International Finance Conflict and Free

International Finance

Conflict and Free Trade: A Primary Issue in International Finance

In Patrick J. McDonald's article, "Peace through Trade or Free Trade?" The author introduces the connection between conflict or peace and international trade as the primary international finance issue. Citing previous scholarship that suggests the connection between international trade and peace, McDonald challenges the accepted theory by suggesting that states need not only participate in international trade in order to avoid conflict, but that those states that participate in free trade with other states are the most likely to avoid going to war. McDonald reasons that free trade reduces a state's likelihood to go to war because the economic system reduces the amount of power stored with the state in addition to promoting interdependence between states. Free trade, McDonald argues, promotes peace by removing an important foundation of domestic privileged -- protective barriers to trade -- that enhances the domestic power of societal groups likely to support war, reduces the capacity of free-trading interests to limit aggression in foreign policy, and creates the mechanism by which the sate can build supportive coalitions for war" (549).

Thus, McDonald's use of an international economic and financial concept -- free trade -- had numerous implications for international relations and conflict theory.

In fact, the economic issue of free trade is of great importance to the area of international finance. It is the economic structure of a country that allows international trade and the international market to operate, and free trade has historically boosted that international market, allowing the laws of supply and demand dictate the flow of goods and services rather than submitting to the limited economy created by protectivism and trade barriers. A complimentary relationship, conflict, or war, and trade have long been seen as adequate predictors of international camaraderie and alliances. Thus, the issue of conflict between nations has a similarly dramatic impact on international finance and the world market. By suggesting that increased amounts of free trade promote a conflict-free international market, McDonald makes a revolutionary argument that may bolster not only the international financial market, but also political and strategic alliances between states.

Both unique and significant, McDonald's argument that increased amounts of free trade between states lead to decreased amounts of conflict has strong implications not only for the field of international finance, but also for a variety of other areas of social science scholarship. Backing up his argument with statistical data, McDonald makes a convincing case that free trade does, indeed, lead to lower instances of conflict between states. Similarly, the logical organization and flow of McDonald's argument -- as he posses that the removal of trade barriers not only decreases the confidence in the state but also improves the interconnectedness between states -- lends credence to his position. A rather important study, McDonald's research attempt deserves further study and attention from leaders in the field.