Capitalism: The Profitability of Peace and the Cost of War

No development since that of agriculture has influenced the relationship between peace and plenty - historically among the most important of all - on individual, social and collective levels more than the industrial revolu­tion of the eighteenth and nineteenth centuries.

Mercantilists took what is called a zero-sum economic view embedded with bellicosity: as there are a fixed number of resources (commodities, metals, territories, etc.), the only way one country or empire can increase its wealth is at another’s expense, making conflict inevitable and perpet­ual. Mercantilist policies, less land-based than the feudal policies of the recent past, thus encouraged state intervention in the economy to foster favorable trade balances (more exports than imports), protectionist tariffs, state-granted or held monopolies on markets and goods, and the accumulation of gold and silver in national treasuries. Reflecting British mercantilist aims was the series of Navigation Acts enacted from the sev­enteenth to early nineteenth century.

As the historical examples of the previous two chapters show, mercan­tilist theories made economic motives sufficient in themselves for coun­tries and empires to go to war with another, even if religious and political justifications were and still are invoked. Clausewitz’s well-known maxim, “war is a mere continuation of politics by other means,” took on its full meaning with mercantilism.¹ No peace, an a priori transitory illusion according to mercantilists, could be made or maintained between coun­tries and empires without economic considerations first being taken into account. Mercantilist peacemaking is analogous to cutting a coveted pie, where participants politely try to negotiate for larger pieces before resort­ing to violence, requiring the ceremonial repetition of the process without enduring peace ever becoming more probable or plausible: zero sums equal zero peace. In mercantilism’s circular logic, imperial commerce pro­vided material support to national governments the militaries of which backed imperial commerce, a broken business model that made peace an instrument of war and war an instrument of economics.

French political theorist Jean Bodin (1530-96) countered that commerce is always an agent of peace by its ongoing solidifications of mutually ben­eficial relationships between people who might otherwise go to war. His insight, that economic development can be a peacemaking activity, was explored by the school of French physiocrats a century later, the first to hold that economies are governed by immutable laws correlated to peace, rather than pragmatic measures opposed to it as mercantilists contended. Tying social welfare to individual wellbeing, the father of physiocracy Francois Quesnay (1694-1774) held that agriculture is the key to higher standards of living, the strongest safeguard of intra- and international peace. Quesnay and his followers gave shape to the idea of “laissez faire, laissez passer” (“let work, let pass”) in arguing that selective non-interference by govern­ments in economic affairs would increase production, innovation and trade by eliminating restrictions and barriers. Peace prospects would “naturally” improve through material abundance, while providing for state services, limited to protecting the peace, with a single uniform tax. Physiocrats after him also noted that breaking economic laws by nepotistic interventions leads to war, as Saintard did in asking “How can peace prevail among nations when there is abundance only for a few of them... when the riches of the earth, the commodities, flow into one or two centers of Europe, leaving outlying parts in want of them?”²

This line of questioning led some physiocrats to an anti-war stance on purely economic grounds, highly productive since. For example, Louis VXI’s finance minister Jacques Necker advised that “to make war is to sow ten grains in order to gather one,” the Quesnay correlative being that to make peace is to sow one grain in order to gather ten.³ Although the nineteenth-century socialist statesman Louis Blanc advocated state regu­lation as necessary to mitigate economic crises that cause conflicts, he held a physiocratic position on standing armies.

The shift away from mercantilism’s innate bellicosity and towards the notion of free trade friendliness was furthered by Adam Smith’s Wealth of Nations (1776). Whereas the zero-sum thinking of the past and present made peace both implausible and improbable by construing all economic transactions as win-lose, he proposed that voluntary, informed transactions are always beneficial to all parties. Reconfiguring the per­ception of commercial interactions as pacifically cooperative rather than competitively conflict-ridden, Smith’s peace-oriented insight lies in the positive-sum view he put forth. With industrial economies, characterized by divisions of labor and mechanized production methods, the allegorical pie gets bigger for everyone because growth in capacities and exchange values of goods and services - not only stores of gold and standing armies - increases wealth. Individuals as nations must work with not against others to get what they need and want, making peace more plausible and probable. Thus, economic and diplomatic activities merge for the benefit of peace when what is given up in negotiations is of greater value to nations than what they already have or could otherwise get.

