Norwegian expert: Economic pressure has an effect only in 1 of 3 cases

Norwegian expert: Economic pressure has an effect only in 1 of 3 cases

Senior Research Fellow at the Norwegian Defence Research Centre Tor Bukkvoll gave a speech on September 18th at the fifth meeting of the Strategic Discussion Club, which was dedicated to the economic challenges of national security.

The event was organized by the Institute of World Policy with the support of the NATO Liaison Office in Ukraine and the Norwegian Government.

The text of Mr. Bukkvoll’s speech is available in English.

What I did in preparation before coming here was to go through some academic literature on the idea or on the concept of economic security. That literature is not very big, so actually it is quite an easy task. What I will present to you is then not so much my own ideas as it is an ideas of others, mostly academics. I just would like to start saying that the idea of economic security has been kind of on and off in the academic debate for quite a long time. During the Cold War the idea of economic security was not particularly popular, because everything was overshadowed by the military security dimensions of the Cold War. But it came into the academic literature after the 1973 oil crisis. Then it kind of disappeared again, and then the idea of economic security re-emerged in the academic literature after the Cold War, when it was a part of extended security debate. These are just two quotes from academic Barry Buzan, who studied security quite widely. “The pursuit of the economic security is the pursuit of the chimera”, that is one quote from Buzan. The reasons for bringing in this quotes is that in general economics is not about security. Economics is about economics first of all. It is important to keep that in mind. Still in some cases it is hard to avoid connection also between economics and security. And that connection I would try to elaborate in this presentation.

Generally, one can say that economic security, or the debate about the economic security, takes place on two levels, on the systemic level and on the policy level. In this presentation I will mostly concentrate on the policy level. I will just start by saying a few words about the systemic level. The systemic level debate about the economic security is mostly about the argument of commercial peace. Probably some of you have heard about the argument of democratic peace, which is the idea that democratic countries generally do not fight each other. That seems to be the case. When you look at it statistically it is hard to find many examples of democratic countries have gone to war to fight each other. So, it seems to be the case that democratisation leads to peace. And then some scholars have argued that the same might be true for trade and this is behind the idea of commercial peace. Te idea here is – countries that trade a lot with each other generally do not fight each other, or generally do not go to war against each other. Those who have studied this statistically tend to find a connection here. So it seems there some truth to the idea, that if there is a lot of trade there will be less war, or less arm conflict between countries. However, there are two exceptions here. First, if trade is highly concentrated to a single partner that tends to correlate with conflict rather than peace. When you have a pierce of countries where trade relationship is highly concentrated towards one partner, or, second, if there is a highly asymmetrical trade dependency. In those two cases those countries tend to have more conflict with each other than the average. So in general it is true that trade promotes peace but not in all cases. Still one can say that commercial peace argument could be an argument for a more trade within the post-Soviet space – if there is more trade within the post-Soviet space that would be a might be a peace enhancing development.

Then on the policy level, that has basically to do with the economic means of the security policy. Alexander Wendt one scholar within International Relations has written that there are in general four types of national interests. That is of course national survival, national autonomy, meaning that countries or governments can more or less have the policy they want without pressure from other countries, and there is also a question of popular well-being, and to some extend a question of collective self-esteem.

An economic means (such as sanction or trade restrictions) is using economics to influence another country or another government. Studies that have been made of these means and sanctions generally tend to suggest that for example such economic sanctions rarely work. Those who have studied it statistically have found that there is some effect on the target government in about 1/3 of all attempts to use economic sanctions or trade restrictions. In effect that targeted government changes its policy on a certain issue. It is not very efficient or effective but it has some effect sometimes. I think, is there a red cross there, which means that it is generally difficult to claim that economic means of policy, sanctions or trade restriction will threaten national survival. It is hard to find out cases when that has happened. However, it is possible to find examples when economic means and sanctions had threatened national autonomy and decision-making or popular well-being. When it comes to collective self-esteem it is really hard to find whether there is an effect or not. But generally this is a bit simplified by there is a model, but still a model of economic means may have security effects on the target government or the target country.

What issues are then often securitised? The literature tends to point to three things that tend to be securitised, three economic policy issues that tends to be put into security policy. First, it is an access to the outside supply. If country is very dependent on specific resource from abroad, then this might become a security issue. In this country I do not have to say this, because we know that because of the gas issue. But that is not only Ukraine of course and you can find in many places on the world that access to outside supply or very strategic resources is often a security issue or is securitised.

The second one, independent capability for military production was probably more a security issue before, because this is just not possible for great majority of countries in the world and even I think today for the big countries this is more and more difficult. I mean Norway could never been independent in terms of military production and I think it is very difficult for Ukraine as well and this goes for vast majority of countries. Still probably the United States to some extend has it capability, Russia has it but there is more and more input, and China maybe. But for great majority of countries that is just not possible any more. It used to be in the old days, but now with the way military production is taking place and the high technological standards of military equipment is just not possible. And the third is that survival or strategic sectors of economy also often become securitised. Put up agriculture here, which might seems strange for Ukrainians. For example in our country, in Norway there is an argument for maintaining agricultural production is that we need to have some kind of food security. If something should happen, we need to know that we have enough food to survive. Actually we do have enough food to survive in Norway even if all import stopped, but we would basically we will be eating fish all day. So that is not very popular I guess, but in other countries the survival or strategic sectors might be otherwise.

The academic literature also points to certain dangers of securitising economic issues. As I said earlier, economic issues are basically about economics, sometimes they are also about security. But there is a danger of moving a topic from the economic field into the security field. It can lead, for example, to intrusive and coercive state in the sense that if an issue, an economic issue, is securitised is put under label of security there are different ways of dealing with that if that had not been under the label of security. So you may get the decisions based on calculations of security that lead to sub optimal economic performance and sub optimal economic policy. So there is a danger to the economic policy if it is securitised too much. The second caution in academic literature is also that if you put too many economic issues into the security field you may cause unnecessary conflict with other states. And the third one is that, as some scholars have pointed that the possibility of what they called political paranoia, in the sense that if you put to many questions into the security field the political decision-making will be sub optimal, because you are not really ready willing to take all non-security arguments into account if you do that. So these three points are just to say that sometimes economics is about security, but it is very much up to the government in question whether it should be about security or not, whether the issue will be labelled under security and whether it should be done with caution.

Then lastly I would just present you what I called case study about the August 2013 trade conflict between Russia and Ukraine. There is an American scholar Daniel Dresner who wrote a book about the sanctions paradox. It is a bit old now, but he used empirical data from the former Soviet Union. He created this model where he said that in a case whether there is a large gap in aggressor and target costs, there is little to lose for the aggressor what much to lose for the target country. If that is a case, but there is a low expectation that this might be repeated. This has to do with the degree of trust. Then the prediction is that there might be significant target concessions. Te idea is that there might be a lot to lose for the target, but the target thinks that it is going to happen only once. It will hurt now, but we will not see it again. So we will agree this time. However, if there is a large loss to the target country and little loss to the aggressor and high expectation of repetition that the target feels: “OK, we give in this time but it will not help because we will be faced it again and again”. That is why the concessions will be much smaller than they were in the first case. If there is a little gap between the aggressor and target costs it means that basically, if a sanction is initiated both the country that initiate a sanction and the target they will both lose if this happens. If there is a high expectation of repetition there are only minor concessions and in the last case there will be no coercion attempts at all. What I try to do then is to place trade conflict from the August this year into the picture. I am pretty sure that one of the considerations of Ukrainian government was that giving in to Russia now will not be the last time. Russia will continue and such things will happen again.