The second chapter of the Economic Freedom of the World: 2005 Annual Report deals with the potential correlation of free economies and peace, rather than democracy and peace. A short quote from the introduction to the chapter:
“Economic Freedom of the World: 2005 Annual Report 29
Classical liberal theory provides two streams of explanation
for peace, one focusing on the forms and practices
of government, the other on free markets and private
property. The former, seen most particularly in the
writings of Immanual Kant, has received extensive attention
from students of international politics in the last
decade. Kant was wrong when he claimed that republics
are less warlike than other forms of government. Instead,
researchers have found that democracies are less likely
to ﬁght each other, while being no less ready to use force
generally. This “democratic peace” has been further proscribed
by the discovery that developing democracies are
just as war-prone as developing dictatorships. Available
explanations involving the paciﬁc eﬀects of democratic
norms, institutions, or transparent rule must struggle to
explain why prosperity is a requirement for peace.
Liberal political economy oﬀers no such contradiction.
Scholars like Montesquieu, Adam Smith, Richard
Cobden, Norman Angell, and Richard Rosecrance have
long speculated that free markets have the potential to
free states from the looming prospect of recurrent warfare.
Capitalism encourages cooperation among states by
creating conditions that make war unappealing or unnecessary.
Free markets create another venue to competition
among countries, often containing minor conﬂicts
below the level of military force. The transformation of
commerce made possible by economic freedom also leads
to a transformation in international aﬀairs. Conquest
becomes expensive and unproﬁtable. Wealth in modern
economies is much harder to “steal” through force than
was the case among agricultural and early industrial societies.
This “capitalist peace” has been slow to reach fruition
but the tools and evidence are now in place to establish
a ﬁrmer connection between economic freedom and
reductions in conﬂict. I use the Index of Economic Freedom
developed by Gwartney and Lawson and multivariate
statistical analysis to show that free markets appear
to encourage peace. I also evaluate several other factors
often thought to inﬂuence whether states ﬁght. Economic
freedom is one of the rare factors that generally discourages
conﬂict among nations.”
The chapter provides an interesting read, and finding what lies behind the unsual period of peace that we’ve seen in the West is of great importance. The claim that two democracies have never gone to war against each other still holds true, and it does seem likely that the mere fact that countries are democratic (preferrably in the wider sense, including a free press and freedom of speech and so forth) severly lessens the risk of war.
Thinking about it, it also seems likely that a free economy, in which there’s a lot of trade with other countries, lessens the risk of war. This is also the main idea of the integration of the EU economies – as more and more people interact and make their living by buying and selling things to people from other countries the cost of going to war with these countries increases. Combine this with a democratic society and it will be very difficult to get to power by conducting wars that leave the population worse off.
However, even if economic freedom has a higher impact on peace than democracy, this does not mean that we should worry less about spreading democracy. People everywhere have a right to think freely, express themselves and elect those that govern their countries – and sometimes war is the appropriate solution, though it is also always a tragedy. Knowing what causes peace is neccesary if we want to build better conditions in regions that are troubled today. Democracy remains one of the keys to this – a free economy seems to be at least as important.
(Thanks to Johan Norberg for the heads up)