The Joke of Economic Sanctions

The reliance on economic sanctions to solve everyday international problems is ridiculous. While I believe in a free market economy, the reckless use of this mechanism as the first alternative is baffling. It has been a worrying trend of late that to every problem the international community faces, they’ll just hash an economic sanctions package and hurl it across the room. Often blindly.

Sanctions Sanctions - You're having a laugh

Sanctions Sanctions - You're having a laugh

Sanctions have not worked against North Korea, it didn’t work against Iran, it didn’t work against any country that is fighting a massive battle or has too much to lose by backing down just to avoid sanctions. Let’s break it down.

Price Equilibrium Unmet 

The only way you can get economic sanctions to work is when you post a cost that is marginally strong enough for the intended recipient to back down. The fact it has not worked simply means the cost posted is not good enough. There is no equilibrium and therefore the deal is off. This does not mean a failure of the free market. Rather, it shows the distinct lack of understanding countries have in projecting cost.

Situation Dependent 

My beef with the use of economic sanctions is not that it is always useless but that is a trigger solution applied anywhere and everywhere. Sanctions only work if you can craft one that hits the country’s decision makers squarely. It is often difficult to do so. Let’s take a look.

Syria 

Sanctions don't mean a thing. Especially now.

Sanctions don't mean a thing. Especially now.

Here we have a government or regime fighting for its life. We have Assad unwilling to give up power and the rebels not wanting to shift an inch as well. From the high and mighty seats of the United Nations came the order of economic sanctions. Are you serious? Do you think that dangling an economic carrot is going to make the Assad regime commit to a ceasefire?

Economic whips always hit the poorest and most powerless in society first and takes a long time before the people targeted are actually reached. Take for example the removal of monetary aid. The drop in income will be shifted to the poor because the leaders won’t be trying to play fair. In a peaceful country this might work. Democracy dictates that the poor will rise against its leaders and demand fairness. Back to Syria, the people are already fighting their leaders. You can cut back all the aid you want, it doesn’t matter. All you are doing is ensuring that the poorest and weakest suffer more. It is no surprise why this hasn’t worked in Syria.

North Korea 

Lived on economic carrots and died. Never having to stop its nuclear programme.

Lived on economic carrots and died. Never having to stop its nuclear programme.

How long have we been slapping sanctions on Pyongyang? For how much longer must we do so before we learn that it is completely useless? Total the amount of sanctions on North Korea and that is the international projection of what countries believe nuclear weapons mean to North Korea. Long story short, they under-projected.

If this isn’t clear enough, let’s put it this way. Telling North Korea you will slam economic sanctions if it doesn’t shut down its nuclear program is the same as telling a man to drop his gun or you would freeze his salary. The catch? You have a gun pointed at him as well. Do you think that man is stupid?

With the useful chip of nuclear weapons, Pyongyang has been able to bargain for plenty of economic goodies. All they have to do is to indulge in a cycle of aggression, go cold turkey, look as if they are ready to back down, get some goodies and repeat the same damned cycle over again.

You think your economic sanctions (or even carrots) can work here? Fact is you have actually incentivized them to keep hold on their nuclear weapons.

Frustration 

Why did we vote for you again?

Why did we vote for you again?

It is frustrating to see economic tools poorly used. It is even more infuriating to see that come from leaders worldwide. Sure, the international community may be handicapped in many ways but why use a tool when you obviously know it will fail?

Maybe its all a facade to show voters that they are doing something.

Because it does seem that international politics is more concerned about looking good rather than solving problems they were elected to handle well.



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