7 Mart 2009 Cumartesi

Economic Sanctions

After the First World War, president Wilson proclaimed:


"A NATION THAT IS BOYCOTTED IS A NATION THAT IS IN SIGHT OF SURRENDER. APPLY THIS ECONOMIC, PEACEFUL, SILENT, DEADLY REMEDY AND THERE WILL BE NO NEED FOR FORCE. IT DOES NOT COST A NATION A LIFE OUTSIDE THE NATION BOYCOTTED, BUT IT BRINGS A PRESSURE UPON THE NATION WHICH, IN MY JUDGMENT, NO MODERN NATION COULD RESIST."
- PRESIDENT WILSON WOODROW,1919

Economic sanctions as America’s grand diplomatic experiment repeated many times shows that three of Wilson’s assertions are quite often and quite simply wrong:
  • A nation boycotted is not in sight of surrender: recall North Korea, Cuba, and Iran.
  • In achieving “high” foreign policy goals, sanctions are not a substitute for force, but they can be a prelude to force—consider Iraq, Haiti, and Bosnia. Contrary to Wilson’s belief, economic sanctions have turned out to be an offer that nearly every target can refuse—not only powerful China, but also powerless Panama.

In the post-Cold War era, sanctions have become American foreign policy. In the face of doubtful record of sanctions, Presidents Carter, Reagan, Bush, and Clinton used economic sanctions as a major foreign policy instrument in the US. Records show that the US government imposes sanctions more than 100 small and large countries, and the most sanctions are directed not only against US adversaries but conspicuously against their allies.

In order to understand economic sanctions, we must answer the following questions:

  • What is it ?
  • How it works ?
  • What conditions lead to the adoption of sanctions ?
  • Under what conditions it works ?
  • What are the evidence in achieving its desired goals ?
  • What are economic causes and consequences of the sanctions ?
  • What are the expectations of future conflict between sender and target countries ?
  • What are the opportunity costs of sanctions to both sender and target countries?
  • Is there a bias in the decision to sanction ? Is there a bias when altering sanction ?
Explain economic sanctions as politicising economic intercourse in using a game-theoretic analysis and a public choice analysis.
why use of military actions as substitute for the economic sanctions are unconstitutional ?

DYNAMICS OF ECONOMIC SANCTIONS:
Critically analyse economic sanctions in the dynamic setting in using both economic and political variables together. We can use Iraq as an example to analyse economic sanctions within a model of dynamic setting.


t → Σ Political and economic relations;
t (1) → Σ Deterioration of political and economic relations;
t (2) → Σ Use of economic sanctions as politicising economic intercourse;
t (3) → Σ Use of military actions as substitute for economic sanctions.




Σ ( X1, X2, X3 ... Xti) → ≈ (t = ∞ ), E (t) = (t + i)
λ (i - 1), λ > 0

Body of empirical evidence show that public discontent against all sort of foreign coercion and economic hardships. Economic sanctions are not only imposed by the US, it also imposed by the UN, EU, Russia and etc. to coerce adversaries (to cause economic hardship or deprivation for the target population's). Poor people who are most vulnerable economically and politically tend to bear the hardships caused by sanctions, whereas the incumbent elite are more able to protect themselves against such deprivations.

Economic sanctions are neither capitalist nor socialist phenomenon. Economic sanctions are international phenomenon that produced by forces outside each country's control. Sanctions are always and everywhere a foreign policy phenomenon. It involve a conspiracy to restrict, monopolize, and restrain trade.

Economic sanctions (or embargoes) are international phenomenon in the sense that it produced by forces outside each countries control and in the sense that each country separately lacks the ability to control its own economic hardship caused by sanctions. Individuals in a target as well as sender country are mostly the victim of government measures. Economic sanctions are not a world-wide phenomenon in the sense that it occur in many countries at the different times- just as trade restrictions, such as tariffs, subsidies, quotas, licensing requirements are not produced by forces outside each countries control.

For foreign policy reasons, sanctions are used to resort to the economic coercion. It is foreign coercion; it is not as a economic reward (e.g Most Favored Nation Clause) but economic punishment. As a foreign policy tool, sanctions are deliberate acts of politicising economic intercourse or commercial relations. Either a foreign policy phenomenon or international phenomenon, economic sanction are unconstitutional.

Free, open trade between countries is important to healthy economies. It allows companies and workers to specialize in what they do best. Competition forces companies to be more productive. Costs are kept lower. Consumers have the options of buying cheaper and better goods and services. Free trade helps create jobs, both in the domestic country where goods are made and in the foreign country where the goods are imported.

In spite of the many advantages of free trade, many nations put limits on trade for a variety of reasons. The main types of trade restrictions are tariffs, subsidies, quotas, embargoes or sanctions, licensing requirements, and standards. A tariff is a tax on goods imported from a foreign country. Tariffs raise the price of the imported goods. This makes the price of the imported goods equal to or higher than the price of the domestic goods. The government of the country that is importing the goods collects the money from the tariff. However that a tariff on tea led to the American Revolution!

Sanction on trade effects workers and companies in term of loss of jobs and production of goods and services. It involves loss of economic freedom- transfer of the competitive advantage to the foreign government status quo. Sanctions are unconstitutional because it involve a conspiracy to restrict, monopolize, and restrain trade of individuals by the foreign government(s) status quo.
We should always remember that; in a globalised world, nothing is more important for the long-run in a country (growing economy) than improving productivity and controlling/protecting the value of money- sound money. We should all aim at creating sanctions free world of trade and finance to achieve vision of Adam Smith...!

Thus, sanctions involve a conspiracy to restrict, monopolize, and restrain trade. It is one of the policy of the foreign government(s) status quo.




Who will sanction sanctioneer ?