The Social Market Roots of Democratic Peace

Democracy does not cause peace among nations. Rather, domestic conditions cause both democracy and peace. From 1961 to 2001, democratic nations engaged in numerous fatal conflicts with each other, including at least one war, yet not a single fatal militarized incident occurred between nations with contract-intensive economies—those where most people have the opportunity to participate in the market. In contract-intensive economies, individuals learn to respect the choices of others and value equal application of the law. They demand liberal democracy at home and perceive it in their interest to respect the rights of nations and international law abroad. The consequences involve more than just peace: the contract-intensive democracies are in natural alliance against any actor—state or nonstate—that seeks to challenge Westphalian law and order. Because China and Russia lack contractualist economies, the economic divide will define great power politics in the coming decade. To address the challenges posed by China and Russia, preserve the Westphalian order, and secure their citizens from terrorism, the contract-intensive powers should focus their efforts on supporting global economic opportunity, rather than on promoting democracy.