The Capitalist Peace

Author(s): Erik Gartzke

Source: American Journal of Political Science, Vol. 51, No. 1 (Jan., 2007), pp. 166-191
Published by: Midwest Political Science Association
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The Capitalist Peace
ErikGartzke ColumbiaUniversity

It is widelyacceptedthatdemocracies arelessconflictprone,ifonlywithotherdemocracies. Debatepersists,however,about

the causesunderlyingliberalpeace.Thisarticleoffersa contrarianaccountbasedon liberalpoliticaleconomy.Economic
development, free markets,and similarinterstateinterestsall anticipatea lesseningof militarizeddisputesor wars.This
"capitalistpeace"alsoaccountsfor theeffectcommonly attributedtoregimetypein standardstatisticaltestsofthedemocratic
peace.

Which Liberal Peace? First, the historic impetus to territorialexpansion is

temperedby the rising importanceof intellectualand
Thediscovery thatdemocracies seldomfighteachother financialcapital,factorsthataremoreexpedientlyenticed
hasled,quitereasonably, to theconclusionthatdemoc- than conquered.Landdoes little to increasethe worth
racycausespeace,atleastwithinthecommunity ofliberal of the advancedeconomieswhile resourcecompetition
polities.Explanations abound,butaconsensus accountof is morecheaplypursuedthroughmarketsthanby means
thedyadicdemocratic peacehasbeensurprisingly slowto of militaryoccupation.At the same time, development
materialize.I offeratheoryofliberalpeacebasedoncapi- actuallyincreasesthe abilityof statesto projectpower
talismandcommoninterstate interests.Economic devel- when incompatiblepolicyobjectivesexist.Development
opment,capitalmarket integration, andthecompatibility affectswho statesfight (andwhat they fight over) more
offoreignpolicypreferences supplant theeffectofdemoc- thanthe overallfrequencyof warfare.Second,substantial
racy instandard statisticaltestsofthe democratic peace.In overlapin the foreignpolicygoalsof developednationsin
fact,aftercontrolling forregionalheterogeneity, anyone thepost-WorldWarIIperiodfurtherlimitsthe scopeand
of thesethreevariables is sufficientto accountforeffects scale of conflict.Lackingterritorialtensions,consensus
previously attributedto regimetypein standard samples abouthow to orderthe internationalsystemhas allowed
of wars,militarized interstate disputes(MIDs),andfatal liberalstatesto cooperateand to accommodateminor
disputes.' differences.Whetherthis affinity among liberalstates
Ifwarisaproductofincompatible interests
andfailed will persist in the next century is a question open to
orabortive bargaining, peace ensues when states
lackdif- debate.Finally,the riseof globalcapitalmarketscreatesa
ferences worthyof costlyconflict,orwhencircumstances newmechanismfor competitionandcommunicationfor
favorsuccessful diplomacy. Realistsandothersarguethat statesthatmightotherwisebe forcedto fight.Separately,
stateinterestsareinherently incompatible, butthisneed these processes influence patterns of warfarein the
be so onlyif stateinterests arenarrowly definedorwhen modernworld.Together,theyexplainthe absenceof war
conquest promises tangible benefits.Peacecanresultfrom amongstatesin the developedworldand accountfor the
at leastthreeattributes of maturecapitalisteconomies. dyadicobservationof the democraticpeace.

ErikGartzkeis associateprofessorof politicalscienceand a memberof the SaltzmanInstituteof Warand PeaceStudies.Email:

gartzke@columbia.edu. Web:www.columbia.edu/-eg589/. Commentsarewelcomeandappreciated.
I thankCharlesBoehmer,BearBraumoeller, MichaelDoyle,MonicaDuffyToft,PeterFuria,KristianS. Gleditsch,ArmanGrigorian,
J. JosephHewitt,RobertJervis,StephanieNeuman,JohnOneal,JackSnyder,DavidSobek,KennethWaltz,ErichWeede,andseminar
participantsat NotreDameUniversity, TheOhioStateUniversity, the Oslo
the OlinInstitutefor StrategicStudies,HarvardUniversity,
PeaceResearch Institute,theUniversityof Pittsburgh,
PrincetonUniversity,theUniversity of California, andUppsalaUniversity
Berkeley,
forcomments.MenzieD. Chinn,JamesGwartney, andDennisQuinnprovideddata.RichardTuckersharedBTSCSandDYADTSCS. An
earlydraftof thestudywaspresented at theMidwestPoliticalScienceAssociationConference, Chicago,IL,15-28April,2004.Anyerrors
aremyown.
'Additionaltestsofkeyvariables,modelspecifications,
andpossibleconfounding factorsappearintheappendix. AStata"do"filereplicating
allaspectsof theanalysisis available
fromtheauthor.
AmericanJournalof PoliticalScience,Vol.51,No. 1,January 2007,Pp.166-191
o2007,MidwestPoliticalScienceAssociation ISSN0092-5853

166
CAPITALIST
PEACE 167

The notion of a capitalistpeace is hardlynew. claimsof classicalliberalpoliticaleconomists likeMon-

Montesquieu, Paine,Bastiat,Mill,Cobden,Angell, and tesquieu,Richard Cobden, and Norman Angell.As with
otherssawinmarket forcesthepowertoendwar.Unfortu- previousresearch,this study finds supportfor a liberal
nately,warcontinued, leadingmanyto viewasoverlyop- peace,thoughthe key causalvariables,and some major
timisticclassicalconceptions of liberalpeace.Thisstudy policyimplications,areconsiderablychanged.
canbe seenas partof an effortto reexamine capitalist
peacetheory,revisingarguments in linewithcontempo-
raryinsightsmuchas Kantianclaimswerereworked in
Two Traditions of Liberal Peace
to
response evolving evidence of a democratic peace.
Existing empirical research on thedemocratic peace,
whileaddressing Liberalscholarshipdetailstwo pathsto peace,one domi-
manypossible alternatives,providesan
natedby democracy,the otherguidedby the philosophy
incompleteand uneventreatmentof liberaleconomic
processes. Mostdemocratic peaceresearch examines trade of marketeconomics.Thisarticlebrieflyreviewseachtra-
in goodsandservicesbutignorescapitalmarkets andof- dition, offeringa few criticalcomments.
fersonlya cursoryassessment of economicdevelopment
(Maoz and Russett 1992). Several studiesexploretheim-
ThePoliticalTradition
pactofinterests, thoughthesehavelargely beendismissed
bydemocratic peaceadvocates (OnealandRussett1999a; Democraticpeace researchmost often attributesits
RussettandOneal2001).Theseomissionsor oversights intellectualgenesis to Kant'sessay PerpetualPeace,
helpto determine the democratic peaceresultandthus thoughscholars likeAbbedeSaint-Pierre, Rousseau, and
shapesubsequent research, thinking,andpolicyon the Benthamallprovidedsimilararguments prior to Kant.4
subjectof liberalpeace.Thisstudyoffersevidencethat Earlytwentieth-century scholar-statesmen likeWoodrow
liberaleconomicprocesses do in factleadto peace,even WilsonandNicolasMurray Butleradvanced thepacificef-
accounting forthewell-documented roleof liberalpol- fectsof democracy intheirwritings,andto a lesserextent
itics.Democracy cohabitates withpeace.It doesnot,by in practice. Aftera coldwarhiatus,contemporary politi-
itself,leadnationsto be lessconflictprone,not evento- cianslikeBillClintonandGeorgeW.Bushhaveagain
wardotherdemocracies. pickedup the bannerof liberalpeacein an eraof U.S.
Theargument andevidenceprovided herearebound hegemony.5
to drawcriticism. Skepticism in thefaceof controversial Earlystatisticalworkquestioned the liberalconvic-
claimsisnatural, reasonable, even essential
for the cumu- tionthatdemocracies aregenerallylesswarlike (cf.Wright
of
lation knowledge. Thedemocratic peaceobservation 1942).Babst(1964,1972)wasthefirstto identifythespe-
is supported by an exceptionally largeandsophisticated cialdyadicobservation.6 SmallandSinger(1976)drewat-
body of research.2 At thesame time, excessivedeference to tentionto thetopic,paradoxically byseekingto establish
previous conclusions privilegesconventional A
wisdom.3 thatKantwaswrong.Rummel(1979,1983,1985)argued
willingness to doubtthatwhichwehavecometo believe foralibertarian peace,incorporating,amongotherthings,
is a hallmark of scientificinquiry.Indeed,theweightof freemarkets: "Themorefreedomthatindividuals have
existing evidence does not directly contradict this in
study in a state,thelessthe stateengages foreign violence"
as previousresearchhas typicallyfailedto addressthe (1983,27). Doyle(1983a,1983b,1997)examinesthree
traditionsof liberalismexemplifiedbyKant,Machiavelli,
2Empirical regularity cannotbe the only reasonfor broadinter-
est in the democraticpeace.As Cederman(2003)pointsout, the
betweenthe frequencyand intensityof warsis also 4See Jacob(1974) for a compilation of essays.Ceadelnotes of the
relationship periodthat"Theargumentthat'republican'regimeswerenecessary
"lawlike" (literallya powerrule).Thisrelationship hasgenerated for peace,..., wasalreadya near-commonplaceof Anglo-American
littleinterestandreceivedalmostno attentionsinceits discovery radicalism"(2000, 16).
by Richardson (1960).
the best strategyto ensure our securityand to build
5s"Ultimately,
3Accumulation isnotcumulation.Replicationoffersalimitedform a durablepeace is to supportthe advanceof democracyelsewhere.
of robustness. As one authorputsit, "Isit surprisingthatrepeat- Democraciesdon't attackeach other" (Clinton 1994). "Democra-
edlytestingthesameprimaryindependent anddependent variables cies don't go to war with each other. . . . I've got great faith in
generallyproducesthe sameresults?" (VanBelle2006,14).Jervis democraciesto promote peace"(Bush 2004).
(1976)offersanentertaining parablebasedon thewritingsof A.A.
Milne.Whileout hunting"woozles," PigletandWinnie-the-Pooh 6Evenproponentsappearto acknowledgethatdemocraticpacifism
mistaketheirowntracksin thesnowforthoseof theirelusiveprey. is at best a considerablyweakerphenomenon than the dyadicrela-
Asthetwofrightenedcharacters circlebackon theirowntrail,the tionship (Benoit 1996;Chan 1984;Ray2001; Rousseauet al. 1996;
"evidence" of woozlesmounts.... Rummel 1996;Weede 1984).
168 ERIKGARTZKE

and Schumpeter,favoringKantianrepublicanism.7 Levy sawconstitutionalconstraintsasinhibitingthesovereign's

