Peace Through Profit: How Capitalism Helps Restore and Revive Former Warzones

Economic growth through a free market system can help lessen the chances of conflict between countries and increase regional stability. Capitalism also has a long track record of helping communities to move on from wars and build a better quality of life.

It has been almost two decades since Thomas Friedman wrote in an op-ed for The New York Times, with his tongue slightly in cheek, that no two countries that each had a McDonald’s restaurant had ever fought a war against each other.

This “Golden Arches” theory of capitalist peace posited that once a country had reached the stage of economic development at which it had a large enough middle class to sustain McDonald’s franchises, its people would no longer be interested in waging war. Friedman later developed this thesis to incorporate the role of global capitalist supply chains in forging peace between nations. The “Dell Theory of Conflict Prevention” added that when international corporations – like Dell – had operations in multiple countries, those countries would not risk their economic interdependence and wealth by fighting each other.

Soon after Friedman published his first book on the McDonald’s peace dividend in 1999, NATO bombed Serbia in the Kosovo War. There have since been other armed conflicts between countries infused with McDonald’s, such as Russia’s invasion of Ukraine.

So is it still possible to argue that capitalism can bring peace between nations? Even leaving aside questions of whether economies like Russia’s are genuinely capitalist, the evidence shows that capitalism does indeed reduce the likelihood of war. “World trade value, merchandise exports, and commercial trade services all grew substantially over the past 70 years, contributing to consolidating peace in the aftermath of World War II,” confirmed the World Bank in its landmark Pathways for Peace report earlier this year.

Meet and Greet

Looking more closely at the experiences of recent war zones makes clear how capitalism can bring together former opponents. By improving citizens’ quality of life through economic development, and by creating interdependency through trade, this can reduce the incentive for nations to take up arms against their neighbors.

Take the Balkans. The Balkan peninsula is made up of Croatia, Bosnia and Herzegovina, Slovenia, Serbia, Montenegro, Kosovo, Macedonia, Romania, Bulgaria, Albania, Greece and the European part of Turkey. This region was a hotbed of conflict when the former Yugoslavia broke up at the end of the cold war (and, in fact the region has a long history of armed conflict).

The Kosovo War in 1998-1999, for example, was fought between the Serbian Yugoslav authority (by then, Yugoslavia was made up of Serbia and Macedonia) — which controlled Kosovo — and the rebel Kosovo Liberation Army (backed by NATO air support). The deadly conflict saw thousands massacred in what a U.N. court would later deem a “systematic campaign of terror.”

Those dark days are far gone, however, and these neighbors now work together in a virtuous economic cycle. Early in 2018, Pristina, the capital of Kosovo, hosted a four-day trade fair — at which 70 of the 174 companies present were Serbian. “I hope we will send the signal that the cooperation is already there,” noted Marko Cadez of Serbia’s Chamber of Commerce and Industry. “The people are working, the people are employing, making products, making profits — and that is most important for our country.”

Or consider relations between India and Pakistan — strategic and military rivals that have threatened nuclear war on numerous occasions. Despite these tensions, bilateral trade between the two countries was worth around $2.6 billion in 2016, according to Indian government figures. Unofficial estimates suggest that it is twice that amount — and that the potential for trade is many times greater yet.

“Peace building and peacemaking will always be subject to the larger political issues between India and Pakistan,” according to a report in 2017 from the independent and non-partisan federally mandated United States Institute of Peace (USIP). But, according to USIP, economic and trade cooperation can offers a path toward greater stability and peace between the countries — and across South Asia as a whole.

A research report titled “Pakistan-India Relations: Peace Through bilateral Trade” — by Muhammad Ali, Noreen Mujahid and Aziz ur Rehman of the University of Karachi — determined that by increasing bilateral trade, it can help resolve political issues between the two countries — and reduce poverty. The report, published in the European Scientific Journal, noted: “If Pakistan and India normalize their economic relations, it will enhance the formal trade — and as a result, both the countries will earn significant revenue, which is lost due to informal trade.” The authors stated that as formal trade volumes rise, “both governments will be compelled to normalize their political relations and resolve their border disputes in an amicable manner.” Hence — as trade increases, pressure mounts on the authorities to ensure nothing interferes with those economic ties.

Internal Strength

Capitalism not only facilitates peace between nations, but also within them. Rwanda experienced a horrific genocide in the 1990s. But since then, the country has undergone a dramatic transformation — in part, because of the hard work of companies that have partnered with the government and outside agencies to create sustainable businesses and industries that are building a stable and growing economy.

One of the many companies that has helped engender peace and create stability since Rwanda’s darkest days is Westrock Coffee. CEO Scott Ford’s pioneering work has helped to build a sustainable, free-market system for independent coffee producers in the country. Ford espoused a direct trade model — paying local smallholder farmers a fair market value for their coffee beans. He also built an agricultural training institute for local farmers, many of whom are women. As Ford explained: “What we are trying to do in Rwanda is be the engine that helps them create their own [economic] ecosystem.” (read more of his story here).

Another example in Rwanda is Africa Improved Foods, which specializes in fortified foods to combat malnutrition. At an event earlier this year to mark the genocide, AIF’s chief executive, Amar Ali, outlined how business can help prevent the divisions that lead to conflict. “At Africa Improved Foods, we want to be a flagship for Rwanda — not only in what we build and the products we produce, but also the way we treat each other,” he said. “Everybody is a human being first, and should be treated as such — irrespective of gender, race, religion, tribe, or any other categorization.”

In September of 2018, AIF received an SDG award for sustainable consumption (based on the UN’s Sustainable Development Goals) from the Swiss Green Economy Symposium. The award recognized the company for its innovative joint venture in Rwanda, along with the government of Rwanda, a consortium of various banks, and the International Finance Corporation, for promoting local production by buying farmers’ maize and soy yields directly at competitive prices. AIF’s factory in Kigali, the Rwandan capital, provides work to some 300 people, and the local-sourcing program provides around 24,000 Rwandan farmers with stable, sustainable income.

Capitalism not only creates an environment for peace but when capitalism stumbles, so do the prospects for international harmony.

In 2016, more countries experienced violent conflict than at any time in nearly 30 years. Not coincidentally, trade growth has been in something of a rut for most of the period since the global financial crisis. In that calamitous year of 2016, trade growth fell below 3% for the fifth consecutive year.

Friedman’s “Golden Arches” theory of capitalist peace may have been tested in recent years, but in Rwanda, in the Balkans and in India and Pakistan — among numerous other countries and regions — capitalism has been proven to reduce the likelihood of conflict and help move countries along the path toward peace and stability.