There’s  a very interesting “Room for Debate” section on NYTimes.com on the efficacy of economic sanctions.  I encourage you all to read it, but let me add my own take.

There are three pieces of “common knowledge” in the wider debate about sanctions:

  1. Economic Sanctions are a valuable and useful tool for encouraging good behavior or penalizing bad behavior.
  2. Economic Sanctions work better when they are multilateral; that is, the more countries that agree to the sanctions, the more powerful they will be.
  3. Economic Sanctions, if not implemented properly, harm the wrong people.

It turns out that none of these assertions are nearly as simple as they first appear.

First, let’s deal with the overall effectiveness of sanctions.  In particular, we need to distinguish between two separate concepts:

  1. Economic Sanctions can force a regime to change policies that are already in place.
  2. The credible threat of economic sanctions can prevent a regime from enacting policies that would be harmful to the sanctioning country.

There is only one case that I know of–or that most of my professors and colleagues in graduate school knew of the first phenomenon: South Africa’s decision to revoke apartheid.  In that case, it does seem that the harsh economic sanctions by the United States, and particularly by the English Commonwealth, had at least some impact on South Africa’s decision to abandon apartheid.  But in my three years in graduate school–and yes, it came up a lot–I never heard a convincing case of economic sanctions ever working anywhere else to change a regime’s bad behavior.  Meanwhile, every attempt to study the problem statistically always came down solidly on the side of “sanctions are ineffective.”

On the other hand, there are numerous examples of the threat of economic sanctions contributing to a country’s decision NOT to enact a certain policy.  This kind of thing happens in our relationship with Europe all the time: France threatens to change their regulations in a way that would harm American imports, we threaten to raise tariffs or forbid the import of certain French goods if they do, France backs down.

So what’s the difference?  Why do sanctions almost never work in the one case, but commonly work in the other?

My personal theory is that it has to do with both the depth of interaction and with prospect theory–the idea that we value potential losses more highly than we value potential gains.  Think of it this way: we already have little or no trade with Iran, North Korea, Cuba, Syria… you know, the countries that we might most want to sanction.  Increasing our sanctions against them won’t have a huge impact on their bottom line.  At the same time, while the United States is potentially a huge market for the goods of those countries, their leadership doesn’t necessarily value that potential gain very highly… especially because those regimes have figured out how to successfully remain in power in an environment in which the United States is the enemy.  The Castro regime has no problem existing in a world in which the United States sanctions them; if the United States allowed free trade with Cuba, that would create a substantially different economic and political environment in Cuba… and THAT might be dangerous.

On the other hand, we deal with France quite a bit.  We have a close relationship with them already, both economically and politically.  Damaging that political relationship too much could be dangerous to French politicians, just as harming that economic relationship even a little could have huge ramifications for the French economy.   In South Africa’s case, their largest trading partners implemented new sanctions based on an old policy–a pretty rare occurrence.  But those sanctions were effective because they fundamentally destabilized the South African economic and political environment, thereby making further destabilization (by eliminating apartheid) less of a risk.

Which brings us to Common Knowledge #2: the strength of multilateral sanctions.  Almost every study I’ve ever read on the subject actually says that multilateral sanctions are not any more effective that unilateral sanctions; I even remember a couple studies indicating that they were LESS effective.  This was often framed as a problem of shirking; if Country A wants to sanction Country X, A will put resources into enforcing those sanctions.  Now, maybe A wants B to sanction X as well, so A tries to bribe or bully B into doing so.  B eventually agrees…  but agreeing to pass the law, and putting resources into enforcing that law are very different things.  B ends up shirking its responsibilities.  Meanwhile, A might decide that “well, if B is sanctioning them, then we can spend fewer resources on enforcing our own sanctions.”  After all, sanctions don’t just harm the other guy; they also harm your own businesses.  A’s companies might want to profit from the lack of competition from B’s companies when it comes to selling their products to X.

And finally, there is common knowledge #3: Sanctions often (usually?) hurt the wrong people.  They hurt commoners, not the elite or the politicians.  There is a lot of truth to this: rich people and governments can always find ways around sanctions.  The US forbids exports of X Boxes to Iran (and yes, we actually do).  But rich or powerful Iranians can get on a plane, fly to Bahrain, buy all the X Boxes that they want, and ship them to Iran.  Sure, the X Boxes are expensive… but they are available.  On the other hand, the rise in X Box prices will prevent people further down the economic ladder from receiving them.  That might not be a big deal with a video game system; but if you replace the word “X Box” with “Rubber”, “Steel”, or “Petroleum”… you can quickly see how raising the price of goods could cause inflation across a country’s economy and have a huge impact on the poorer segments of society.

Of course, hurting a country’s poor often has some combination of the following three effects.  It could take the wind out of an opposition, allowing an oppressive regime to consolidate power.  It could inflame public opinion AGAINST the regime, and spark demonstrations that undermine an oppressive regime.  Or it could give the regime a foreign scapegoat, allowing them to rally their people against the foreign oppressors.  In other words, sanctions–even poorly targeted sanctions that harm a country’s poor–might or might not help to destablize a regime… but there is no way of really knowing ahead of time.

In conclusion:  Sanction your friends, trade with your enemies.  Sanctions can cause your friends to change behavior, at least sometimes.  But they are unlikely to affect your enemies, and might end up helping them.

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