Evan Soltas
Feb 7, 2012

Sanctions and Economic War

Iran as a case study

The New York Times' Robert Worth reports that economic sanctions on Iran are biting hard. There have been American sanctions in place since 1979, but they have been sharply ramped up on our part, and the international community, for the most part, has come on board.

Our Treasury Department, for example, has made the life of the Iranian central bank and that nation's business class exceedingly difficult, if not impossible. The EU cut off imports of Iranian oil, which accounted for 18 percent of their demand.

Generally speaking, I find these two types of targeted sanctions relatively appealing. The harm is severe yet lands sharply and directly on the intended targets--i.e. the Iranian ruling class. Indeed, the Times reports that support within this demographic for the current regime is shrinking quickly.

But I think the evidence on general trade sanctions is mixed. Economically, it is well documented that they hurt both sender and recipient, to use the terminology in the literature. Multilateral sanctions are significantly more effective, both in terms of the economic damage they inflict and their political success rate. This should make intuitive sense to us: losing more than just one customer for exports reduces the ability of the sanctioned country to seek alternative destinations, and they also signal a stronger commitment from the international community.

I find that libertarians, and Ron Paul most publicly, are frankly on the wrong side of this argument. They are correct to insist that trade sanctions hurt economies and the poor and middle class in the targeted countries.

So does war. Although Mr. Paul may contend that we have no business caring whether or not Iran gets nuclear weapons or not, I think that's just plain wrong--we're not going to sit here and put the stability of the world in jeopardy because of some ill-considered commitment to free trade in a world that, frankly, could no longer exist.

Second, the anti-sanctions argument rests on two weak points: (1) sanctions don't work because they encourage war, (2) sanctions don't work because they don't hurt the government. Regarding (1), the evidence is mixed: sanctions are a hostile act, taken against an enemy, but as an alternative to military action, they often prevent escalation. Regarding (2), the point simply doesn't make sense: the idea of general sanctions is explicitly that they hurt the populace and thereby reduce support for the government and destabilize the political and economic system there. The effect is intentionally indirect. (This is the same argument between total war, which tries to weaken the will to fight, and disabling your enemy's ability to make war. Of course the latter is preferable, and is analogous to the financial and oil sanctions. But these are insufficient, as we are finding, for Iran.)

Although not always effective, trade sanctions are one of the best foreign policy tools we have, short of war, to halt or prevent actions beyond our borders.