Economic Coercion Is Not an Effective Foreign Policy Tool By Ivan Eland Price of Liberty

November 27, 2006

Many foreign policy experts advocate using economic sanctions to motivate foreign governments to change policy. And, while it may be true that many of these governments could improve their countries with policy reforms, history shows that economic coercion doesn’t work.

Both conservatives and liberals like to use economic coercion. For more than 45 years, conservatives have largely been responsible for attempting to get rid of Fidel Castro by putting the screws to the Cuban population. Yet conservatives always maintained that economic coercion would not get rid of apartheid in South Africa. In contrast, liberals were skeptical that sanctions would get rid of Fidel, but warmly embraced them for use against the repressive South African regime. But measures of economic coercion should succeed or fail through the same processes, regardless of whether the regime is hated by the left or the right.

With some qualifications, economic sanctions usually fail, both economically and politically. Although bans on trade, investment, lending, travel, etc. can bite initially, smuggling and black markets are lucrative and, over time, become rampant. Over the long-term, the best that can be accomplished is to raise the prices paid by the target nation for the things it wants. Because sanctions use economic coercion to try to achieve political ends, attenuation of the economic pain through adaptation lessens the chance that sanctions will produce the desired political outcome. The possibility of political success is further diminished by the oft grandiose goals of the sanctioning nations—for example, sanctions attempting to change the nature of an oppressive regime, such as those proposed against the government of Alexander Lukashenko in Belarus. Furthermore, although apartheid was eventually eliminated in South Africa, the mild international sanctions imposed on that country had less to do with apartheid than the internal social movement for the reform of a ghastly social anachronism.

Also undermining the achievement of sanctions’ political goals is the “rally around the flag” effect. When attacked, either militarily or economically, by a foreign power, the populace of a country usually rallies around the existing leader—no matter how odious he or she may be. Fidel Castro, despite the disastrous consequences of his centralization of the Cuban economy, has been able to blame poverty and economic stagnation on the coercive economic measures imposed by his powerful northern neighbor. In other words, the Cuban people likely would have thrown out Castro long ago if the United States hadn’t declared him “enemy number one.” Also, the most comprehensive international sanctions in world history against Iraq—which at least initially had a grinding and impoverishing effect on the country—were unsuccessful in getting rid of the tyrant Saddam Hussein.

Dictators often have control over their nation’s economy and can redirect the pain of sanctions onto the backs of those in society least able to weather them. Saddam did this in Iraq and Manuel Noriega did the same when harsh financial sanctions were imposed against Panama in the late 1980s. The authoritarian Lukashenko is likely to do the same if the United States imposes the proposed financial and export sanctions against the government of Belarus, its senior officials, and its companies. Belarus’ government controls 80 percent of that country’s economy.

So why do public officials from both parties continue to advocate the use of a policy instrument that has such an abysmal track record? In short, sanctions usually can achieve only modest goals—usually symbolic—but this is of great use to politicians. They can send a signal to their politically important domestic constituencies that they are doing something about a problem short of a costly “over-the-top” military attack. For example, the U.S. government showed the African-American community that it was concerned about racism in South Africa by imposing mild sanctions on South Africa and has signaled, for 45 years, Cuban exiles in the important electoral state of Florida that it wanted Fidel Castro removed from power. No matter that such sanctions had little effect—or in some cases, a counterproductive one—in the target country.

Also, there is a bit of hypocrisy in U.S. policy. Sanctions are often imposed selectively—against only autocratic regimes that the United States doesn’t like or that won’t play ball with U.S. policy. Although the United States actively supports despots in Egypt, Jordan, Pakistan, Saudi Arabia and other nations around the world, both the Executive Branch and Congress have focused their ire on Lukashenko—a thug that local polls say is popular—because Belarus is the one former Soviet country to maintain close economic and political relations with Russia and is resistant to NATO expansion in its neighborhood. Some already say Lukashenko is beginning to resemble a “Slavic Castro,” who receives preferential economic treatment and subsidies from Moscow. In its silent post–Cold War Cold War against Russia, the U.S. superpower is frustrated that it can’t pry away the last major nation in Moscow’s vastly diminished European sphere of influence. But ratcheting up the pressure by imposing economic sanctions will only ensure that Lukashenko does become a genuine “Slavic Castro”—potentially lasting in power for 45 or more years.

The proposed sanctions against Lukashenko’s tawdry regime are only a microcosm of a much larger problem: The tendency of the U.S. government to overuse ineffective, and potentially counterproductive, economic coercion for symbolic purposes.

Alvaro Vargas Llosa is director of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. He is widely published and has lectured on world economic and political issues including at the Mont Pelerin Society, Naumann Foundation (Germany), FAES Foundation (Spain), Brazilian Institute of Business Studies, Fundación Libertad (Argentina), CEDICE Foundation (Venezuela), Florida International University, and the Ecuadorian Chamber of Commerce. He is the author of the Independent Institute books The Che Guevara Myth and Liberty for Latin America.

Ivan Eland is Director of the Center on Peace & Liberty at The Independent Institute and Assistant Editor of The Independent Review. Dr. Eland is a graduate of Iowa State University and received an M.B.A. in applied economics and Ph.D. in national security policy from George Washington University. He has been Director of Defense Policy Studies at the Cato Institute, Principal Defense Analyst at the Congressional Budget Office, Evaluator-in-Charge (national security and intelligence) for the U.S. General Accounting Office, and Investigator for the House Foreign Affairs Committee. Full Biography and Recent Publications

Pierre Lemieux is an economist and co-director of the Economics and Liberty Research Group at the Université du Québec en Outaouais and a Research Fellow at The Independent Institute in Oakland, California.

Alexander Tabarrok is research director at The Independent Institute, associate professor of economics at George Mason University, editor of the Independent Institute books, Entrepreneurial Economics, The Voluntary City (with D. Beito and P. Gordon), and Changing the Guard: Private Prisons and the Control of Crime.

Robert Higgs is Senior Fellow in Political Economy at The Independent Institute, author of Against Leviathan and Crisis and Leviathan, and editor of the scholarly quarterly journal, The Independent Review. Click here for a bio on Dr. Higgs, the noted economist and historian.

William Marina is Research Fellow at the Independent Institute in Oakland, Calif., and Professor Emeritus of History at Florida Atlantic University.

David T. Beito is a Research Fellow at The Independent Institute, Associate Professor of History at the University of Alabama, and co-editor of the book, The Voluntary City: Choice, Community and Civil Society.

William Marina and David T. Beito belong to "Liberty and Power," a group blog at the History News Network.

For further articles and studies, see the Center on Peace & Liberty and OnPower.org.

Nicolas Heidorn is a public policy intern at The Independent Institute in Oakland, California.

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