Chapter 12 Economic integration, economic signalling and the problem of economic crises

• Date: 08 July 2010
• DOI: https://doi.org/10.1108/S1572-8323(2010)0000014016
• Published date: 08 July 2010
• Pages: 205-223
• Author: Jedidiah Royal

CHAPTER 12

ECONOMIC INTEGRATION,

ECONOMIC SIGNALLING AND

THE PROBLEM OF ECONOMIC

CRISES

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Jedidiah Royal

ABSTRACT

Purpose – This chapter draws on several areas of scholarship to consider

the impact of economic crises on the utility of economic costly signalling

theory (ECST).

Design/methodology/approach – The chapter introduces the problem of

economic crises into the debate over ECST to better understand its

practical utility. It f‌irst highlights the pacif‌ic benef‌its anticipated by

ECST to provide a conceptual baseline. It then reviews contemporary

economic and political science literature that links economic integration,

economic crises and external conf‌lict. Finally, it introduces a perspective

on how the conditions created by economic crises reduce the ability and

willingness of states to send economic costly signals.

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Disclaimer: The words and views expressed in this chapter are the author’s alone. They do not

represent any off‌icial policies or views of the US Government.

Economics of War and Peace: Economic, Legal, and Political Perspectives

Contributions to Conf‌lict Management, Peace Economics and Development, Volume 14, 205–223

Copyright r2010 by Emerald Group Publishing Limited

All rights of reproduction in any form reserved

ISSN: 1572-8323/doi:10.1108/S1572-8323(2010)0000014016

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Findings – The chapter f‌inds that the value of ECST to security policy is

problematic when considering the occurrence of economic crises.

Originality/value – This chapter advances the debate over capitalist peace

theory by introducing the problem of economic crises to the discourse.

INTRODUCTION

Does economic interdependence lead to peace? Recent scholarship has

produced promising results linking interdependence with a decrease in the

likelihood of military conf‌lict (notable contributions include Oneal &

Russett, 1997;Russett & Oneal, 2001;Gartzke, 2005;Gartzke, Li, &

Boehmer, 2001;Hegre, 2000).

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In accordance with this, some advocate

policies expanding economic interdependence to reduce the likelihood of

conf‌lict. Theoretical arguments linking interdependence and peace have

traditionally been described in terms of economic costs: economically

interdependent states are less likely to go to war with one another because of

the costs associated with disruption of the economic relationship during

wartime. This rationale has been a long-standing feature of liberal theory,

dating back at least to Immanuel Kant’s writings.

More recently, some theorists have drawn from signalling theory to

develop a second rationale for linking interdependence with peace. This

rationale, referred to here as economic costly signalling theory (ECST), posits

that economically integrated states can use their economic relationship

to send costly signals, short of the use of force, that credibly represent their

resolve, thus reducing the potential for miscalculation that could result in

militarised conf‌lict. However, the recent scholarship on ECST has not suff‌i-

ciently considered the occurrence of and conditions created by economic

crises. The focus of this chapter is to address this gap in the literature.

It draws attention to recent economic and political science scholarship that

correlates economic integration, economic crises and inter-state conf‌lict.

Furthermore, it hypothesises that economic crises tend to reduce the ability

and willingness of states to undertake economic costly signals. As such, the

advent of an economic crisis can undermine the general expectations of

ECST theorists.

This chapter proceeds in three parts. It f‌irst reviews the expected pacif‌ic

benef‌its of ECST to provide a conceptual baseline. Second, the chapter

reviews contemporary research that correlates economic integration,

economic crises and inter-state conf‌lict. The f‌inal section considers the

JEDIDIAH ROYAL206