1. Introduction:
What factors are most important in promoting peaceful relations between countries – the
values they share, or their common economic interests? One way to define the sharing of
norms and values is when countries have common political systems, as is the case with
democracies. As long ago as 1795, the philosopher Immanuel Kant argued that nation
states based on ‘republican’ constitutions will not go to war with each other, but will
instead be in a state of ‘perpetual peace’.1 Put another way, democracies will not fight
each other because they share cultural norms that preclude the use of force as a means of
dispute resolution, or because the checks and balances that characterize political
processes in advanced democracies restrain violence. This idea is described as
democratic peace.
An alternative hypothesis is liberal peace, which suggests that democratic states
cooperate not because of their similar political systems, but because of their mutual
economic interests. International trade is central to this idea. For more than two centuries
scholars have stressed the fact that when nations are engaged in commerce they will also
be at peace.2
In our research, we have examined these two ideas in the case of India and Pakistan, two
nations that are well known for their mutual hostility despite their shared historical
heritage.
2. Armed peaceOutright war is just one manifestation of the rivalry between nations, but armed peace is equally consistent with aggressiveness. India and Pakistan have fought at least four wars
(in 1948, 1965, 1971 and 1999), but have otherwise spent a great deal of time engaged in
uncompromising posturing vis-à-vis each other. India, for example, has frequently
accused Pakistan of sponsoring terrorism on her territory. But occasionally the two
nations make goodwill gestures, such as agreeing to resume the bus service between the
cities of Delhi and Lahore, and organizing cricket tours.3 Less frequently, they appear
willing to make concessions; in 2003, for example, President Pervez Musharraf
announced that he was ready to put aside Pakistan’s long-standing demand, supported by
United Nations resolutions, for a plebiscite to settle the future of Kashmir.4
Our research has demonstrated that in both countries military expenditures are
considerable5 – in India about 3% of its gross domestic product (GDP) and in Pakistan
about 5% of GDP. One can assume that such large military expenditures have a negative
impact on efforts to promote development and reduce poverty in the two countries.6
Do the tense relations between the two states result from a lack of common democratic
values, or from a lack of economic ties? On the first point, we first consulted the analyses
of the Centre for International Development and Conflict Management,7 which score
countries in terms of their level of democracy or authority. India has long had one of the
highest democracy scores in the developing world (7–9 out of a maximum of 10).
Pakistan’s experience with democracy has been volatile, with both high authority scores
(–7) associated with the military coups in 1958, 1969, 1977 and 1999, and high
democracy scores of 8. Although the current regime in Pakistan has a military
orientation, and is therefore less democratic, it has nevertheless made major concessions
to India in the long-standing dispute over Kashmir. Could that softer stance be related to
Pakistan’s economic growth record in recent years?
Caption: Border guards at Wagah, on the India–Pakistan border :
Indeed, Pakistan’s economic growth rates have been impressive, although somewhat
slower than India’s. When countries move to higher levels of economic development the
opportunity costs of conflict could increase as they have more to lose, and have more
resources with which to negotiate peaceful settlements.
Official trade between India and Pakistan (as a proportion of Pakistan’s total international
trade) declined steadily from nearly 20% in the years following partition in 1947,
plummeting to almost zero after the war in 1965. Although there were some signs of
recovery in the 1990s, trade is still below the levels of the 1950s. This is despite the fact
that both India and Pakistan now have fairly open economies.
3. Chain of causation
Our research has found that military expenditures tend to move inversely with
development spending (particularly on education), providing prima facie evidence that
high military expenditures can crowd out spending in the social sectors.
Our work was based on a time series econometric model, and an evolutionary analysis of
the India–Pakistan conflict from 1950 to 2005. Using data on economic growth,
economic integration with rest of the world, bilateral trade, military expenditures and
democracy, we examined how these variables may have contributed to the increase or
decrease in hostilities between the two nations. We also used various tests to investigate
the chain of causation between each of these variables and conflict – in other words, do
these variables promote conflict, or, conversely, does conflict also contribute to their
evolution (reverse causality)?
Our most significant result is that multilateral trade, or increased international trade with
the rest of the world (in contrast to bilateral trade between India and Pakistan), is the
most significant factor in reducing conflict. Our analysis also showed that while
hostilities in the Kashmir dispute have hampered bilateral trade between the two nations,
the converse is also true. Increased trade between India and Pakistan decreases conflict,
and any measures to improve the bilateral trade are likely to have considerable benefits in
terms of confidence building.
