Waging Peace

The Economic Weapon: The Rise of Sanctions as a Tool of Modern War, Nicholas Mulder, 2022.

Artwork: Apokalyptische Landschaft, Ludwig Meidner, 1913.

When Russia invaded Ukraine in February of 2022, sanctions were on everyone’s lips. It was understood Western states would seek to limit Russia’s financing options, foreign exchange, exports, and imports. Material support for Ukraine was expected. It was also clear to all that such actions did not constitute acts of war, nor did anyone expect any declarations. Little more than a century ago, however, this would have seemed quite strange. When first used against Germany during the First World War, the “economic weapon” - as sanctions were called - was considered the most destructive tool in the arsenal of the state. Woodrow Wilson would describe sanctions as “something more tremendous than war”. To cut a nation off from international trade in peacetime was considered illegal, illiberal, and downright immoral.

The story of how we got from then to now is the focus of Nicholas Mulder’s The Economic Weapon - a book published, incidentally, a month before said invasion. Mulder’s narrative begins with the First World War, and a new economic weapon: the blockade. The devastation it wrought - part real, part exaggerated - led sanctions to be re-conceived after the war as a deterrent to conflict; a means to wage peace. It formed the basis of a new liberal internationalism, not based in a naïve doux commerce, but in what became known as “collective security”. But the role of economic sanction in liberal internationalism was as uncertain as it was tenuous. There were always questions as to how, and by whom, they would be used. This weak political foundation undermined the sanctionist agenda in the thirties, even if the raw economic power of sanctions, contrary to popular opinion, found vindication in the interwar years. It would fail explosively in the Second World War. A new, reinforced, US-led liberal internationalism would emerge from the rubble; one profoundly influenced by the lessons of the thirties. But would it be based on a more legitimate political order? In light of recent events, I think there are significant doubts. Among other things, The Economic Weapon reveals that liberal internationalism has, despite its genuine ambitions to the contrary, always been subordinated to power politics: an observation as grimly relevant now as ever.

In the late nineteenth century, the separation of economic activity from inter-state conflict was assumed. Not since the Revolutionary and Napoleonic Wars had private property been seized during conflict. But as with so many nineteenth century norms, the First World War broke this system. All the great powers raced to weaponise their economic heft, and as the centre of the greatest web of haute finance, naval power, and merchant marine the world had ever seen, it was only natural Britain was the most successful state to do so. Initially a crude contraband blockade, Britain’s economic war against the Central Powers grew increasingly sophisticated: the toolbox of modern sanctions - restrictions on finance and forex, as well as physical trade - was largely developed in London. Strategic concerns overruled legal ones: as Mulder writes, “the British state had shifted the operating logic of the blockade from a legal to an economic basis”. I would have loved to write further about this theme, because its consequences are still with us today, and it is a key strain of The Economic Weapon. Just a week ago, Mulder published an essay in the FT advising against the seizure of frozen Russian assets, referencing this history of legal overreach which dates back to the First World War. However, I have opted to leave it for brevity’s sake. I hope that can be forgiven.

Britain, of course, was not the only user of the economic weapon. The Central Powers, in control of both the Baltic and Black Seas, blockaded Tsarist Russia to great effect. But when it came to finding sanctions a place in the post-war order, the British-led blockade of Germany was the key reference point. In part, this was because the economic weapon had, by the Versailles negotiations, acquired mythical status as the weapon that defeated Imperial Germany. For the Allies, the sudden collapse of the German home front could be conveniently explained by the blockade. For Germany, exaggerating the impact appealed to stab-in-the-back nationalists, old imperial administrators looking to save their skin, and Weimar negotiators seeking low reparations at Versailles. In actual fact, Mulder argues, it is unlikely sanctions won the war. Resources lost in one sector were substituted by those freed up in another, and Germany produced enough food domestically to support itself. The Imperial German Army collapsed in 1918 despite a plentiful supply of armaments. But the “blockade myth” was powerful. By the Peace Conference, Mulder writes, belief that the economic weapon won the First World War for the Allies had become “an article of faith for the supporters of economic sanctions”.