(1988) characterized the democraticpeaceas "lawlike',8 innateproclivitytowardwarfare.Normsexplanationsas-
anticipatingthebulkof quantitativeresearch.'Numerous signananalogousroleto informalprocessessaidto evolve
studieshavenowreporteda negativestatisticalassociation in maturedemocracies(Dixon1993,1994;Ember,Ember,
betweendyadicdemocracyand disputes,crises,or wars, andRussett1992;MintzandGeva1993;Owen1994,1997;
especiallyin the post-WorldWarII period (Beck,Katz, Russett1993).12Constructivistsarguethatwarfareis be-
andTucker1998;Bremer1992,1993;GelpiandGriesdorf coming sociallyunacceptable(Cederman2001a,2001b;
1997;Gleditsch1995;GleditschandHegre1997;Gleditsch Cedermanand Rao 2001; Mueller1989;Risse-Kappen
andWard1997;Hensel,Goertz,andDiehl2000;Hermann 1995, 1997;Wendt 1999).13 Some see the evolutionof
and Kegley 1995, 1996; Hewitt and Wilkenfeld1996; a common identity (Deutsch 1978; Flynn and Farrell
Huth and Allee 2002, 2003; Maoz and Abdoladi1989; 1999).14 Othersclaim that maturedemocraciesdo not
Maoz and Russett 1992, 1993; Morganand Campbell go to warwithstatesthattheyperceiveas democratic,but
1991;Morganand Schwebach1992;Onealand Russett may fight with unrecognizeddemocracies(Weart1994,
1997, 1999a,1999c;Oneal,Russett,and Berbaum2003; 1998).'5
Onealet al. 1996;Raknerudand Hegre 1997;Ray 1993, Constrainttheorieshavebeencriticizedasadhoc and
1995; Russett 1993; Russettand Oneal 2001; Russett, deductivelyflawed(Buenode Mesquitaet al. 1999;Gates,
Oneal,andDavis1998;Senese1997;VanBelle1997;Ward Knutsen,andMoses1996;Layne2003;Rosato2003).Note
and Gleditsch1998;Weede1992).1o thatthestatement"democracies behavedifferentlytoward
Theoriesof democraticpeacehavealso proliferated, each other than towardnondemocracies" characterizes,
in no smallpartbecauseof the difficultyin accounting in broadstrokes, both the observation and manyof the
for the specialdyadicnatureof the observation."Ini- theoriesdesignedto explainthe observation.Effortsto
tial accountsfocusedon linkingdomesticliberalnorms avoida circularitybetweentheoryand evidencebenefit
or institutionsto constraintson the use of force.Institu- most fromnew empiricalcontent(HuthandAllee2003).
tionalexplanationsassertthatelementsof the apparatus Workby Mousseau(2000),Hegre(2000),andMousseau,
of liberalgovernmentinterferewith the exerciseof mili- Hegre,and Oneal (2003), for example,restrictsthe do-
taryforeignpolicy(Buenode MesquitaandLalman1992; main of the democraticpeace to stateswith advanced
MaozandRussett1993;Russett1993).Kant([1795]1957) industrializedeconomies.It is not obviousfrom existing
explanationsfor the democraticpeacewhy norms,insti-
7Doyle chooses Schumpeter (1950,1955)because his views differ tutions,orotherfactorswouldinhibitconflictamongrich
fromthetradition ofliberal
political
economy andbecause he"saw
theinteraction of capitalism
anddemocracy asthefoundation of democraciesbutfailto do so forpoordemocraticstates.16
liberalpacifism"(Doyle1986,1152).Thus,evenDoyle'sattempt Buenode Mesquitaet al. (1999,2003) offeran elab-
at synthesisassumes awayan independenteffect of capitalismon orate and carefullyconstructedexplanationin which
peace.
8Waltz assertsthat "theoriesexplain laws"(1979, 6), suggestinga
need in internationalrelations for more laws or fewer theories.
Partof the intellectualappeal of the democraticpeace is that it is
dyadsappearaboutas disputeproneas newer
12Olddemocratic
dyads(Enterline1998;WardandGleditsch1998).
somethingto explain.
'3Kaysen (1990)offersa critiqueof Mueller's theoryandanunder-
'For reviews,see Chan(1993,1997), Gleditsch(1992), Maoz(1997), on theliberalpeace.
appreciated perspective
Morgan(1993), and Ray(1997, 1998, 2000).
'4Theargumentpotentiallyappliesto autocraticregimeswith a
'OSeveral authorsclaim that the democraticpeace relationshipex- commonidentity(Peceny,Beer,andSanchez-Terry 2002).
isted in the nineteenthcentury(Gochman 1997;Onealand Russett
1999c;Tucker1997).Othersfind evidencein the ItalianRenaissance '5Liberalleaders(or populations) canalsointentionally downplay
(Sobek 2003) or classicalGreece(Weart 1994, 1998). Russettand the"democraticness" of anotherregime(Oren1995)."Simply be-
Antholis (1992) and Russett (1993, chapter3) identify the "frag- causeit wonthevotesof a desperatepeopleis no reasonto grant
ile emergence"(1993, 43) of norms of democratic cooperation, eventhe slightestscrapof legitimacy... to Hamas"(MortimerB.
though Bachteler(1997) views Delian cooperationas a productof Zukerman,U.S.Newsand WorldReport,February13,2006,page
Athenianhegemony (see also Russett 1997). Dixon, Mullenbach, 63).
and Carbetta(2000) suggest that democratic peace arises in the '6Mousseau(2003)arguesthatcapitalism createsa cultureof con-
twentiethcentury.Hewitt and Young(2001) date the origins of the hisanal-
which
tracts, thenconditions democratic peace.Strangely,
democraticpeaceat somewherebetween 1924 (for wars) and 1930
(for MIDs). For additionaldebateabout the ancient evidence, see ysisfocuseson an interactiontermbetweendemocracyandeco-
Robinson (2001a, 2001b) and Weart(2001).
nomicdevelopment,ratherthanexaminingfreemarketactivity,
policies,or the availability
laissez-faire of con-
or enforceability
S"The growingconsensusthatdemocraciesrarelyif everfight each tracts.Tradingdemocraciesshouldpresumably alsobe affected,
otheris not matchedby anyagreementas to how bestto explainthis since tradeinvolvesextensivecontracting.However,Mousseau,
strong empiricalregularity"(Levy2002, 359). Lipsonquips about Hegre,andOnealreportthattheinteraction termbetweendemoc-
the democraticpeace that "Weknow it works in practice.Now we racyandtradedependence is statistically (2003,Table
insignificant
haveto see if it worksin theory!"(2005, 1). 2, 296).
CAPITALIST
PEACE
leadersintent on remainingin office seek to retainthe
supportof a winningcoalitiondrawnfromthe groupof
politicallyrelevantcitizens(the selectorate).Sizematters
in this theory,as leadersin societieswith smallwinning
coalitions(autocracies)can efficientlytargetbenefitsto
key supporters,while leadersfacingbig winning coali-
tions (democracies)arebetteroff providingpublicgoods
to stayin power.Democraciesfightharderbecauselead-
ers with largewinning coalitionsare more likelyto be
replacedin the event of defeat.Twodemocracies,taken
together,promiseparticularly expensivecontests,leading
democratsmoreoftento prefernegotiatedsettlements.17
Comparisonsof the costsor risksof waroftentell us
more about who gets what than about whetherforce is
neededto get there.Sincedisputestypicallyend in some
division of the stakes,the democraticpeace can be de-
scribedin terms of the timing of bargains,ratherthan
abouttactics.Severalauthorsview democraciesas more
transparent(Mitchell 1998;Small 1996;VanBelle 1997).18
Othersarguethat "audiencecosts"or oppositiongroups
allowdemocraciesbetterto signalresolve(Fearon1994;
Schultz1998, 1999;Smith 1998). Properlyunderstood,
however,these explanationsanticipatemonadicdemo-
craticpacifism,not the dyadicdemocraticpeacerelation-
ship. Contestsshouldbe less likelyin all dyadspossess-
ing at leastonedemocraticstate,regardlessof the regime
typeof thedyadicpartner.19AsSchultzacknowledges, do-
mesticsignalingarguments"... arefundamentally claims
about democraticstates,ratherthan democraticdyads"
(1999, 243).20
'7Tomy knowledge, Bueno de Mesquitaet al. (2003) are unique
in providing a formal logic consistent with the democraticpeace
observation.To achievethis result,however,the authorsappearto
essentiallyturn Kant'soriginal intuition on its head. Where Kant
arguesthatwar "doesnot requireof the ruler... the leastsacrifice"
and is "apoor game"for citizens "decreeingfor themselvesall the
calamitiesof war"including, among other things, "havingto pay
the costsof warfrom theirown resources"([ 1795] 1957, 11), Bueno
de Mesquitaet al. assume elites bear the burden of improvingthe
war effort: "By trying harder,B's leader reduces the amount of
resourcesavailableto rewardhersupportersthroughprivategoods"
(2003, 232). Where Kant sees sovereignsand their key followers
as the principalbeneficiariesof victory, Bueno de Mesquitaet al.
treatthe spoils of war as public goods: "Amilitaryvictorybenefits
everyonein nation B" (2003, 233). Kantsees war as redistributing
welfarefrom the population to politicalelites. Bueno de Mesquita
et al. argue that war is costly to elites and victory profitable to
populations.
"'Fineland Lord (1999) argue, and provide some evidence, that
transparencycan lead to greaternoise and confusion.
'9Rationalactorswith common priors,and the same information,
should have identicalbeliefs (Myerson1991,67-83).
20Domesticoppositiongroupscan revealinformation,or pool, con-
fusingobservers,dependingon electoralconditions (Ramsay2003;
Trager2004). Increasedcredibilityalso providesnew incentivesfor
leadersto bluff (Nalebuff 1991).
169
Which explanationsfor the democraticpeace are
mostnearly"right?" Givenso manyaccounts,it isa safebet
thatat leastsometheoriesmustbe in error.Still,whittling
awayat the panoplyof plausibleargumentshas proven
difficult.Textbooksocial sciencebegins with deductive
theories,implicationsof which are then tested empiri-
cally.Theevolutionof democraticpeaceresearchhasbeen
messier,withthebulkof explanationscomingin response
to the observation.Severalauthorsseekto criticallyeval-
uatedemocraticpeacetheory(Gates,Knutsen,andMoses
1996;Layne1994;Rosato2003),but cullingtheoriesde-
ductivelyis problematic.A poorlycraftedargumentcould
still be fundamentallysound. Conversely,explanations
that areseen to be flawedareoften revised,escapingin-
tellectualdeath.Othertheoriesmightbe deductivelyco-
herent,butremainproducts,ratherthanpredictors,of the
observation.It is not clear,for example,how to reconcile
the persuasivetheoryof Buenode Mesquitaet al. (2003)
aboutlargeselectorates,with the persuasiveevidenceof
Mousseau,Hegre,andOneal(2003)thatonly somelarge
selectoratesmatter.Giventhemalleability of assumptions,
one shouldbe ableto developnumerouslogicallycoherent
explanationsfor almostanygivenempiricalrelationship.
Indeed,giventhe flexibilityof assumptions,andthe num-
ber of brightmindsengaged,it is rathera riddlethatthe
democraticpeacehas yet to producenumerouslogically
coherenttheoreticalexplanations.
Statisticaltestingis necessaryto substantiateanythe-
oretical claim that is at variancewith the established
democraticpeace observation.21 This same evidenceis
also sufficientto challengeexistingtheoriesof the demo-
craticpeace. Ratherthan seek to show that every con-
ceivableattributeof democracycannotpossiblyinfluence
the propensitytowardinterstateviolence-an impossible
task-this articlefocuseson comparingdemocraticand
capitalistvariantsof the liberalpeaceempirically.
TheEconomicTradition
What else but democracycould accountfor liberal
Theassociation
peace?Oneanswermightbe capitalism.
21Whilesomequantitative critiquesof thedemocraticpeacechal-
validity(Spiro1994),culturalbias(Henderson
lengeits statistical
1998),or generalizability (Henderson2002),otherstudiestreat
democracyas a productof peace(James,Solberg,and Wolfson
1999;Thompson1996).Criticsalso offer a varietyof alterna-
tives,includingalliancestructures(Gowa1994,1995),thecoldwar
(FarberandGowa1995;Gowa1999),satisfaction withthe global
statusquo (Kacowicz1995;Lemkeand Reed 1996),and com-
mon interstateinterests(Farberand Gowa1997;Gartzke1998,
2000).Mansfieldand Snyder(1995a,1995b,2002a,2002b)and
Braumoeller (1997)arguethat new democraciesare morewar-
like,whileacceptingthatmaturerepublicsarepeaceful.Enterline
(1996)andThompsonandTucker(1997)attemptto counterthis
argument.
170
betweeneconomicfreedomandinterstate peacehasdeep
intellectual
roots,though the liberalpoliticaleconomy
traditionhasreceivedlittleattentionin recentdecades.22
Enlightenment figureslikeMontesquieu andSmithar-
gued that market interests abominate war. Painewrote
that"commerce diminishes thespirit,bothof patriotism
andmilitarydefense"(citedin Walker2000,59). Cob-
den calledtrade"thegrandpanacea"([1867] 1903, 36).
Millsawmarketforcesas"rapidlyrenderingwarobsolete"
(1902,390). Angellarguedthatit had become"impossi-
ble for one nationto seizeby forcethewealthor trade
of another... war,evenwhenvictorious,canno longer
achievethoseaimsfor whichpeoplesstrive"(1933,60).
Angell(1933)servesas a usefulpointof departure
in attempting to identifyhowcapitalism contributesto
interstate two
peace.Angellhighlights processes thought
to diminishtheappealof conquestamongcountries with
modernindustrialeconomies.First,changesin the na-
tureofproduction makeitdifficulttocheaply subdueand
to profitablymanage modern economies throughforce.
Industrial economiesareincreasingly dependenton in-
puts that are more and
easily cheaplyobtainedthrough
commerce thanthroughcoercion. Relating talesofViking
raidson the Englishcountryside, Angellaskswhy,now
thatthe tableshaveturned,he did not see "ournavy
loadingup a goodlypartof ourmercantile marinewith
the agriculturalandindustrial wealthof the Scandina-
vianpeninsular" (1933,103).Governments, likeindivid-
uals,choosebetweentradeandtheftin obtaining needed
goods and services.
Modernity made it easierto profit
fromproduction andtrade,andharderto drawwealth
fromconquered landsorconfiscated loot.23
The secondprocessAngelloutlinesinvolveseco-
nomicglobalization. The integrationof worldmarkets
notonlyfacilitates commerce, butalsocreatesnewinter-
estsinimicalto war.Financial interdependence ensures
thatdamageinflictedon one economytravelsthrough
theglobalsystem,afflicting evenaggressors.Angellimag-
inesaTeutonic armydescending onLondon: "theGerman
General,whiletryingto sacktheBankof England, might
findhis ownbalancein the Bankof Germany hadvan-