For Smith, distinct resources and expertise lead nations to specialize in what they can do better or cheaper than others, creating constructive inter-dependencies between them as between individuals intra-nationally. Devoting resources to mercantilist militarism makes no sense when they could be used for trade or economic development instead, a mainstay argument for liberal anti-war activists, based upon which he proposed that England divest itself of its colonies:

A great empire has been established for the sole purpose of raising up a nation of customers who should be obliged to buy from the shops of our different producers all the goods with which these could supply them. For the sake of that little enhancement of price which this monopoly might afford our producers, the home-consumers have been burdened with the whole expense of maintaining and defending that empire. For this purpose, and for this purpose only, in the two last wars, more than a hundred and seventy millions has been contracted over and above all that had been expended for the same purpose in former wars. The interest of this debt alone is not only greater than the whole extraordinary profit, which, it ever could be pretended, was made by the monopoly of the colony trade, but than the whole value of that trade, or than the whole value of the goods, which at an average have been annually exported to the colonies.⁵

The conditions for peaceful collaborative growth to occur are in Smith’s view that rational self-interest motivates individuals, nations and empires to participate in economic activities of their volition, and that these eco­nomic activities are free of restrictions. In this way directing “industry in such a manner as its produce may be of greatest value,” an individual like a nation or empire “intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” Smith describes the end towards which the invisible hand guides as society’s “best interests,” only implicitly including an overall decrease in conflicts by an overall increase in prosperity.

Like Smith, his friend Jeremy Bentham (1748-1832) held that “all trade is in its essence advantageous - even to that party to whom it is least so,” and “all war is in its essence ruinous; yet the great employments of government are to treasure up occasions of war, and to put fetters upon trade.”⁶ He even went so far as to say that “peace may always be had by some unessential sacrifice.”⁷ However, a lawyer who preferred pursuing reform to practicing, he approached the economics of peace from a dif­ferent angle than Smith. Bentham’s famous principle, “the greatest hap­piness for the greatest number,” made him the fountainhead of utilitarian perspectives on peace, which see the most promising peace as the one that can be spread widest, sometimes and to its detriment regardless of its qualities. This principle, as the foundation of morals, law and economics, was for Bentham the standard by which the utility of pubic policies and institutions ought to be judged, whether geared towards peace or not. By utility, he meant that which tends to produce benefit, advantage, pleasure, good, or happiness, or to prevent the happening of mischief, pain, evil, or unhappiness to the party whose interest is considered: “if that party be the community in general, then the happiness of the community; if a par­ticular individual, then the happiness of the individual.”⁸

Enhancing this definition into a process, Bentham presents pleasure and pain as governing forces of human activity, their properties as gauges of and guides to individual, social and collective decisions: the extent, intensity, duration, certainty or uncertainty, proximity or remoteness, fecundity (the probability of causing the same sensation) and purity (the probability of causing the opposite sensation) of pleasure and pain can be quantified to form qualitative opinions or strategies. Bentham applied his “hedonic calculus” to war, ranking it low on the utility scale as a “mis­chief” highest on the pain scale, impending “indiscriminately over the whole number of members in the community.”⁹ While, in countering prevailing notions of natural laws of nations that all must invariably obey, Bentham the legalist coined the term “international law”to convey utility­based consensus, Bentham the economist did not apply his calculus directly to peace. By doing so, distinctive definitional and analytical potentials emerge: in a general sense, peace and peacemaking are always useful because they maximize pleasure and minimize pain; in particular cases, they can always be comparatively evaluated by properties of pain and pleasure to develop optimal, conditional peace plans and learn from their implementations.

Smith’s laissez-faire and Bentham’s utilitarian perspectives on the eco­nomics of peace were expanded as well as refined by Bentham’s close com­panion James Mill (1773-1836) and other members of the “classical school” of British economics, classical insofar as capitalists are concerned. Mill also condemned war for its disastrous economic consequences, and mercantilist imperialism for being an aggressive economic system infused with militarism, arguing for its replacement by mutually beneficial free trade among independent international partners. Only defensive armed forces would then be needed and would in time become unnecessary. Even in economically motivated wars, nations expend wealth accumulations and productive capabilities (capital), decreasing their post-conflict eco­nomic capacities; perpetual industrial peace could, in theory and contrast, indefinitely increase nations’ economic capacities. For Mill, capital’s utility thus lies in providing for (a) productive conditions of prosperity in which peace is most likely, and (b) contingencies that may threaten existing peaces within or between nations. The idea that, through free trade and the utility of capital, enrichment without conflict is possible was more fully explored by Mill’s friend, David Ricardo (1772-1823). His innovative analyses of the value of labor led him to the notion that economic compe­tition can diffuse or act as a substitute for war and support peace by a conscious consumerism. Taking others’ needs, resources and means into consideration along with their own, individuals like nations can use “comparative advantages” to produce and trade goods that are in demand:

Under a system of perfectly free commerce, each country naturally devotes its capital and labor to such employments as are most beneficial to each. This pursuit of individual advantage is admirably connected with the uni­versal good of the whole. By stimulating industry, by regarding ingenuity, and by using most efficaciously the peculiar powers bestowed by nature, it distributes labor most effectively and most economically... by increasing the general mass of productions, it diffuses general benefit, and binds together by one common tie of interest and intercourse, the universal society of nations throughout the civilized world.¹⁰

Competitiveness, then, need not mean the militaristic mercantilist ability to monopolize or take away, but the pacific capitalistic ability to meet needs and keep customers.

