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Michael Mousseau and Xiongwei Cao

The democratic peace—the absence of war between democratic nations—shook the field of International Relations when it emerged as a widely accepted true fact roughly a quarter-century ago. In the context of the rapid spread of democracy that coincided with the end of the Cold War, the promise was vast: A world of democracies would be a world in peace. The democratic peace had a crucial weakness, however: a convincing explanation. While many potential explanations were developed, only a few produced supportive evidence, and not one yielded evidence supportive enough to render it widely convincing. Into this void emerged the contractualist peace—the dearth of militarized conflict between nations with advanced market-oriented economies. Unlike the democratic peace, the contractualist peace was not discovered after the fact but predicted ex ante. Economic norms theory predicts societies that are market oriented to embrace democracy as the best means to ensure their state’s impartiality in the enforcement of contracts. These societies also seek global markets, and any nation interested in global markets can have no economic incentive of attacking another nation that abides by market rules. On the contrary, contractualist nations are friends, for among nations seeking global markets each is always better off when the other is better off, as wealthier nations make better customers than poorer ones. Economic norms theory thus explains the democratic peace as spurious, with contractualist economy causing both democracy within nations and the peace among them. Early examinations of the economic norms explanation tested for an interaction of democracy and development as a proxy measure for contractualist economy and yielded supportive but not widely convincing results. Then a direct measure of contract-intensive economy was discovered, and the result was striking: Whereas prior studies showed that no two democracies ever fought each other in war defined as one thousand or more battlefield-connected deaths, it now appears that no two contractualist nations have ever experienced even a single battlefield-connected death. About half of all democracies lack contractualist economies, and these nations fight each other about as often as everybody else: There is no democratic peace. Defenders of the democratic peace have made multiple attempts to rescue their observation, but the evidence against them remains overwhelming. Instead it appears that it is market-oriented development that causes both democracy and peace. The implications are more substantial than the democratic peace, since the contractualist peace is far deeper than the democratic one, rooted in common interests and perfect peace rather than mere constraints that only diminish the probability of militarized conflict. It is also more practical, suggesting that global peace can be achieved without a war-inducing crusade to democratize the world: It can be achieved by a peace-inducing campaign for global economic development.


Capitalist peace theory (CPT) has gained considerable attention in international relations theory and the conflict literature. Its proponents maintain that a capitalist organization of an economy pacifies states internally and externally. They portray CPT either as a complement or as a substitute to other liberal explanations such as the democratic peace thesis. They, however, disagree about the facet of capitalism that is supposed to reduce the risk of political violence. Key contributions have identified three main drivers of the capitalist peace phenomenon: the fiscal constraints that a laissez-faire regimen puts on potentially aggressive governments, the mollifying norms that a capitalist organization creates; and the increased ability of capitalist governments to signal their intentions effectively in a confrontation with an adversary. Defining capitalism narrowly through the freedom entrepreneurs enjoy domestically, this article evaluates the key causal mechanisms and empirical evidence that have been advanced in support of these competing claims. The article argues that CPT needs to be based on a narrow definition of capitalism and that it should scrutinize motives and constraints of the main actors more deeply. Future contributions to the CPT literature should also pay close attention to classic theories of capitalism, which all considered individual risk taking and the dramatic changes between booms and busts to be key constitutive features of this form of economic governance. Finally, empirical tests of the proposed causal mechanism should rely on data sets in which capitalists appear as actors and not as “structures.” If the literature takes these objections seriously, CPT could establish itself as central theory of peace and war in two respects. First, it could serve as an antidote to the theory of imperialism and other “critical” approaches that see in capitalism a source of conflict rather than of peace. Second, it could become an important complement to commercial liberalism that stresses the external openness rather than the internal freedoms as an economic cause of peace and that particularly sees trade and foreign direct investment as pacifying forces.