ished, and the value of even the best of his investments
reduced"(1933, 106-7). As wealthbecomeslesstangible,
more mobile, distributed,and more dependenton the
good will of investors,it also becomesmore difficultto
coerce(Brooks1999;Rosecrance1985).
22Notableexceptions include, but are not limited to, Mousseau
(2000), Tures(2004), and Weede (2003, 2004, 2005).
23The first edition appearsin 1909 under the title Europe'sOptical
Illusion.Subsequentprintingsappearedin 1910/1912as TheGreat
Illusion.The world wars are widely viewed as having repudiated
Angell'scapitalistpeace thesis, along with the claims of Kantand
Wilson (see Gartzke2007).
ERIKGARTZKE
The chief challengeto the argumentsof Angelland
other politicaleconomistsis that they turnedout to be
wrong (Carr1939;Morgenthau1948).Twoworldwars
and associatedeconomicupheavalreversedthe trendto-
wardglobalizationanddissolvedoptimismabouta capi-
talistpeace.24Coldwartensionsensuredthatscholarship
was preoccupiedwith balancingand deterrence(Jervis
1978;Richardson1960;Snyder1961;Waltz1959, 1979),
andthatsubsequentgenerationsof researchers remained
the
skepticalabout prospects forliberal
peace(Waltz1970,
1999, 2000). These same events led to the long hiatus
in democraticpeaceresearch.However,when interestin
liberalpeacereturned,attentioncenteredon democracy.
Kantiantheorywasgivena thoroughrewritein anattempt
to conformto the evolvingevidence,while the capitalist
peacereceivedlittleattention.
Of the factors emphasized by liberal political
economists,tradehasbeenby farthe most closelyevalu-
atedin contemporary scholarship(BlissandRussett1998;
Keohaneand Nye 1989;Onealand Ray1997;Onealet al.
1996;OnealandRussett1997,1999a;Polachek1980,1997;
Polachek,Robst,andChang1999).25Yet,of the elements
of global capitalism,trade is arguablythe least impor-
tant in terms of mitigatingwarfare.Classicalpolitical
economistshadyetto considerthestrategicnatureof con-
flict(Schelling1966).Iftrademakesone partnermorepli-
ant,it shouldallowotherstatesto becomemoreaggressive
(Morrow1999;Wagner1988),so thatthe overalldecline
in warfareis smallor nonexistent(Beck,Katz,andTucker
1998;Gartzke,Li,and Boehmer2001). Economicdevel-
opment,financialmarkets,and monetarypolicycoordi-
nationall arguablyplaya morecriticalrolein promoting
peace(Gartzkeand Li 2003). Muchof the impactof free
marketson peacewill be missedif much of what com-
prisescapitalismis omittedor ignored.
Whatarethe "aimsfor whichpeoplesstrive,"which
Angell mentions?Much like realists,classicalpolitical
economistsassumedthat warfareresultsfrom resource
competition.If thereareotherreasonswhynationsfight,
thensomewarswilloccur,despitethebasicvalidityofcapi-
talistpeacearguments. It is thennecessaryto revise,rather
than reject out of hand, economic explanations for lib-
eral peace. This article next offers the outlines of a revised
theory of capitalist peace.
"Kanthimselfispessimistic abouthumannature:"thenaturalstate
is one of war."Citizenscurbthewarliketendenciesof leaders,the
samecitizensthatare in turn constrained by government.Kant
explicitlyrejectsthe notionthat individualsor nationsareable
to cooperatespontaneously. "Astateof peace,therefore,mustbe
established"(Kant[1795]1957,10).
25SeeMcMillan (1997)andMansfield andPollins(2001) forreviews
of theliteratureon interdependenceandconflict.
CAPITALIST
PEACE
Capitalism as Pacifism
The securitydilemmaimpliesthatinsecurityis a durable
facetof internationalaffairs.Warcanresultas eachcoun-
try fearsfor its own security,evenwhen neitherstatein-
tendsaggression(Glaser1997;Jervis1978).Yet,insecurity
is predicatedon the expectationthatat leastsome coun-
tries are revisionistpowers.Even"pessimistic"concep-
tionsof worldaffairsappearmoresanguineaswe relaxthe
assumptionthatinsecurityis ubiquitousandimmutable.
The taskbeforepeacetheorists,then, is to identifywhen
andhownationsareliberatedfromthe securitydilemma.
The argumenthere is that capitalismresolvesinsecurity
by creating"powerfulpacifists"(Lake1992), countries
possessingmilitarystrengthensuringthattheyarelargely
free from foreigninfluenceor domination,but equally
thattheylackincentivesto actaggressively
abroad,at least
undercertaincircumstances.26
Warfareresultsfromtwo stagesof interaction.First,
statesmust possessthe willingnessand abilityto com-
pete. Second,statesmust be unable,or unwilling,to re-
solve differencesthroughdiplomaticmeans.27Capabili-
ties constrainweak,distantstates(Belizeand Burundido
not fight each other),but weaknessalone is often insuf-
ficient,giventhe relativityof power.Indeed,weaknessis
an attractiveattributein a target.Forsimilarreasons,an
unwillingnessto fightmust alsobe mutual.Forthe pur-
posesof exposition,imaginethatthe motivesfor warare
dividedbetweenzero-sum(privategoods) and nonzero-
sum(goodswithpublicproperties).Privategoodscompe-
tition involvesthingslikeattemptsto conqueror control
materialresources(land,labor,minerals).28
Competition
can also occur over effortsto influenceor compelpoli-
cies (norms,alignments,leaders).29 The allocationof re-
sourcesis inherentlyconflictual;two statesthatclaimthe
same territorymust compromise,fight, or delaya deci-
sion. The allocationof policiesmayor maynot generate
significantfriction,dependingon whether,or to whatex-
tent,stateobjectivesarecompatible.Whileit wouldbeodd
to speakof countriesas havingsubstantiallycompatible
likedemocracy,
26Capitalism, meansmanythings.
Thetermisused
here as shorthandfor the three processesdiscussedin the theory.
27Cost-benefitcalculusis insufficientto explainwar (Fearon1995),
but can be sufficient to explain the lackof war. Conflict exists in
bargainingtheory as the result of a set of necessaryconditions.
The absenceof any of these conditions is sufficient to explain the
absenceof fighting.
28Territory can also have strategic (Fazal 2004), symbolic (Toft
2003), or reputational(Walter2003, 2006) value.
29A"sphereof influence"suggestspreciselya desireto control the
choices, though not necessarilythe territory,of anotherstate.
171
interestswhendrawinga commongeographicboundary
(cf. CollinsandLapierre1997;Holbrooke1998),it would
be strangenot to considerthe existence(or absence)of
commoncausein assessingsuchtopicsas ideology,norm
enforcement,terrorism,or the organizationof the global
or regionaleconomy.
At least three mechanismsassociatedwith capital-
ism are capableof addressingthe securitydilemmaand
mitigatingthe causesof war. Stateswith similarpolicy
goalshaveno need to fight to establishpolicysincelittle
can be gainedfrom victory,or lost in defeat.Statesal-
wayshavedissimilarinterestswhen it comes to resource
or territorialissues,but changesin modern economies
often makethese differencestrivial,as resourcescan be
hadmoreeasilythroughcommerce.Therecanbe no basis
for agreementbetweentwo passersbyaboutwho should
collecta quarterlyingon the sidewalk,but fightingover
25 centsmakeslittlesense.If,however,a sackof $100bills
falls from the sky,landingon the quarter,then it is en-
tirelypossiblethata fightwill ensueoverwho cancollect
theirbagof riches.Yet,eventhe sackof moneyneed not
leadto violenceif the passersbycan agreeon how to di-
vide up the wind fall. Stateswillingand ableto fightcan
still avoida contestif competitorsareableto foreseethe
likelyconsequencesof fightingand identifyappropriate
bargains.
Economic Development
Conflictis inherentin the allocationof resourcesamong
two or moreparties,but neednot resultin violenceif the
stakesareliterally"notworthfightingover"or whenbar-
gainspreemptfighting.Imaginetwo countriesattempt-
ing to divideup a bundleof goods (resources,territory).
Comparisonof availableallocationsis zero-sum;anyshift
fromone allocationto anotherbenefitsone countryonly
at the expenseof the other country.In this framework,
a mutualpreferencefor peacerequiresthat the valueof
winningbe smallrelativeto the cost of fighting(Morrow
1989;Powell1999).
Peace advocates have long championed factors
thoughtto makewarprohibitively expensive.Cobden,for
example,claimedoptimistically "Shouldwarbreak
that
out betweentwogreatnationsI haveno doubtthattheim-
menseconsumptionof materialandtherapiddestruction
of propertywould havethe effect of verysoon bringing
the combatantsto reasonor exhaustingtheirresources"
([1867] 1903, 355). Yet,if war is a processwherecom-
petitorsinflictcosts on one another,makingwar more
expensivewillaffectwho wins,or how long fightinglasts,
butnotwhethera contestoccurs(LevyandMorgan1984).
172
Warcostsarealso endogenous;if fightingis prohibitive,
countrieswill makethemselvesa "nicelittle war."'3In-
creasingthe cost of fighting,or alternatelyincreasingthe
benefitsof peace-even whenpossible-shape whateach
actorwillacceptin lieuof fighting,butdo nottelluswhich
bargainsareforgedbeforewarfare,andwhichafter.Even
theprospectof nuclearannihilationdidnot deterdisputes
duringthe coldwar(Schelling1960).
If, on the otherhand, the valueof resourcesin dis-
pute is smallor varieswith ownership,then statescan be
disinclinedto fight.Nationshavehistoricallyused force
to acquireland and resources,and subdueforeignpop-
ulations.Waror treatiesthat shiftedcontrolof territory
changedthe balanceof resources,andpower.Sovereigns,
and to a lesserextentcitizens,prosperedas the stateex-
tended its domain. Developmentcan alterthese incen-
tivesif modernproductionprocessesde-emphasizeland,
minerals,and rooted labor in favorof intellectualand
financialcapital(Brooks1999,2005;Rosecrance1996).
If the rents from conquestdecline,even as occupation
costsincrease,then statescan preferto buy goods rather
than stealthem.31As the U.S.invasionof Iraqillustrates,
occupyinga reluctantforeignpower is extremelylabor
intensive.If soldiersare expensive,then nationscan be
betteroff "outsourcingoccupation"to local leadersand
obtainingneededgoods throughtrade.32
At the same time that developmentleads statesto
prefertradeto theft,developedcountriesalsoretainpop-
ulationswith common identities,culturalaffinities,and
political,social,and economicties. Thesestatesmay be
reluctantto conquertheirneighbors,but theyareequally
opposedto arbitrarycontractionsof theirborders.Resi-
dents of Gibraltar,for example,preferBritishrule,even
whileSpain,whichhas foughtoverthis lump of rockfor
centuries,is todayunwillingto provokea war.33Thecom-
binationof a lackof motivefor territorialexpansionand
continuedinterestin servingandprotectinga givenpop-
ulation ensuresa decline in conflict among stateswith
3?In GungaDin (1939), Sgt. Archibald
Cutter (Cary Grant) asks,
"Howcan we get a nice little war going?"
31Boix(2003) arguesthat developmentreduceselite opposition to
democratizationas the bases for wealthbecome more mobile.
32Theoriginal U.S. war plan was for Iraqioil assets to be quickly
returnedto local control (Woodward2004, 322-24). What com-
merce cannot do--where force is still efficacious--is to supplant
obstreperousleadersor to undermineinimical policies.
33Asrentier activity becomes unprofitablewith economic devel-
opment, political units default to culturalvariables.Ambivalence
aboutbeing Britishhasbeen a nearconstantin ScotlandandWales,
but official acceptanceof autonomy is a novelty.Conversely,inde-
pendence in Northern Irelandis resistedmore robustlyas it con-
fronts Protestantidentity.
ERIKGARTZKE
developedeconomies,especiallywheredevelopedcoun-
triesaregeographicallyclustered(Gleditsch2003). Since
most territorialdisputesare betweencontiguousstates
(Vasquez1993), I hypothesizethat developed,contigu-
ous dyadsare more powerfulthan eitherdevelopingor
noncontiguousdyads.34
HI: Developmentleadscontiguousdyadsto
be less likelyto experienceconflict.
Whiledevelopmentdecreasesincentivesfor territo-
rialaggrandizement, it greatlyenhancesthe technological
abilityof statesto projectpower.Nationswith shipsand
aircraftcan engagein distantdisputesinconceivablefor
poor countries.Developmentmayalso leadto increased
willingnessto pursuepolicy conflicts.If developmentis
clusteredandneighborsno longercovetterritory,capabil-
itiescanbe devotedto pursuingthe nation'ssecondaryor
tertiaryinterests.Distributedproductionnetworksand
greatereconomic, social, or politicalintegrationnatu-
rallyalso createincentivesto seek to influencethe for-
eignpoliciesof othercountries,sometimesthroughforce.
In contrastto the blanketassertionof classicalpoliti-
cal economists,I expectthat developmentactuallyleads
countriesto be morelikelyto engagein conflictsfar from
home.35 IraqinvadedandoccupiedKuwaitinAugust1990,
intenton securingits "nineteenthprovince"andwresting
Kuwaitioil wealthfrom local leaders.The UnitedStates
anditsCoalitionalliesalsoinvadedKuwait,notto conquer
and keep,but to returnthe Emirateto its previouslead-
ers.WhileCoalitionobjectiveswerecouchedin moralistic
rhetoric,the UnitedStateswas clearlyconcernedabout
whogovernedKuwait,whilepreferringnot to governthe
countryitself.Similarly,Europeancolonialpowershave
repeatedlyintervenedin Africa,Asia, and elsewhereto
propup or dethroneregimes,imposesettlements,or oth-
erwisemeddlein the affairsof developingcountries.
H2:Developmentleadsnoncontiguousdyads
to be morelikelyto experienceconflict.
34Resultsarecomparable to separateregressions
of territorial
and
nonterritorialMIDs(Gartzke2006a).Thecontiguityinteraction
termis convenienthere(mostterritorial disputesinvolvecontigu-
ous states).Forfurtherdiscussionof therelationshipbetweenter-
ritoryandcontiguity,seeHensel(2000).
effectsof development
35Contrasting arespatially
distinctandtem-
porallysequenced.Technology shocksbeginningin the fifteenth
centurypropelledEuropeans abroadin searchof loot, land,and
labor.Imperialismfirstflowedandthenebbedasthecostof main-
tainingarmiesexceeded thevalueofrentsfromoccupation (Gartzke
andRohner2006a).
CAPITALIST
PEACE 173