In the short term, improving Indian access to Pakistani markets will help decrease
hostilities between the two countries; whereas in the long run, as peace is achieved, both
countries could export more to each other. A regional trade agreement along the lines of
the South Asian Free Trade Agreement (SAFTA) could also help to improve relations
between India and Pakistan in the long term. Their degree of openness to world trade is,
however, the dominant economic factor in conflict resolution. Thus, as both countries
become more closely integrated into the global economy, the hostilities between them are
more likely to diminish.
We also find that Pakistan’s military expenditures are more sensitive to hostilities with its
neighbour, whereas India’s military activities are not entirely focused on Pakistan. India,
the regional hegemon, has other domestic and international concerns to which its defence
spending is targeted, beyond its dispute with Pakistan. Overall, India may have shown
more belligerence towards its neighbours because of its greater military power. For
example, India unilaterally massed troops on Pakistan’s borders in 1951 and 2002.
Indeed, there is some reverse causality between military capability and conflict, meaning
that they both cause each other. This suggests that Pakistan’s military build-ups may have
been more in response to India’s actions.
Overall, in both countries, high military expenditures are diverting scarce resources away
from social development, such as education, and poverty reduction. Education spending
was found to be good for both peace and economic progress in our study.
Caption: Friends ?
4. A liberal peace
In an ideal world, democracy between pairs of nations should reduce inter-state hostility,
according to the democratic peace hypothesis. In the case of India and Pakistan this
relationship is present but weak. Peace initiatives, it should be remembered, are not the
sole prerogative of democracies; they can also be made by countries that are less than
perfectly democratic out of economic self-interest. Pakistan, for example, has offered
unilateral concessions on many disputed issues with India.
The findings of our analysis, however, lean towards the alternative liberal peace
hypothesis. Economic progress, combined with greater openness to international trade in
general are more significant drivers of peace between nations like India and Pakistan,
than are the independent contributions of a common democratic polity. So economic
interdependence rather than politics is more likely to contribute to peaceful relations
between India and Pakistan in the future.
In many ways, our findings echo those of Solomon Polachek, who argued that
democracies cooperate not because they have common political systems, but because
their economies are intricately interdependent.8 As pointed by Håvard Hegre,9 it is at
these higher stages of economic development that common democratic values can make
significant contributions to peace. Meaningful democracy can not truly function in
countries where poverty is acute and endemic, even in ostensible democracies such as
India.
In the final analysis, as suggested nearly half a century ago by Seymour Lipset, it may be
that democracy itself is a by-product of increased general prosperity.10 Then, and only
then, will nations be able to fully appreciate the futility of inter-state conflict.11
Footnotes
• 1. Kant, I. (1795). Perpetual Peace and Other Essays on Politics, History and
Morals, reprinted 1983, Indianapolis: Hackett Publishing.
• 2. Montesquieu, C.-L. de (1748) De l’Espirit des lois, reprinted 1979, Paris:
Flammarion.
Paine, T. (1791–92) The Rights of Man. Reprinted in 1995 as Rights of Man,
Common Sense and other Political Writings, edited by Mark Philip, Oxford
Classics, Oxford University Press.
• 3. Bus trips signal India–Pakistan thaw, BBC News, 11 July 2003.
• 4. Pakistan makes Kashmir concession, BBC News, 18 December 2003.
• 5. Murshed, S.M. and Mamoon, D. (2007) On the Costs of Not Loving Thy
Neighbour as Thyself: The Trade and Military Expenditure Explanations behind
India–Pakistan Rivalry. Working Paper 446, Institute of Social Studies, The
Hague, the Netherlands.
• 6. As defined by the UN Millennium Development Goals (purchasing power
parity of below US$1 a day per person).
• 7. Polity IV project, Centre for International Development and Conflict
Management, University of Maryland, College Park, MD.
• 8. Polachek, S.W (1997) Why democracies cooperate more and fight less: The
relationship between international trade and cooperation, Review of International
Economics, 5(3): 295–309.
• 9. Hegre, H. (2000) Development and the liberal peace: What does it take to be a
trading state? Journal of Peace Research, 37(1): 5–30.
• 10. Lipset, S. (1960) Political Man: The Social Bases of Politics, New York:
Doubleday.
• 11. Angell-Lane, R.N. (1910) The Great Illusion: A Study of the Relation of
Military Power in Nations to Their Economic and Social Advantage, London:
Heinemann.
