January 29, 2012 | Commentary on National Security and Defense, Economic Freedom

More Free Markets Will Mean Fewer Wars

Sir Ralph Norman Angell had all the answers. In 1909, he published "Europe's Optical Illusion," a pamphlet arguing that the global integration of economies through trade and industrialization had made total war obsolete.

The outbreak of World War I dented the theory somewhat. But such was the power of Angell's argument -- and the insight of European elites -- that he received the Nobel Peace Prize in 1933. World War II started six years later.

Angell and others had missed a key point. It's not just the intensity of trade between nations that influences the tide of war and peace; the kind of nations engaged in trade matters as well.

The old British adage "trade follows the flag" had an important postscript: "War often follows trade." When free-market nations rubbed up against mercantilist and other "not free" economies, the friction often produced bloodshed.

On the other hand, economic activity between nations that share a commitment to economic freedom tends to flow peacefully, without rancor. Indeed, strong trade ties between free-market nations tend to actually promote national security.

Economic freedom helps nations generate the wealth that allows them to defend themselves. Beyond that, it creates a community of nations with a shared interest: protecting their right to freely exchange goods, peoples, services and ideas.

This common bond promotes the cause of peace by creating strong, self-reliant, sovereign and independent nations interested in preserving the mutual freedoms that allow them to engage commercially and prosper.

Economic freedom hinges on an institutional framework that allows all individuals to exercise their liberties in the market place. In addition to accommodating free trade, that framework includes institutional commitments to fight corruption, protect property rights and the sanctity of contracts and pursue responsible fiscal policies.

Each year, the Heritage Foundation and the Wall Street Journal produce an Index of Economic Freedom that measures 10 major components essential to economic freedom and assesses the state of virtually every economy in the world.

The 2012 Index of Economic Freedom should be a wake-up call for the world. It found that, generally speaking, economic freedom is in decline throughout the globe.

The decline is very real right here in the United States. For the second straight year, America has failed to qualify as a free economy; it rates as only "mostly free."

As recently as 2008, the U.S. was a Top Five country in terms of economic freedom. This year, we barely managed a 10th place finish.

The loss of freedom has been accompanied by a stagnant economy and persistently high unemployment. Reviving economic freedom is essential to growing the economy and creating jobs ... and for national security as well.

Beyond getting our own house in order, encouraging and working with other nations to promote economic freedom is equally important. Washington needs to embrace ambitious policies that create economic dynamism, policies that will unshackle innovation, which leads to better products, new markets and greater investment.

Promoting property rights and anti-corruption measures ought to be high on our foreign policy agenda as well. And virtually every region of the world offers opportunities for the United States to enter new free trade agreements.

New initiatives such as the proposed nine-country Trans-Pacific Partnership could create new economic opportunities by expanding trade between the United States, Asia and Latin America.

The prescription for solving America's ills requires a double dose of national security and economic freedom. That's what's needed to make "peace through strength" a reality, rather than a bumper sticker.

James Jay Carafano is a senior research fellow for national security at the Heritage Foundation.

About the Author

James Jay Carafano, Ph.D. Vice President for the Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy, and the E. W. Richardson Fellow

First appeared in The Washington Examiner