The leading liberal of the times, John Stuart Mill (James’ son, 1806­73), argued further that free trade and unrestrained economic develop­ment can end war and guarantee world peace by the individual liberties and private property they presuppose:

Before, the patriot, unless sufficiently advanced in culture to feel the world his country, wished all countries weak, poor, and ill-governed, but his own: he now sees in their wealth and progress a direct source of wealth and progress to his own country. It is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it. And it may be said without exaggeration that the great extent and rapid increase of international trade, in being the prin­cipal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the char­acter of the human race.¹¹

Hence, interdependencies created by specialization lead to reciprocal rela­tionships in diversified, integrated economies, local or global, which act as guarantees of peace. The Mills’ and Ricardo’s unabashed optimism regarding capitalist economics of industrial peace stands in stark contrast to the pessimism of Thomas Malthus (1766-1833). He held that scarcity of resources and national territorial limits combined with unchecked pop­ulation growth lead to civil and international wars, which by eliminating large numbers of people prevent further ones, but only temporarily. Only when population levels are optimized on an ongoing basis, according to Malthus, will intra- and international peace be assured. The idea that peace could be a result of widespread death or other undue hardships was denounced in a statement by statesman Benjamin Disraeli (1804-81) regarding the principle of peace at any price. “That doctrine,” he pro­claimed in an 1844 speech, “has done more mischief than any I can well recall... It has occasioned more wars than any of the most ruthless con­querors. It has disturbed and nearly destroyed that political equilibrium so necessary to the liberties and the welfare of the world.”¹²

By the mid nineteenth century, free trade liberalism had become a mainstream in British policy and a defining characteristic of the Pax Britannica, heralded by the Frenchman Michel Chevalier as a practical model applicable worldwide. Still other approaches to improving peace prospects through economics were put forth in France and Germany during the same period. In working out the laws of supply and demand, Jean-Baptiste Say (1767-1832) proposed that the science of economics can aid in establishing and maintaining the material conditions of peace. Economists can in this way take up the roles of peacemakers by raising public awareness of, giving shape to, negotiating and implementing such material conditions within and between nations or empires. A science of peace, as a sub-field of economics, could for example aid in exposing the wastefulness of war and provide arguments for eliminating military expenditures, which would decrease the likelihood of invasions by the for­mation of alliances impossible at current levels of militarism. Say also identified economic war tactics such as sanctions, trade restrictions, embargos, boycotts, as alternatives to armed forces, but renounced them as self-defeating measures: in diversified and integrated economies based on free trade, disrupting chains of supply and demand affects the eco­nomically derived peace of all market participants negatively. What Say suggested, arguably for the first time, is that quantifying the conditions, causes and attributes of peace and its absence not only makes peace mea­sureable, but in so facilitating evaluations and continual improvements of policies and their implementations, makes peacemakers into scientists in that they can draw upon the process of trial and error through experi­mentation.

Along these scientific peacemaking lines, progressive in the dual sense of a necessary series of steps and ongoing betterment, the leading member of the historical school of economics in Germany, Gustav von Schmoller (1838-1917), contended that:

The progress of the nineteenth century beyond the mercantilist policy of the eighteenth depends - keeping to this thought of a succession of ever larger social communities - on the creation of leagues of states, on alliances in the matter of customs and trade, on the moral and legal community of all civ­ilized states, such as modern international law is more and more bringing into existence by means of a network of international treaties... The strug­gle of social bodies with one another, which is at times military, at other times merely economic, has a tendency, with the progress of civilization, to assume a higher character and to abandon its coarsest and most brutal weapons. The instinct becomes stronger of a certain solidarity of interests, of a beneficent interaction, of an exchange of goods from which both rivals gain.¹³

Frederic Bastiat also argued that competition and conscious consumerism are conducive to peace in Economic Harmonies (1863): “Superficial minds accused Competition of introducing antagonism among men. This is true and inevitable as long as one considers them only as producers; but if one takes the consumption point of view, then Competition itself will bring together individuals, families, classes, nations and races, united by universal brotherhood relations.”¹⁴ In his Peace and Freedom, or the Republican Budget of a year later, he proposed an immediate and com­plete disarmament of France to place the country on a sound economic and political footing which other countries could look to for inspiration. Free trade, for Bastiat, is in everyone’s best interests, especially the working classes whom war affects most, because it ensures peace better than political solution can. Leon Walras, in Peace Through Social Justice and Free Trade (1907), combined Say’s, von Schmoller’s and Bastiat’s views, proposing that economists act as advisors to government, giving politicians “the means to establish absolute free trade and, by this very fact, to ensure universal peace.”¹⁵ In the same spirit, Passy predicted that “One day, all barriers will fall; one day the human race, continually united by ceaseless transactions, will constitute a single workshop, a single market, a single family.”¹⁶ However, by this time, mercantilism was on the rise again, and a new set of economic principles with old roots was being proposed to make and maintain peace.