Do Not Take Peace for Granted: Adam Smith's Warning on the Relation between Commerce and War

Abstract

Is trade a promoter of peace? Adam Smith, one of the earliest defenders of trade, worries that commerce may instigate some perverse incentives, encouraging wars. The wealth that commerce generates decreases the relative cost of wars; it increases the ability to finance wars through debts, which decreases their perceived cost; and it increases the willingness of commercial interests to use wars to extend their markets, increasing the number and prolonging the length of wars. Smith therefore cannot assume that trade would yield a peaceful world. While defending and promoting trade, Smith warns us not to take peace for granted.

Keywords: Adam Smith, Commercial Peace, War, International Trade

JEL Classification: B12, F02, O1, O30