade is a flow, while conflict is a shock. Fighting may interrupt commerce
episodically, but as long as trade remains profitable, there is no reason why
interruptions should not be temporary and modest in impact. Long, intense
wars will disrupt commerce, but they are also highly costly in their own
right, again making the loss of trade a modest part of the larger picture.
Where states are genuinely reluctant to give up trade, as in dependent relationships where one state owes much of its economy to foreign powers, the
temptation must be for nondependent states to use dependence to extract
concessions, within limits (Wagner, 1988). A more appealing alternative is
to treat interdependence as a preparatory informational mechanism, allowing competitors to reveal resolve short of actual military violence (c.f., Reed,
2003).
While some research on commerce and conflict has focused on evidence
that nations can continue to trade with their enemies in the midst of contests
(Barbieri & Levy, 1999), another approach may be to note that commerce can
generally continue with third parties, even when conflicts interrupt direct
bilateral ties. Recognition of this fact has led to exploration of the elasticities
of substitution in sourcing goods and services elsewhere (Crescenzi, 2002;
Polachek et al., 1999). Others model the effects of trade networks on whether
states fight (Dorussen & Ward, 2008; Hafner-Burton & Montgomery, 2008,
Lupu & Traag, 2011), suggesting that it is the cumulation of indirect effects of
trade and conflict that are most important. Another approach is to consider
the effects of capital rather than trade. Portfolio investment in particular is
much more volatile than the exchange of goods and services and volumes
are larger (Gartzke, 2007).

Interdependence, Development, and Interstate Conflict

9

DIRECTIONS FOR FUTURE INQUIRY
So little is known with any confidence about the relationships between
interdependence, development, and interstate conflict that there can be few
important barriers to future inquiry. Still, the enormous amount of attention
to the subject over decades means that there is a substantial amount of
plausible speculation, and this speculation must be confirmed (or refuted)
theoretically or empirically. Here, a growing consensus about the theory of
war can play an important role. The effects that are most likely to impact
warfare are those that relate most closely to the causes of war. Explanations
for the effects of trade or development on conflict that do not speak to a
compelling model of conflict must be treated as suspect from the outset.
Ruling out plausibilities through estimation will prove much more difficult,
precisely because the precision required is absent from both the theories and
from the available data. Interdependence theory assumes that states value
trade. Presumably this means profits, as the total monetary value of trade is
not in itself a direct indication of benefit to the exporting state. Yet, typically,
empirical research has no information about the profitability of trade ties.
It would obviously be better for the literature if scholars were measuring
something more similar to what the theories imply. Similarly, there is much
room to add to our understanding of how firms and states interact in the
context of development and interdependence. The statist model of trade
can only approximate the forces in question in nonmarket economies,
which of course rules out most of the sample of interest to researchers.
It will also be useful to pursue research on the network, elasticity, and
sectoral nature of trade linkages, research that, as mentioned, has already
begun.
Given the difficulties in measurement, it is tempting to conclude that the
greatest advances will come from theory. Little is known about how trade
and development interact, as I have said. There is room to make this relationship clearer. More theoretical research is also needed on the effects of
capital markets on the conflict behavior of states. The invention of sovereign
debt was believed by Kant, in particular, to be behind the rise of long-term
contests. There is also room to study the role bond markets may play in constraining state discretion. I have begun to examine asymmetry and also the
substitution effects that interdependence has on low- versus high-intensity
conflict. Trade, in effect, creates conditions similar to the classic chicken game,
where fear of escalating conflict to a level that will damage trade should at
once both discourage major disputes between trade partners and increase the
tendency to confront one another with minor conflicts (Gartzke, 2013). The
stability–instability paradox is familiar to students of deterrence, but has not
previously been considered in the context of interdependence (Snyder, 1965).

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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES

Development, too, has been the neglected stepchild of the study of economics and conflict. While much of the effect of monadic variables will
be subsumed in bargaining between states, this would not be the case if
development (i) removes incentives for states to behave aggressively and (ii)
increases the ability of states to resist aggression from others. The absence of
a motive for aggression and the lack of opportunity for opponents to attack
should be sufficient for peace. We must hope that Thucydides got things
wrong because this goes right to the heart of contemporary international
affairs. If the effect of rising wealth in Asia and elsewhere is to create new
capabilities without blunting aggressive instincts, then the world is in for
interesting times. If, instead, prosperity brings with it a preference for profits
over plunder, then the world may finally realize the dream envisioned by
enlightenment scholars centuries earlier.
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ERIK GARTZKE SHORT BIOGRAPHY
Erik Gartzke is Professor of Political Science at the University of California,
San Diego, specializing in International Relations and Formal/Quantitative

Interdependence, Development, and Interstate Conflict

13

Methods. He studies the impact of information on war, peace, and international institutions. His research has appeared in the American Journal of
Political Science, International Organization, International Studies Quarterly,
the Journal of Conflict Resolution, the Journal of Politics, and elsewhere. He
is currently working on two books, one on globalization and the other on the
democratic peace, as well as dozens of articles.
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