Powerful, inexpensive, and administrable from afar; sanctions were not going back in the bottle. But while many perceived them as an irredeemably brutal weapon that hurt civilians most, some saw a deterrent, and the basis for a new liberalism. Channelling Albert Hirschman, Mulder observes “the innovation of sanctions was to rely on economic total war to intimidate peoples into restraining their princes”. If commerce could not make nations gentle, maybe the threat of being cut off from it could. Perhaps, it was thought, a legitimate international political order could be founded on economic coercion. This was the principle upon which the newly founded League of Nations pinned its hopes. Most of us are familiar with how those hopes ended - in the rise of fascism and the outbreak of yet another cataclysmic war. Sanctions are often blamed: from E.H Carr to Kindleberger, their weakness as a deterrent is seen as the fatal flaw of the League-based interwar order. But Mulder argues this view is mistaken. In fact, sanctions demonstrated “considerable but unpredictable strength” in the interwar years. The threat of League sanction led Yugoslavia to call off an invasion of Albania in 1921 and prevented war between Greece and Bulgaria in 1925. The actual use of sanctions against Italy after her invasion of Ethiopia in 1935 almost derailed Mussolini’s campaign, even if the measures - targeting exchange through exports rather than limiting crucial imports - were relatively mild. If anything, the success of sanctions as a threat, not the failure of sanctions as a weapon, was ultimately what plunged the world once more into war. The revisionist states - Italy, Japan and Germany - felt forced into risky expansionary gambles in the face of it. Nonetheless, the sanctionist liberal ideal did fail to materialise. Asking why, however, leads us to another question the Economic Weapon answers: did interwar liberal internationalism ever stand a chance of living up to its promise?

From reading Mulder, I think the answer is a resounding no. Even while the ink was still wet on the Versailles treaty, sanctions had clouded the distinction between war and peace; and thus, had opened new coercive possibilities, providing an ambiguous space for Great Powers to operate within that was, and still is, irresistible. The blatantly illegal use of sanctions to force regime change in revolutionary Hungary (with success), and in Soviet Russia (without), violated the spirit of liberal internationalism as early as 1919, before the League had even sat its first session. Other interwar episodes- the Ruhr occupation, the Corfu Crisis, and eventually, the Japanese invasion of Manchuria - all undermined the political legitimacy of the League’s use of economic sanctions. In each instance, internationalism was shown to only extend so far as the Great Powers found it in their interest to uphold it. While Britain and France bear much responsibility - as the senior powers in the League Council, they decided if and how to employ sanctions - internationalism’s failure was a combined effort. The refusal of the United States to sign the Versailles Treaty - and hence to join the League - complicated matters. American neutrality made Britain extremely hesitant to risk aggressive sanctions in the thirties, for fear it would put Britain into conflict with the United States. This fact could, of course, be interpreted in defence of liberal internationalism: one might argue it could have worked, if only the United States had been committed to upholding it. But I am pessimistic. A US-backed League may have made the cleavage between ideals and interests less apparent, but not any less real. The capacity of sanctions to discipline the Great Powers - necessary for a genuine liberal internationalism - would have rested still on the logic of coalitions, not law. I am reminded of Hirschman’s insight from The Passions and the Interests, that keeping complex economies running implied freezing arbitrary power as much, if not more, than it implied restricting it. By the same token, the sanctionist hope that the economic weapon could produce a more just political order ran aground. In the deeply unbalanced interwar world, the best hope sanctions held was the calcification of Versailles. Any other notion was as unrealistic as doux commerce had been before it.

A truly liberal, sanctionist internationalism may have been impossible in 1919. In all likelihood, the political obstacles were insurmountable. Nonetheless, the belief it might have worked is fundamental to how international affairs are understood today. Mulder observes poignantly that “the picture of a well intentioned but naïve League provides a neat backdrop for an upbeat and progressive Bildungsroman-style narrative about the modern international order that took shape after 1945”. Geneva had to fail for New York to succeed. But has it? There are reasons to be optimistic. Undoubtedly, The United Nations is more powerful than the League ever was. It is also genuinely representative - as empires disintegrated in the postwar period, the United Nations grew into something approaching the Wilsonian community; a fact one need only look at a vote tally to appreciate. There is a genuine internationalism in the General Assembly. But by centring the history of sanctions Mulder reveals a much gloomier scene. Today, sanctions have little to do with liberal internationalism. They are a tool the United States uses to wage war in peacetime. When US strategic interest and internationalist commitments align - as in Kuwait during the nineties, or in Ukraine today - the order appears solid; as the League order did in Yugoslavia and Bulgaria during the twenties. But when they do not, the inability to reign in powerful states is as apparent as ever. Sanctions are a tool which still cannot be used where it would be needed most - against the hegemon. Mulder teaches us how this fact confounded League policy in the thirties. Today, Gaza makes for another painful reminder; for even a genocide-in-motion, opposed by most of the international community, cannot seem to prevent the raw exercise of power - ongoing events at The Hague notwithstanding. For a book which discusses liberalism so extensively, it is thus no wonder that the subtitle of The Economic Weapon is The Rise of Sanctions as a Tool of Modern War, not ‘…as a tool of modern liberal internationalism’. Encased within the story of a weapon, Mulder has written an obituary to the hope that sanctions could have been something greater.