SimilarInterests Li 2003;Gartzke, Li,andBoehmer2001).Competition

createsincentivestobluff,toexaggerate orre-
capabilities
Thereis a secondsalientdifference betweenthetwosets solve.Anarchy makes it for
difficult to
states compelhon-
of motivesfor invadingKuwait.SupposethatIraqhad est answersfromone anotherexceptthroughthe threat
formedan alliance,likethe U.S.Coalition.Spoilsfrom or impositionof harm.Contestsinformbybeingcostly,
the conquestof Kuwaitwouldhavehad to be divided
forcingactorsto choosebetweenbearingtheburdenof
up in somemanner.Eachnewmemberof an Iraqi-led competition andbackingdown.Ofcourse,onecansignal
alliancewoulddilutethespoils,diminishing eachmem- au-
by "burningmoney,"expendingvaluableresources
ber's"slice." it
Bygoing alone,Iraqkept allof thewealth but such acts createa as
relative well asabso-
tonomously,
of Kuwaitto itself,at leastfora littlewhile.In contrast, luteloss.Tacticsthatimpartcostsonlyasa byproduct of
U.S.objectives werenot muchdilutedby the sizeof its costsonanopponentcanproduce relativegains,
imposing
coalition.Sincetherewasno resource "pie"to distribute, whiletacticssuchasburningmoneyonlyharmtheinitia-
thesizeof theCoalition wasnotahindrance in allocating tor.Stateswitheconomiesintegrated intoglobalmarkets
benefits,thoughreasonsfor reconstituting Kuwaitdif- faceautonomous investorswithincentives to reallocate
feredmarkedly among the members, another sourceof threatsagainstanother
capitalawayfromrisk.A leader's
tensionthatcouldhaveledto conflict(Baker1995). statebecomecostlywhenthreatssparkmarketrepercus-
Studentsof waroftentreatstateinterestsas largely sions.Participants learnfromwatchingthe reactionsof
uniform,and largelyincompatible. International com- leadersto thedifferential incentivesof economiccostand
petition forcesnations-large and small--to secu-
be reward. Two economically integratedstatescan
political
rity seekers (Waltz1959,1979),or to lust afterpower moreoftenavoidmilitary violence,sincemarketintegra-
(Mearsheimer 2001).A differentconception of interests tioncombinesmechanisms forrevelation andcoercion.
comesfromutilitarianism (Bentham[1781]2000;Mill Aneconomically integrated targetcanbe coercedbythe
[1861]1998)and rationaltheory(Black1948;Downs threatof losingvaluableexchange, but a nonintegrated
1957;Riker1963),oneinwhichinterests arevariable and initiatorcannotmakeitsthreatscredibleor informative.
areoftenlogicalprimitives. Manycountriesmayshareto a globalized initiatorcansignalbuthaslittle
Conversely,
a greateror lesserextentcompatible worldviews or ob- incentiveto hamperits own marketswhena noninte-
jectives(cf. Keohane and Nye 1989).Conversely, strong gratedtargetdoesnotsuffer(Gartzke 2006b).
policydifferencescanleadto conflict,andpossiblytowar
(BuenodeMesquita 1981,1985,1989;Morrow1985).For H4:Financial leads
or monetaryintegration
example, World War II andthecoldwarwere"ideologi- to
dyadsto belesslikely experienceconflict.
calcontests"whichpittedcoalitionsof countrieswith in-
compatiblevisionsof an appropriateworldorderagainst Research Design
eachother.Sincepolicyinterestsvary,whileinterestsover
resourceallocationsare more nearlyconstant (in their I nextanalyzethe hypothesesin a standardstatisticaltest
fundamentalincompatibility),policyconflictshouldalso of the democraticpeace,usinga sampleof all dyadyears
vary.The rangeof policy issues over which state pref- (1950-92). This sampleis well documentedby previous
erencesmight vary is literallyinnumerable.This article studies.The democraticpeaceis thoughtto be most ro-
adoptsan axiomaticapproach,makingthe broadestthe- bust in the post-WorldWarII period.36Unless noted,
oreticalclaim,and then using a policy interestindex to variablesare coded as describedin Oneal and Russett
operationalizeinterestaffinityin testing. (1999a).Adoptingthe assumptionsof this canonicalre-
searchprogramallows for readycomparisonof results
H3: Similar state policy interests lead dyads and diminishes the danger that my findings result from
to be less likely to experience conflict.
idiosyncrasies in coding or model specification. Oneal
and Russett (1999a) appear to offer the most appropriate
Globalizationof Capital baseline for the analysis. Subsequent researchfocuses on
other aspectsof their Kantiantripartiteliberalexplanation
Whilepolicydifferencesor resourcecompetitioncangen-
erate conflict, they need not producecontestsif states the post-WorldWarII
peaceexistsanywhere,
MIfthe democratic
canresolvedifferencesdiplomatically. Liberaltheoryem- periodis the obviousplaceto look. "Indeed,the pastseveraldecades
phasizesthe pacifyingeffect of cross-bordereconomic 'when therewerethe most democracies'providethe best temporal
linkages.Marketsare arguablymost relevantas mech- spanto give 'thehardesttest of the propositionthat democraciesdo
not makewar on each other' (R. J. Rummel,InternationalStudies
anismsfor revealinginformation,however,ratherthan Association,ForeignPolicy InternetCommunication,20 January
for addingto the risksor costs of fighting(Gartzkeand 1995),"cited in Kegleyand Hermann(1996, 312).
174
(Onealand Russett1999c;Russettand Oneal2001), or
on extendingthe temporaldomain (Onealand Russett
1999b;Oneal,Russett,and Berbaum2003).
I estimatedcoefficientsusinglogit and GEEin Stata
(v. 8) with Huber/Whiterobuststandarderrors,though
for brevityonly the logit estimatesare reported.Results
usingGEEaregenerallyequivalentor more favorableto
thehypotheses.Independentvariablesarelaggedone year
behindthe dependentvariableto controlforendogeneity.
The Beck,Katz,and Tucker(1998) methodof temporal
splinevariableswas adoptedto controlfor durationde-
pendence.37
Dependent Variable
ZeevMaoz'sconstructionof dyadicmilitarizedinterstate
disputes(DYMID)is usedasthe dependentvariable,with
the standarddichotomouscoding of "1"for the initial
yearof a MID in the dyadand "0"otherwise(Gochman
and Maoz 1984;Jones,Bremer,and Singer1996).38The
Maozdataareintentionallyformattedin dyads.Maozalso
correctsfor codingerrorsin the MID2.1 dataset.39
KeyIndependent Variables
9 Democracy:Researchersdiffer over how to measure
democracy,both monadicallyand dyadically.I relyon
three differentdatasetsand three variableconstruc-
tions to representdyadicdemocracy.The standardin
democraticpeace researchis the GurrPolity IV data
(Jaggersand Gurr1995).I firstpreparedmonadicval-
ues by combiningPolitydemocracy(DEMOC) and au-
tocracy(AUTOC) scalesas follows: -
[(DEMOCi AUTOCi)
+ 10]/2, (wherei E [A,B]).The variablediffersmod-
estly from Onealand Russettin that I add 10 so that
all values are nonnegativeand divide by 2 to yield
the 0-10 range of Polity variables. DEMOCRACY statisticin the dyad(Blissand Russett1998;Onealand
(Low)
and DEMOCRACY Russett1997,1999a,1999b).Tradeinterdependence
(HIGH),respectively, reportthe lower
to
and higherof democracyvaluesin the dyad.DEMOC- expected modestly
RACYA x B is the product of monadic values. BOTH * Development:
DEMOC.(>7) equals one ("1") if each dyad member
has a monadic score of at least seven and zero ("O")
otherwise.
37AStata"do"file is availablefromthe authorreplicatingall aspects
of data constructionand analysis.
38MIDcoding rules produce a selection bias (Smith 1998). For
example,a statethat threatensand then uses force is only coded as
using force.Whetherthreatsbecome uses also dependson whether
a targetacquiescesor resists.
39DYMIDis available at http://spirit.tau.ac.il/poli/faculty/maoz/
dyadmid.html.In subsequentresearch,I will extendanalysisto the
new MID 3 data(once othervariablesarecoded or madeavailable),
and the ICBdata.
ERIKGARTZKE
* Markets:Democraticpeace researchexaminestrade
(Onealet al. 1996,2003;Onealand
interdependence
Russett1997, 1999a,1999b,1999c;Russettand Oneal
2001). Capitalandmonetaryintegrationmaybe more
relevantto conflict than trade (Gartzkeand Li 2003;
Gartzke,Li, and Boehmer2001). Liberalizationcre-
atesvaluablelinkagesand institutionalconstraintson
a state'sabilityto intervenein marketprocesses.Be-
cause statesmay be temptedto interferewith market
responsesto interstatecrises,bothrobustmarketsand
laissez-fairepoliciesmatter.
The InternationalMonetary Fund (IMF) pro-
videsseveralindicatorsof marketsize,robustness,and
liberalization.The IMF publicationAnnual Reports
on ExchangeArrangements and ExchangeRestrictions
(AREAER) lists a series of variablesmeasuringeco-
nomic openness.I use an indexevaluatedin previous
studiesthattakesthe differencebetweeneightand the
sum of eight types of governmentrestrictionson for-
eign exchange,current,and capitalaccounts(Gartzke
andLi2003;Gartzke,Li,andBoehmer2001).IMFFIN.
OPEN. (Low) reportsthe lower monadicscore in the
dyad.40Highvaluesof IMFFIN.OPEN. (Low) arethus
expectedto reducethe likelihoodof militarizeddis-
putes.TheIMFonlyreportsdataon membercountries,
systematicallyreducingvarianceand biasing against
statisticalsignificance.
I alsoincludeindicatorsof tradeto assesswhether
trade influencesmilitarizeddisputesindependentof
capitalliberalization.I use both the trade data pro-
vided by Onealand Russett,and data from Gleditsch
(2002).41Again, I follow the Oneal and Russettop-
erationalization.Monadicvaluesare firstconstructed
usinga ratioof bilateraltradeoverGDPto measurethe
importanceof traderelativeto a state'stotaleconomy.
TRADE
DEP.(Low) denotes the lower trade dependence
is
decreaseMID propensity.
Economicdevelopmentleadsto a secular
decline in the valuation of conquerable resourceswhile
intellectual and financial capital critical to productiv-
ity in modern economies must be enticed rather than
coerced. Conversely,wealth and the technology effect
allow for greaterpower projection. Poor countries sel-
dom fight abroad because they cannot, and because
4Bilateral dataon financialopennessis not availablefora largesam-
ple of countries. Signalingshould occur monadically,though two
integratedeconomies probablyincreasethe effect. Unlike democ-
racy,economic freedom has a monadic effect (Gartzke2005a).
41Oneal,Russett,and Berbaum(2003) advocateuse of the Gleditsch
(2002) datasince these datacontain fewermissing observations.
CAPITALIST
PEACE
theirgovernmentsarepreoccupiedwith existingterri-
tory.Developmentbringswith it the abilityto project
power,encouragingcontestsoverboth policyand re-
sources,whilethe richeststateslose muchof theirwill-
ingnessto stealresourcesassociatedwith territory.
Earlyquantitativestudiesof the democraticpeace
includedGDP/pop(theconsensusmeasureof develop-
ment),but the variablewasnot foundto be significant
(Maozand Russett1992).I arguethatper capitaGDP
hascontrastingeffectson disputes.GartzkeandRohner
(2006b)examinethisargumentdirectlyby splittingthe
sampleof disputesbetweenterritorialand nonterrito-
rial conflicts,and by lookingat initiatorsand targets.
Here,however,I need to adhereto an establishedre-
searchdesign.To parseout the contrastingeffectsof
developmenton warandpeace,I includetwovariables.
GDPPC(Low)measuresthe lowerof the two monadic
populationweightedgrossdomesticproductstatistics
for a given dyad (Gleditsch2002). I also examinethe
naturallog of GDPPC(Low)to limit multicollinearity
amongvariables.42 A secondvariableisolatesthe effect
of wealth on likely subjectsof territorialaggression.
GDPPCx CONTIG (Low) interactscontiguityand the
developmentvariable.It is most likelythata declinein
the value of conquestwill manifestitself in relations
with neighbors,whereterritorialclaimsaremost com-
mon and aggressionmost practical.43
P InterestSimilarity:Manystudentsof internationalre-
lationsrejectas excessivelynarrowthe realistempha-
sis on uniform,monolithicinterestsand argueinstead
that state objectivesvary with a complex varietyof
factors (cf. Moravcsik1997). Relationsbetween the
UnitedStatesandIsrael,andbetweenthe UnitedStates
and Indiahavebeen quitedifferentin the post-World
WarII period,even accountingfor capabilities,geog-
raphy,regimetype, and so on. Nationalinterestsalso
changeovertime;electionsin BoliviaandGermanyre-
sultedin twoverydifferentleaders,one who is moving
hercountrycloserto the UnitedStates,andone who is
movingfartheraway.
Ideally,researchers
in internationalrelationswould
possessa model of stateintereststhat would estimate
the effects of a numberof relevantcausalvariables.
The same could be said for democracy,however,and
for measuresof nationalcapabilities,economicdevel-
opment,allianceties,andso on. Thereexistsno consen-
42Noneof the keyvariablescorrelatesat above0.38 (Democracy
[Low]andGDPpercapita).Resultsareavailable fromtheauthor.
43SeeVasquez(1993)fora discussionof the closerelationshipbe-
tweencontiguityandterritorialdisputesor wars.Datameasuring
conflictcannotbe usedin the researchdesignrequired
territorial
to replicateexistingdemocratic
peaceresearch(Tiret al. 1998).
175
sus theoryof nationalpreterences,nor is one likelyto
be constructedin a reasonabletime.Empiricalresearch
on conflictmustthuschoosebetweenmeasuringinter-
ests imperfectly,and not measuringthem at all. I have
chosen the former,while being mindfulof the many
potentialpitfallsinvolvedin this approach.The argu-
ment suppliedhere is consistentwith other research
in arguingthat variablestate interestsare an impor-
tantindicatorof foreignpolicybehavior(cf. Buenode
Mesquita1981;Voeten2000). If we cannotknow the
myriadcausesof preferences,we can at leastgo some
wayin measuringtheirmanifestationandtheireffects.
Measuringinterestsprovidesa numberof empiri-
cal challenges.Preferencesarenot directlyobservable,
so one must identifyconditionsthat appearto reflect
statepreferences.Usingdataon UnitedNationsGen-
eralAssemblyvoting availablefor the period covered
by the Oneal and Russett(1999a) data (1946-96), I
constructan AFFINITY index.Dataon "revealed" pref-
erences are an imperfectrepresentationof an actor's
realrankingover outcomes.Still,UN votingarguably
distortspreferenceslessthanavailablealternatives such
as allianceportfolios(Gartzke1998,2000). I examine
otherindicatorsin theappendix(I alsousetheresiduals
of AFFINITYas a proxy,afterregressingthe interestvari-
ableon democracyand othervariables,and showthat
the residualshave similareffects).The Affinityindex
reportsthe similarityof dyadicUN votingpatterns,us-
ing the "S"coding(Signorinoand Ritter2001).Values
rangebetweenone, "mostsimilar,"and negativeone,
"leastsimilar."I expecta thresholdeffect of interests.
AFFINITY shouldbe negativelyassociatedwith disputes,
with the more dissimilarvalues (closerto -1) being
disproportionately likelyto fight."
AdditionalVariables
I includethesame"control"variablesasOnealandRussett
(1999a)to facilitatecomparisonof results.45
who prefer can ignore the interest argument without
"44Readers
alteringthe effects of developmentor markets.Russettand Oneal
(2001) suggestthatUN votingpatternsareexplainedby democracy.
Gartzke(2000) reportsthat even the residualsfrom a regressionof
democracyand othervariableson AFFINITY accountfor the effectof
democracyon conflictin politicallyrelevantdyads.Regressingboth
monadic DEMOCRACY variableson AFFINITYin the all dyadssample
yields an R2 of 0.0658 (93% of the varianceis left unexplained),
while adding an indicator of liberalization,GDPPC (Low), and
dummies for NATOand WarsawPact membershipincreaseR2 to
only 0.0936.
45Therearereasonsto be cautiousaboutthe arbitraryeffectsof con-
trol variables(Achen2005;Clarke2005;Ray2003,2005). However,
a study of this type needs to replicateexisting canonical models.
176
* Geographic Contiguityand Distance:Distancemaynot
makethe heartgrowfonder,but it does appearto dis-
courageinterstatedisputes.The contiguitydummyis
a dichotomousvariablecoded"1"for dyadicpartners
thatsharealandborderorthatareseparatedbylessthan
150milesof water. CONTIGUITY is expectedto increase
MIDlikelihood.I alsoincludea variablemeasuringthe
naturallogarithmof the greatcircledistancebetween
nationalcapitals(withsome largecountriesthesedata
use the nearestmajorcity to the appropriateborder).
DISTANCE shoulddecreasemilitarizeddisputes.
* MajorPowerStatus:Majorpowersare arguablymore
than just capablestates.Powerfulcountriesare more
activeinternationally,leadingmore often to warfare.
MAJOR POWER is a dummyvariablecoded"1"if at least
one statein a dyadis one of the five post-WorldWar
II majorpowers(China,France,UnitedStates,United
Kingdom,and USSR)and "0"otherwise.
* MilitaryAlliances:Alliancesare intendedto affectin-
terstateconflict,both by deterringaggressionand by
encouragingintervention.Previousstudiesinclude a
measurefor allianceties within a dyad (Oneal and
Russett1997;RussettandOneal2001).ALLIANCE is a di-
chotomousvariablefor the presenceof a defensepact,
neutralitypact, or entente in the dyad based on the
Correlatesof War(COW)AllianceDataset(Singerand
Small1966;Smalland Singer1990).
* Capabilities:CAPABILITY RATIOequalsthe naturallog of
the ratio of the strongerstate'sCOWcapabilitiesin-
dex (CINC)to that of the weakerdyadicstate.CINCis
constructedas the weightedaverageof a state'sshare
of total systempopulation,urbanpopulation,energy
consumption,iron and steelproduction,militaryper-
sonnel,and militaryexpenditures.
* Regions:Severalscholarsidentifyregionalvariability
in interstateconflict (Bennettand Stam 1999;Lemke
2002, 2003a, 2003b). Controllingfor samplehetero-
geneityis importanton botheconometricandsubstan-
tivegrounds.Indeed,the problemappearsparticularly
relevantin the contextof the democraticpeace(Hen-
derson 2002). I preparesix dummyvariablesfor the
respectiveregions(Asia,Europe,NorthAfrica,theMid-
dle East,NorthAmerica,SouthAmerica,Sub-Saharan
Africa),coded "1"if both statesare in the regionand
"0"otherwise.46
a standard
democratic
Adopting peacemodelalsoensures
thatI
havenotchosencontrolvariables
thatfavormyhypotheses.Acheck
usingjustthe democracy andmarketvariables,
withandwithout
temporalsplines,yieldsthesamesubstantive
result.
4UnlikeCOW,I dividethe Americasat the Isthmusof Panama,
includingPanamain SouthAmerica.I alsodroptheWestPacificas
a categoryto avoida dummyvariabletrap.Theregionexperiences
ERIKGARTZKE
Results
The trendin democraticpeaceresearchhas been to nar-
rowthe scopeof claimsto conformto an evolvingunder-
standingof the empiricalrelationship,from monadicto
dyadicprocesses,and from all democraciesto just those
with developedeconomies.Advanceddemocraciesdiffer
fromdevelopingdemocraciesin theirwealth,integration
into the globaleconomy,and in theirpost-WorldWarII
preferenceconvergence.Below,I assessthe effectsof vari-
ables representingmarkets,development,and interests.
I conductedmanytests,but to savespace,I reportonly
representativeexamplesof the results.Additionalanalysis
is summarizedin an appendixto this study.
Basic Analysis
Table1 lists five regressions.Model 1 is a baselinerep-
resentingwork by Oneal and Russettand other demo-
craticpeaceresearchers.47 Consistentwith conventional
wisdom, DEMOCRACY (Low) is significantand negative
(reducingdisputelikelihood),while DEMOCRACY (HIGH)
increasesthe odds of a MID. Exceptfor the Africaand
NorthAmericadummies,and the intercept,all variables
aresignificantat or abovethe 5%level,withsignsthatare
consistentwith conventionalexpectations.
In Models2 to 5 in Table1, I sequentiallyadd lib-
eral economic variables,first examiningthe impact of
marketson disputes,then addingthe more complexin-
fluenceof development,and finallyaddinginterests.In-
troducingan indicatorthat capturesthe broadereffects
of capitalismcausesthe democracyvariablesto become
insignificant,while IMFFIN.OPEN. (Low)is statistically
significantat the 0.1%level, and in the expecteddirec-
tion. NoticethatTRADE DEP.(Low)andalsothe ALLIANCE
dummy are no longerstatisticallysignificant.A broader
measureof globalcapitalismaccountsfor the apparent
impactof tradeand allianceson disputes.Similarly,sev-
eralof the regionaldummiesarenow insignificant(Asia,
Europe),or aresignificantat a lowercriticallevel (South
America).Only conflictbehaviorin the MiddleEastre-
mainsrobustlydifferentfromconflictin otherregions.
one MID (#3575 PapuaNew Guineaversusthe Solomon Islandsin
1992). I find comparableresultsusingjust the MiddleEastdummy.
47Model 1 replicates (Oneal and Russett 1997, 278, Model 1,
Table2). Resultsdifferslightlybecauseof the MaozMID dependent
variable,the regiondummies,andotherminordiscrepancies.Other
studiesby Onealand Russettfocus on interdependence(Onealand
Russett1999a),IGOs(Onealand Russett1999b;Russett,Oneal,and
Davis 1998), or critics (Oneal and Russett1999c). Oneal, Russett,
and Berbaum(2003) extend the temporal domain, but financial
data are not availableto coverthis longer time period. In any case,
the post-World War II period is generallyconsidered to be the
period duringwhich the democraticpeace is strongestempirically.
CAPITALIST
PEACE 177

1 LogitRegressionof LiberalVariableson MilitarizedInterstateDisputes

TABLE
D.V.:MID(Maoz) 1 2 3 4 5
DEMOCRACY
Democracy(Low) -0.0641*** -0.0103 -0.0152 -0.0107 -0.0171
(0.0139) (0.0137) (0.0140) (0.0128) (0.0119)
Democracy(High) 0.0356*** 0.0077 0.0074 0.0080 -0.0022
(0.0100) (0.0122) (0.0120) (0.0122) (0.0125)
MARKETS
TradeDep. (Low) -37.8343* -16.9177 -24.3312 -5.2063 -5.4023
(15.8743) (10.0734) (14.0447) (8.4729) (9.0358)
Fin.Open. (Low) -0.1877*** -0.2116*** -0.2143*** -0.2468***
(0.0529) (0.0604) (0.0588) (0.0581)
DEVELOPMENT
GDPPC(Low) 6.88 x 10-5 2.237 x 10-4*** 2.481 x 10-4***
(3.71 x 10-5) (3.87 x 10-s) (3.25 x 10-s)
GDPPCx Contig. --2.853 x 10-4*** --2.776 x 10-4***
(4.91 x 10-s) (4.92 x 10-s)
INTERESTS -0.9824***
(0.2005)
CONTROLS
Contiguity' 2.0028*** 2.7595*** 2.7581*** 3.4285*** 3.7404***
(0.2112) (0.3022) (0.3060) (0.3063) (0.2734)
Distance2 -0.6108*** -0.4742*** -0.4643*** -0.4327*** -0.4164***
(0.0835) (0.0972) (0.0967) (0.0928) (0.0853)
MajorPower' 2.5152*** 2.0301*** 1.9481*** 1.9734*** 1.4035***
(0.2567) (0.3738) (0.3680) (0.3557) (0.2733)
Alliance' -0.4299* -0.2381 -0.2342 -0.2172 -0.0073
(0.2030) (0.2404) (0.2356) (0.2318) (0.2334)
CapabilityRatio2 -0.3040*** -0.1286* -0.1273* -0.1295* -0.1506**
(0.0548) (0.0598) (0.0596) (0.0578) (0.0555)
Africa' 0.4437 0.1726 0.2841 0.1780
(0.3202) (0.3626) (0.3633) (0.3644)
Asia' 1.3172*** 0.7064 0.7720* 0.6314
(0.2462) (0.3609) (0.3577) (0.3644)
Europe' -0.9231*** -0.9167 -0.9871 -0.8978
(0.2948) (0.5070) (0.5044) (0.4635)
MiddleEast' 1.3296*** 1.0086*** 0.8818** 0.9785**
(0.2668) (0.3140) (0.3198) (0.3088)
NorthAmerica' 0.1425 0.7021 0.7250 0.7517
(0.3379) (0.4746) (0.4748) (0.4771)
SouthAmerica' 1.3191*** 0.8872* 0.8315* 0.8811*
(0.4395) (0.4024) (0.4009) (0.3937)
CONSTANT -0.4677 -1.1358 -1.2880 -1.8606* -1.0878
(0.7076) (0.8399) (0.8302) (0.8089) (0.7615)
N 282287 174548 171509 171509 166140
Log-likelihood -5120.999 -2170.270 -2146.564 -2121.190 -2078.058
X 17,18,19,20,15) 1868.46*** 1717.58*** 1719.86*** 1698.78*** 1607.35***
splinevariables
fortemporal
Estimates tosavespace(Standard
suppressed inparentheses).
errors
Sp< 0.05.
**p < 0.01.
***p< 0.001.
I'dummyvariable.
variable.
2lo0gged
178 ERIKGARTZKE

Thetheoryproposedherearguesthatdevelopment OPEN.(Low) correlateswithDEMOCRACY (Low) at 0.1451,

imposescontrasting effectson conflict.Model3 addsthe with DEMOCRACY at
(HIGH) 0.1556, and with TRADE DEP.
lineardevelopment variable.Resultsareas reportedin (Low)at0.1517.AFFINITY correlateswiththesevariablesat
otherstudies.Theeffectof development on disputesis -0.1053, -0.2915, and0.0023,respectively. Itmaybe that
not statistically significant.Other key variables remain the covariance between the democracy variables and the
substantially thesameasin Model2. Model4 introduces dependentvariableis capturedby IMF FIN.OPEN. (Low),
aninteraction variable betweenpercapitaGDPandconti- AFFINITY,andothervariables,butthisis preciselywhatthe
guity.Estimating boththelineareffectofaverage national theorypredicts,andwhatexcessempiricalcontententails.
incomeandtheinteraction termshowsbothvariables to Still anotherconcern involvesappropriateestima-
be significant in oppositedirections. GDPPC(Low)in- tion method.In some studies,Onealand Russett(1999b,
creases thedisputepropensity ofdyads,evenasitdecreases 1999c)advocatetheuseof thegeneralestimatingequation
thetendency ofstatestofightwiththeirneighbors. Finally, (GEE).Theremaybe reasonto debateOnealandRussett's
I introducethe indicatorof interestsimilarity basedon choiceof GEE,particularlytheirassumptionthattempo-
UnitedNationsvoting.Stateswithsimilarinterests, orin- raldependence iscaptured byanAR1process(Beck2003).
tegrated markets, or mutual development and an absence However, it is usefulin this instanceto simplyadoptthe
of policydifferences arelesslikelyto fight.Model5 also data,variables, and methods preferred bythosewhoantic-
dropstheregionaldummiesto showthatthecombined ipatecontrasting results.Findings usingGEEaresubstan-
influenceof liberaleconomicvariables doesnot depend tiallythesame,andoftenpresentsubstantively stronger
on thepresence of controlsforregionalheterogeneity. evidencefora capitalist peace than resultspresented here
Readersshouldasksomeprobingquestionsbefore usinglogit.
acceptingthesefindings(additionaltestsappearin an
empirical appendix). Onesourceof discrepancy between SubstantiveImpact
theresultsreported hereandthoseof otherstudiescould
1 plots the relativerisk ratiosfor DEMOCRACY
be samplesize.Thereported sampledropsfrom282,287 FigureIMF FIN.OPEN. (Low),thecombined development
in Model1 to 166,140in Model5.48Tocheckwhether (Low),
variables, and AFFINITY fromModel5.Valuesforeachkey
samplesizeexplainsthe insignificance of democracy, I
of a MID,weightedby
reranModel1 usingthe samplefromModel5. DEMOC- variablerepresent probabilities
of a MID
maximum variable values.Initialprobabilities
RACY (Low)isagainstatistically significantintheexpected
direction,thoughat a lowercriticallevel (p = 0.012).
arecalculated usingthemethodof recycled predictions,
the actual data back through Model 5,butreplac-
Standard errorsfor DEMOCRACY (Low)in both models running one of the variables with a standard value suchas
areaboutthe same,butthe estimated coefficientin the ing key
themean,minimum, etc. This process repeated sev-
is for
sampleforModel5 is abouthalfthesizeof thatin Model eralstandard valuesandthenthe originalvaluesof the
1. DEMOCRACY (HIGH)is not statisticallysignificant,but andanotherkeyvariable is assessed.
arereplaced
thisis oftenalsofoundto be thecasein studiessupport- variable
The relative of
impact key variables differssubstantially.
ingthedemocratic peace.Thetradevariable, TRADE DEP. with the leastintegrated markets or themostdis-
(Low),haslowerstandard errorsandthusis significant Dyads
similarinterests areaboutfivetimesaslikelytoexperience
a
at higher critical level.Finally,the alliancevariableis a MIDas marketsor verysimilar
errors dyadswithglobalized
not statisticallysignificant,thoughtthe standard
forALLIANCE arealmostthe sameasin Model1.Thefind-
interests.The effectof interestson disputesalsoappears
nonlinear. Valuesof AFFINITY abovethemeanshowlittle
ingsin Models2 to 5 do not appearto resultfromlistwise butvaluesbelowthemean
deletion of cases. changein disputeprobability,
(stateswith dissimilarinterests)producemajorchanges
Another possibility is that democracy is insignifi-
in the probabilityof a dispute.I combinethe effect of
cant due to multicollinearity. This is not the case. Multi-
GDPPC(Low) and GDPPCx CoNTIG. (Low) to assess
collinearity is a problem of estimation that occurs when A change
of
the overallimpact development on conflict.
two or more independent variables covary at such a high
from the maximum to the minimum value of develop-
level that almost none of the variance in these variables
ment increasesthe likelihoodof a disputeby roughly2.5
can be shown to have an independent statistical effect on
times.49The developmentvariablesalsoappearto havea
the dependent variable (Kmenta 1986, 430-42). IMF FIN.
graduatedeffecton conflict,withthegreatestreductionin
disputepropensityoccurringamongthe most developed
48IMF dataonliberalization
underrepresentstheeffectof economic
freedom,sincemissingvaluesarefarmorecommonamongless
integrated (Kingetal.2001)wouldthustend
countries.Imputation = 1. The effect of GDPPC(Low) on disputes(where
49CONTIGUITY
to favorthehypotheses. (Low)= 0) is positive.
GDPPCx CONTIG.
CAPITALIST
PEACE 179

1 RelativeRisk of a MID for Valuesof Democracy,Markets,

FIGURE
Development, and Interests (Risk Relativeto Maximum
Value for Each Variable. Source: Table 2, Model 5)

5 /

Markets '
-
4
."
. / ,
. Interests

0/ "

*
?Development
2-2 00

000 Democracy
"

max mean + 2 s.d. mean+ 112s.d. 1/2 mean min

Valuesof KeyIndependentVariables

states.Comparing the mostdemocratic andmostauto- velopment ratherthandemocracy. Themajority of MIDs

craticdyads,thelatteris onlyslightlymorelikelyto fight. involvelittleornoactualbloodshed, however. Thefactors
saidto makedemocracies peacefularearguably mostpo-
tentwhendealingwithlarge-scale A
contests. thorough
WarsandFatalMIDs assessment of the determinants of liberalpeaceshould
Whileanalysisof militarized disputedatahas become thusexaminewarsas (SmallandSinger1976,1982).
inthe ofthedemocratic Byanystandard, warsbetweendemocracies arerare.
widespread study peace,MIDsus-
Ifwedefinedemocracy asa statethatscoresaboveseven
ageisnotubiquitous. Otherresearchers emphasize theef-
fectofjointdemocracy onwars(Ray1993,2000;Rummel on the Politydemocracy scalethen,out of 222category
1979,1983;SmallandSinger1976).Militarized five MIDs(wars),thereareno observations of warin
disputes
havea numberof advantages as an indicatorof conflict a democratic dyad in the postwarsample(x2 = 17.27,
behavior, nottheleastof whichis theirgreater
frequency. Pr = 0.001).The resultseemsprettycompelling.Yet,
Warsaresuchrareeventsthattheirnonoccurrance in a democratic dyadsconstituteonlyabout7.2%of theob-
context or not be indicativeof a servations. Manyotherthingscouldbe happening that
given may may qualita-
tivechangeintheconflicttendency of countries
ordyads. areignoredin sucha simpletest.
Still,themostintuitive,widelyarticulated, andin some Howmanywarsoccurbetween"capitalist" countries?
respects robustformulation of the democratic peacein- It is not obvioushowto condensethebundleof factors
volveswars,notMIDs."Democracies veryrarely,if ever, discussed aboveintoasinglevariable. Still,IMFFIN.OPEN.
makewaron eachother"(Russett andOneal2001,43).5o (Low)is probably thebestcandidate forsucha test.Let
TheresultsdetailedinTable1 (andintheappendix) seem me arbitrarily definecapitalist dyadsas thosewherethe
toindicatethatliberalpeaceisaproductofcapitalandde- lowerIMFFIN.OPEN scoreisatleastsix.Thisistheclosest
ordinalvalueon thescaleto a valueatleasttwostandard
50Starrcalls the war proposition "prettywell proved"(1997, 154).
deviations abovethemean(3.006+ 2 x (1.627)= 6.26).It
Some use the proposition to justify war. Kaplanand Kristol,for alsoproduces asubsample of capitalistdyadsthatisabout
example, argue that since "democraciesrarely,if ever, wage war 6.9%of theavailable of
sample observations, not much
against one another"(2003, 104), the United States should make fromthatfordemocratic = 0.1491 for
waron othercountries,forceregimechange,and therebyachieving different dyads(R
peace. That this itself involvesa potential increasein warfareis an thetwodummyvariables). therearenowars
Interestingly,
ironythat is apparentlylost on these authors. in thecapitalist dyads either,though smallersample
the
18o
of casesforwhichdataon financialopennessareavailable
meansthatonlyabouta quarterof thewarsareaccounted
forin thesample(54wars,X2 = 4.0,Pr= 0.045).Toextend
thisverycrudetesta bit further,I addzerosto roundout
missingobservationsso thatthe capitalistanddemocracy
samplesarethe samesize and all 222 warsappearin the
sample.WhenI do this,the capitalistdyadsagaincontain
no warsand the relationshipis highlysignificant(0.1%).
Thus,bothdemocraciesandcapitalistdyadsappearnever
to fightwars.Still,determiningmoreabouttheserelation-
ships,and theirrelativeimpacton war,requiresthat we
movebeyondcrosstabs.
Table2 lists four regressionsthataresimilarin most
respectsto those reportedin Table1. The main differ-
ences involvethe dependentvariable.Ratherthan cod-
ing for the presenceor absenceof MIDs, the first two
columns of coefficientsand standarderrors(Models6
and 7) representthe estimatedprobabilityof a war be-
tweenpairsof countriesin the post-WorldWarIIperiod.
The secondpairof columns(Models8 and 9) reportes-
timatedcoefficientsand standarderrorsfor fatal MIDs
(militarizeddisputeswith at leastone battlecasualtyre-
ported).The first and third columns (Models6 and 8)
includedemocracyand othervariablesbut omit the cap-
italistpeace variables.The second and fourth columns
(Models7 and 9) againintroduceindicatorsfor market
integration,economicdevelopment,and the interaction
betweendevelopmentand contiguity.I omit the interest
variablebecauseit is not statisticallysignificantin these
regressions.This makessense as fatalconflictsand wars
disproportionately involveresourcecompetition(Senese
2005;Vasquez1993),ratherthanthe policydisputescap-
turedbytheinterestvariable(Gartzke2005b).Mostof the
militarizeddisputesaccountedforbypolicydifferencesin
the sampledo not involvefatalities.
Model 6 in Table 2 replicates the first model
in Table1, but estimatesthe determinantsof warsrather
than militarizeddisputes. Democraciesare much less
likelyto experiencewars.Distancemitigateswarfare,but
contiguityappearsinsignificant.Allianceties and power
disparityarealsoassociatedwitha lowerlikelihoodof war.
Interestingly,therearemajorregionaldifferencesin war
propensity (Bennett and Stam2003). Some,but not all,
of these differencesare subsumedby the capitalistvari-
ablesintroducedin Model7. Asiano longerappearsmore
warprone,but theMiddleEast,wherepercapitaincomes
are high due to resourcewealth ratherthan manufac-
turing or industry,and where marketsare largelystate
controlled,remainsatypicallyhostile.5'Europedropsout
of the analysisbecausethereareno Europeanwarsin the
51Theassociationbetweenoil and autocracy(Dunning 2005; Ross
2001), and civil warfare(De Soysa 2000; Fearon 2005), and the
ERIKGARTZKE
sample.Contiguitybecomesstatisticallysignificantand
positive,but now distanceis not a significantpredictor
of warfare,perhapsbecausearmiesthatfightmajorwars,
ceterisparibus,arealso morewillingto travel.Similarly,
majorpowerstatusand allianceties appearirrelevantto
whetherstatesgo to warwith eachotherin this analysis.
Thebiggestchangein Model7, however,is thatthe intro-
ductionof measuresof economicdevelopmentandmar-
ket integrationleadsdemocracyto becomeinsignificant,
whilethe capitaland developmentvariablesareall statis-
ticallysignificant.Weseea repeatof theeffectsof thecapi-
talistpeacevariableson warsthatwaspreviouslyreported
forMIDs.Developmentdiscouragesfightingamongcon-
tiguousstates,but makeswarsfarfromhome morelikely,
whilefreemarketsleadto lessviolentdyads.
A similarstory is told by comparingModels8 and
9, each estimatingthe probabilityof deadlyMIDs,with
eachotherandwith previousregressions.One difference
in Model8 is that the thresholddemocracyscoreis just
shortof standardlevelsof statisticalsignificance(DEMOC-
RACY (Low)is statisticallysignificantat the 10%level).A
second differenceis that tradeties are associatedwith a
decreasein conflictin Model8, as they werein Table1,
Model1.ContiguitymattersfordeadlyMIDs,presumably
becausemanystatesthatwillfightsmallconflicts,but not
wars,arealsounwillingor unlikelyto travelfardistances.
Both SouthAmericaand Europereturnas independent
variables,asthelowerconflictthresholdensuresthatthere
are for observationsin both regions.The MiddleEastis
againunusuallydisputeprone, as is Asia,while Europe
is atypicallypeacefulonly when the effectsof capitalism
areignored.Africaand the Americasarenot differentin
theirdisputebehaviorfromoveralltrends,once we mea-
surecapitalistpeace.Again,we find thatfreemarketsand
developmentdiminishdisputesandwar,whiledemocracy
has no effecton whetherdyadsfight.
Conclusion: The (Other)
Liberal Peace
Thisstudyoffersevidencesuggestingthatcapitalism,and
not democracy,leads to peace. Additionalresearchis
neededto corroborate,extend,and even refutethe find-
ingsreportedhere.Onemustbe circumspectin question-
inga bodyof evidenceaslargeandascarefullyconstructed
as that on the democraticpeace.Still,economicliberals
havelongseenin freemarketsandprosperitythepotential
to discouragewar. A century ago, the "conventional
wisdom"lookedmorelike this studyand less likethatof
argumentsuppliedhere, implies that resource-exportingstatesare
more prone to interstatewarfareeven if they are rich.
CAPITALIST
PEACE 181

2 LogitRegressionof LiberalVariableson WarsandFatalMIDs

TABLE
Wars FatalMIDs

D.V.:MID (Maoz) 6 7 8 9
DEMOCRACY
Democracy(Low) -0.1260*** 0.0369 -0.0469 -0.0271
(0.0284) (0.0661) (0.0278) (0.0277)
Democracy(High) 0.0232 -0.0079 0.0337* 0.0282
(0.0241) (0.0511) (0.0155) (0.0226)
MARKETS
TradeDep. (Low) -213.2004 -48.7568 -165.601* -85.2508
(334.1007) (125.1016) (76.7378) (65.4883)
Fin. Open. (Low) -0.4642** --0.1648*
(0.1606) (0.0751)
DEVELOPMENT
GDPPC(Low) 2.66 x 10-4*** 1.82 x 10-4***
(7.13 x 10-5) (4.82 x 10-5)
GDPPCx Contig. -4.19 x 10-4* --2.30 x 10-4**
(1.92 x 10-4) (8.43 x 10-5)
CONTROLS
Contiguity' 0.4951 4.6554*** 2.2827*** 3.3585***
(0.4463) (0.7191) (0.3132) (0.3884)
Distance2 -0.6505*** -0.2937 -0.5898*** -0.4191***
(0.1327) (0.1913) (0.0955) (0.1185)
MajorPower' 3.9806*** 1.5502 2.1806*** 1.4176**
(0.4793) (1.2571) (0.4277) (0.4745)
Alliance' -1.2019** -1.0525 -0.2429 0.1573
(0.4551) (0.6436) (0.3016) (0.4470)
CapabilityRatio2 -0.8650*** -0.6950** -0.3423*** -0.1790*
(0.1230) (0.2291) (0.0658) (0.0850)
Africa' -0.4739 0.6290 0.4002 0.5325
(0.6722) (0.9516) (0.3953) (0.5283)
Asia' 1.8044*** -0.2342 1.2479*** 1.5317**
(0.4529) (0.8432) (0.3753) (0.5046)
Europe' -2.5545* -0.9047* -1.3859
(1.1140) (0.4306) (1.0707)
MiddleEast' 1.7844*** 2.3645*** 1.4481*** 1.5501***
(0.4950) (0.6338) (0.3172) (0.3849)
NorthAmerica' -0.4936 1.0875 -0.1719 0.6321
(0.9559) (0.9510) (0.4573) (0.5607)
SouthAmerica' 0.7952 0.2432
(0.7131) (1.0156)
CONSTANT -1.0745 -4.7603** -2.3843** -4.2320***
(1.0876) (1.7773) (0.8106) (1.0130)
N 280195 165194 282287 171509
Log-likelihood -890.859 -180.725 -1606.849 -689.586
X#16,18,17,20) 519.42** 312.07*** 1796.80*** 1170.63***
splinevariables
fortemporal
Estimates (Standard
suppressed inparentheses).
errors
*p < 0.05.
**p < 0.01.
***p< 0.001.
1dummy variable.
2logged variable.
182 ERIKGARTZKE

democraticpeaceresearchers. Whilepastargumentswere East,in no smallpartbecausepolicymakersbelievethat

clearlysimplistic and overblown,there does now seem
to be groundsfor reconsideringliberaleconomicpeace
theory.
Onecanreasonablydifferwithmyversionof classical
arguments,or canplausiblychallengethe assumptionson
whichmyversionof thecapitalistpeaceisbuilt.Thestatis-
ticalmodelsI develop,andthe findingsthatI present,can
be altered,possiblyin waysthatagainshow thatdemoc-
racymatters.Fornow,I hopethatthe claimsof thisstudy
are coherent,empiricallyplausible,and at the veryleast
intellectuallyprovocative.Whatis the "larger"relation-
shipbetweendevelopment,capitalism,anddemocracy? It
mightbe that democracyactuallylies behindthe appar-
ent impactof capitalismon peace.Still,theworldwasnot
alwaysmadeup of a largeproportionof democracies.Lit-
tle attempthasbeen madeto ruleout the possibilitythat
democracyandpeacehavecommoncauses,orthat,ashas
long been argued,developmentand capitalismleadboth
to freerpoliticsand to a more peacefulplanet.A logical
extensionof this studyis the explorationof determinants
of politicaland economic liberalism,though resolving
thesemorecomplexcausalarrowswouldseemto require
a levelof understandingaboutthe determinantsof cap-
italismand democracythatis stillunderconstructionin
comparativepolitics,economics,and otherfields.
The collapseof the SovietUnion in the early1990s
gavenew impetusto the explorationof domesticdeter-
minantsof internationalrelations.Today,politicalrev-
olution from without is being attemptedin the Middle
peacecanbehadthroughregimechange.Iftheimposition
of liberalpoliticsoffersa domesticparadox,at the inter-
nationallevelcoercingdemocracyis an extreme,though
arguablylogical,extensionof democraticpeacetheory.At
peoplefreedomtochooseimplies
thesametime,allowing
that they will sometimeschoose to disagree.A growing
numberof popularlyelectedleadersopposethe interests
of establisheddemocracies.Ifdemocracyreflectsthepop-
ularwill, and manypeoplein the worldareunhappy,we
shouldperhapsnot expectthat all new democracieswill
likethe old ones.Democratization, implies
paradoxically,
increasing tensionsamong democracies.Free marketsand
development,in contrast,leadnationsclosertogether,or
at down gradehistoricterritorialanimosities.
Appendix
AdditionalQuantitativeTests
There are a variety of other factors that could be
responsiblefor the insignificanceof democracy(and
trade). I conducted numerous other regressionsto
check for possible errors, omitted variablebias, etc.
Table 3 summarizesthese additional tests. I review
the resultsonly briefly,as furtherdiscussionwould be
repetitive.In no case did I find that the results for
key variableschangedsubstantivelyby using different
data,variableconstructions,or includingother control
variables.

TABLE of KeyVariablesandControlVariables
3 AdditionalOperationalizations
Category Data Construction Effect
Democracy PolityIV dummy/low/low andhigh/Ax B None
Vanhanen (2000) dummy/low/low andhigh/Ax B None
FreedomHouse dummy/low/low andhigh/Ax B None
Markets ChinnandIto(2002) low/A x B Sig.(-)
Quinn(1997) low
interpolated Sig.(-)
Gwartney andLawson(2000) low
low/interpolated Sig.(-)
IMFCap.flows low Sig.(-)
IMFFDI low Sig.(-)
IMFPortfl.Inv. low Sig.(-)
Gleditsch(2002)trade low/lowx Democracy (low) None
Gleditsch(2002)openness low None
Development Mousseau(2000) developmentx democracy None
Interests UN voting (AFFINITY) residualsregress,on AFFINITY Sig. (-)
IGOportfolios of IGOmemberships
similarity Sig.(-)
Alliance COW 3rdand4thpartyties Sig.(+)
ColdWar NATO/Warsaw Pact/Both None
IGOs OnealandRussett(1999c) low Sig.(+)
Capabilities COW low Sig.(+)
NuclearWeapons JoandGartzke(2007) bothnuclear/onenuclear None
Learning Cederman(2001a) (dem.andaut.)dummyx year None
CAPITALIST
PEACE 183

* Democracy: In additionto the Politydata,I also eval- intervals from1970to 1995forsome125countries.53

uate the Vanhanen(2000) Polyarchydata and data FREE.
ECON. INDEX identifieswhichdyadsareeconom-
from FreedomHouse (2000).52Vanhanenmeasures icallyfreeand open.I alsopreparea versionof the
democracyas politicalcompetitionand participation variable thatinterpolates missingvalues.I againapply
and offersa compositeindex of democratization(ID) theweaklinkassumption (cf.Dixon1993,1994).The
for the period1810-1998for 187countries.The index leastliberalstateinthedyadeffectively servestobound
of democratizationin the Vanhanendatarangesfrom theeconomicfreedomof thedyadiceconomy.
zero to 70, though no state currentlyreceivesa score Yetanotherapproach istouseactualdataoncapital
higherthan 50. Thesedatacorrelatestrongly,but not flows, rather than an index. Capitalflowdatarecords
perfectly,with the Politydata (Vanhanen2000, 260- cross-border movementof portfolioor directinvest-
61, TablesI andII). FreedomHousecodesregimetype ments.Conversely, existingflowsmayor maynot be
overa shortertemporaldomain(1972-98). The Free- anaccurate indication of thedegreeto whichstatesare
dom Housedataincludetwoeight-point(0 to 7) scales, freeto actautonomously. No datawidelyavailable for
one for politicalrightsand the otherfor civilliberties. a largesampleof countries containsinformation about
FreedomHouserecommendssummingthe indicators theamountof capitalthatexistsacrossborders.Simi-
fora singleannualdemocracyscale(0 to 14).I construct larly,thefactthatcapitalflowsexistdoesnotguarantee
dyadicvaluesas describedin the text. thatgovernments willbe restrained frominterfering
* Markets:Thereare a numberof waysto constructan in themovementof moneyduringa crisis.Neverthe-
index from the IMF AREAERvariables.Chinn and less,it makessenseto examinea broadrangeof indi-
Ito (2002) offer an index of capitalaccountopenness catorsof marketactivity.IMFGROSS FDI(Low)mea-
(KAOPEN)basedon four dummyvariablesfor mul- suresthesumofabsolute valuesofinflowsandoutflows
tiple exchangerates,restrictionson currentand cap- of foreigndirectinvestments weightedbyGDP.54 IMF
ital accounttransactions,and surrenderrequirements PORTFL. INVEST (Low)reports the sum of the absolute
for exportproceeds.Chinnand Ito invertthe dummy valueof inflowsandoutflowsof portfolioandrelated
variables,
smoothing valuesoverfiveyears.KAOPEN is investments, asaportionofGDP.IMFCAP. FLOW (Low)
constructedusing standardized principal components is an aggregate measurethatattemptsto combinethe
(theindexisboundedby- 1and1,withamean
analysis effectsof FDI(IMFGROSS FDI(Low))andportfolio
of zero).Quinn(1997)andQuinnandInclin(1997) flows(IMFPORTFL. INVEST (Low))withthe indexof
offera measureof capitalliberalization (CAPITAL), capital openness (IMF FIN. OPEN. (Low)).Ineachin-
rangingfrom 0 (autarky) to 100 (fullyopeneconomy). stance, I usethe lower value in the dyadforeachdyad
Quinnmakesuseof qualitative codingsprovided inthe year.
AREAER. Dataavailabilityfordeveloping countriesis * Development: Several authorsshowthattheeffectofthe
uneven. democratic is
peace contingent, thatonlysomedemoc-
Onecanalsoseekothersourcesof data.Gwart- racies(inparticular, richones)experience mutualrela-
neyandLawsondevelopan index"designed to iden- tivepeace(Hegre2000;Mousseau 2000;Mousseau etal.
tifytheconsistency of institutionalarrangements and 2003). These studies introduce an interactionterm be-
with
policies economic freedom in seven majorareas" tweendemocracy andeconomicdevelopment, reveal-
(2000,3).Theindexisthusbroadly withthe
consistent ing that onlyrich democratic dyadsarelesswarlike. In
economiccomponents of Rummel's libertarian
peace orderto avoidbiasingagainsttheKantian variables,I
theory.The areasinclude "(I)size of government, (II) do not include the interaction term between democ-
economicstructureanduse of markets,(III)monetary racyanddevelopmentin the basicanalysis.In orderto
policy and price stability, (IV) freedom to use alter- ensurethe robustnessof the analysis,I introducethe
native currencies, (V) legal structure and security of interactionDEMOCRACY (low) x GDPPC here in the
private ownership, (VI) freedom to trade with foreign- appendix. The variable is not significant in the analy-
ers, and (VII) freedom of exchange in capital markets" sis here and has no impact on the key variables in the
(Gwartney and Lawson 2000, 3). The seven areas of study.
economic freedom are further composed of 23 differ- * Interests:It has been argued that United Nations vot-
ent statistical indicators. Data are availableat five-year ing patterns are really just a product of regime type

"The economic freedom data are availableat http://www.

freetheworld.com/download.html.
52TheVanhanen Polyarchydataset is availableat http://www.svt
.ntnu.no/iss/data/vanhanen/.The FreedomHouse CountryScores "All GDPdatausedin the studyarein the formof purchasing
can be obtainedat http://www.freedomhouse.org/ratings/. powerparities(PPP).
184
and other variables(Oneal and Russett1999b;Rus-
sett andOneal2001).Todispelconcerns,I firstregress
DEMOCRACY (Low)and (High) on AFFINITY.I then use
the residualsfrom this regressionas a substitutefor
the original indicator.There can be no relationship
betweenthe residualsand democracy(Gartzke2000).
In fact, the explanatorypowerof democracyis quite
weak,accountingfor less than 7% of the variancein
UN votingpatterns(R2= 0.0658).The residualsfrom
AFFINITY performjust as the originaldata, while the
democracyvariablesremaininsignificant.Someschol-
arshaveused allianceportfoliosto measureinterstate
interests(Buenode Mesquita1981;Buenode Mesquita
and Lalman1992). Sincethere is very little variation
in alliancetiesin thepost-WorldWarII period,I use
insteadan indicatorof the similarityof states'port-
foliosof intergovernmentalorganizations(IGOs).The
measureis againcalculated using"S"(Sweeneyand
Keshk2004).TheIGO-based indicator
performs much
as AFFINITY, while democracyand tradeare againsta-
tisticallyinsignificant.
* Alliances: Stateshaveallianceswithpartnersoutsideof a
givendyad.Thesetiesviolatethe assumptionof spatial
independence.Third-partyalliancesinvolvea commit-
ment by one state(A) in dyadA-C to act on behalfof
state (C) in the eventthat dyadB-C experiencescon-
flict. For example,the probabilitythat Canadafights
againstthe SovietUnion in 1979is not independentof
the probabilitythat the UnitedStatesfightsthe Soviet
Union duringthe same or precedingyear."5Similarly,
fourth-party alliancetiesarecodedif in dyadC-D, state
C is alliedwith A and D is alliedwith B and dyadA-B
experiencesa contest. 3rd PARTY ALLY is a dichotomous
variableequal to "1"if one state in the dyad has an
alliancewith a third-partystatethat engagedin a dis-
pute with the otherstatein the dyadin the currentor
previousyear, and "0" otherwise.4th PARTY ALLY is a
dichotomousvariableequalto "1"if eachstatein the
dyadhas an opposingalliancewith statesthatengaged
in a disputein the currentor previousyear.Alliance
ties widen conflicts.4thPARTY ALLY is significantand
positive in all analyses, while 3rd PARTYALLY is usually
significant and also positive.
* It has been suggested that the democratic peace is a
byproduct of the overarching alignments of the cold
war (Gowa 1995; Rosato 2003). My findings could re-
flect ties among members of NATO and the Warsaw
Pact. I construct three dummy variables, one for each
alliance, plus one for the combined effect of both al-
liances. These variables are not significant. The major
alliances of the cold war do not appear to explain the
55Use of currentand subsequentyearsof alliancecontagionis some-
what arbitrary,but it seems to work.
ERIKGARTZKE
liberalpeace,ordisputebehavior amongtheirmembers
orbetweenalliances.
" Intergovernmental Organizations:Severalstudiesar-
gue that IGOsencouragepeace(Onealand Russett
1999c;Onealet al. 2003;Russettet al. 1998).Other
evidencesuggestsotherwise(Domke1988;Gartzke,
Li,andBoehmer2001).56Findingsfor IGOsdepend
on sample,statisticalestimator, andvariable construc-
tion (Boehmer,Gartzke,and Nordstrom2004).Re-
sultsaresimilarwhenI replicate theanalysisin Oneal
andRussett(1999c),but the IGOvariableis positive
andsignificant. WhileI do not believethatIGOsin-
creaseconflict,theiranalysisrequiresfurtherrefine-
mentof theoryanddata.Useof IGOdataalsoreduces
the samplesizeby morethanhalf.It is for thisrea-
sonthatI do notincludean IGOvariable in themain
analysis.
" Capabilities:CAPABILITYRATIO relative
identifies power.
It cannot,for example,distinguish betweenparityin
a weakdyadandparityamongpowerfulstates.While
not critical,controllingfortheabsolutesizeof dyadic
capabilitiesappearsappropriate. CAPABILITY (Low)re-
ports thelower of thetwo CINC scoresin a dyad.The
thresholdcapability variableis usuallypositiveandis
significantin abouthalfof theregressions conducted
forthisstudy.IncludingCAPABILITY (LOW)doesnot alter
the keyresults
* Learning:Constructivists (Mueller1989;Risse-Kappen
1995, 1997; Wendt 1999) and others (Farkas1998;
Reiter1994,1996)arguethatlearningis an important
dynamicomittedfrommuch of the researchon inter-
nationalpolitics.Why learningcan only occur in re-
centdecadesis unclear.I checkto seewhetherlearning
mightaffectthe resultsof thisstudy.Cederman(2001a,
of learning
2001b) offersa concreteoperationalization
in the contextof the democraticpeace.He interactsa
dummyvariablefor regimetype with the yearof each
observation.Healsoconstructsa similartime-seriesfor
non-democracies.I generatelearningvariablesas the
productof whethereitheror both statesin the dyad
have PolityIII DEMOC scoresgreaterthan or equalto
six. The resulting variables do not report significance
and do not affect the principal results.
* Nuclear Weapons: It has been argued that nuclear
weapons promoted stability during the post-World
War II period (Mearsheimer 1984, 1993; Sagan and
Waltz 2003). It is possible that the democratic peace
is the result of nuclear deterrence. I use Jo and Gartzke
(2007) to identify nuclear dyads in which either one
state or both states possess nuclear weapons. Nuclear
weapons status shows no significant effect on dispute
behavior in this analysis.
in-
5Democraciesmayactuallybe lesswillingto bargainthrough
ternational (Schmidt2003).
organizations
CAPITALIST
PEACE 185

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