Before reviewing some lessons from the “sanctions against Russia,” we should realize how misleading this expression is. They are not, properly speaking, sanctions from “Western nations” against “Russia,” but from Western countries’ states against residents of Western countries who trade with Russian government rulers and entities. They will hit Russians because they hit Americans (and other individuals in the West) first (see my previous posts on this general point). And they will hit ordinary individuals in both the West and Russia.
One lesson of the current sanctions is that they are quite certainly preferable to World War III. They do involve discrimination against individuals and companies (which are made of people) in our own countries, but it is a safe assumption that virtually all the individuals hit would prefer the sanctions to actual war. My formulation tries to avoid the standard cost-benefit approach in favor of the constitutional-economics approach proposed by James Buchanan: which general rules would individuals unanimously accept ex ante?
Note, however, that the sanctions may themselves provide another casus belli to the autocrat and the authoritarians who rule the Russian state. Putin has been showing his nuclear teeth. Heightened tensions increase the probability of a fatal miscalculation or error. A cornered tyrant is not necessarily less dangerous than an unchallenged one. Difficult game.
Anther lesson, it seems to me, is the following: the situation illustrates how dangerous a world government would be. Observe the enormous power that a cartel of states (in this case: NATO, the G10, the European Union or, more fuzzily, states sharing the Western culture) can wield to “cancel” individuals and groups by crippling them economically and making them international pariahs (to use Joe Biden’s terminology). This power rests on the power of each government to control its citizens’ or subjects’ assets and economic transactions. In the normal course of things, thanks God, a national government’s power to cancel an individual or group is limited by the decentralization of political authority in the world. Individuals can, at some cost, escape a too powerful state.
I agree on the necessity of making Vladimir Putin an international pariah, but a world government would have the power to do the same against any individual or group as a matter of course anywhere on earth. It could “disconnect” a rebellious individual or group of individuals from even a nominally private payment system (as illustrated by the partial disconnection from Swift that we are witnessing).
READER COMMENTS
Craig
Feb 28 2022 at 3:44pm
“It could “disconnect” a rebellious individual or group of individuals from even a nominally private payment system (as illustrated by the partial disconnection from Swift that we are witnessing).”
Crypto?
Pierre Lemieux
Feb 28 2022 at 9:40pm
That’s a good point, or interrogation, Craig!
Craig
Mar 1 2022 at 10:36am
Its really an important question because I currently am of the opinion that Bitcoin will turn out to be 100% taxable, 100% traceable and 100% subject to confiscation. I actually want to be wrong, but for me to be wrong on that one, Bitcoin has to prove that it is aloof of all sovereign authority. Whether it facilitates a Ukrainian refugee or a Russian oligarch; Bitcoin doesn’t care about the underlying cause.
The sanctions themselves may still block the physical movement of product but it is going to be interesting to see how individual Russians respond to imposition of financial sanctions.
Jose Pablo
Feb 28 2022 at 6:13pm
I am not sure that because you can “disconnect” a country whose army has arbitrarily attacked a sovereign independent country without any reasonable cause, you can arbitrarily do the same to any individual or group of individuals.
For governments to be able to do what they are doing to “punish Russia by punishing western citizens dealing with Russia” (your basic argument is right) you need a broad-based consensus that only the evil, uncivilized, intolerable behavior of Putin’s Russia can foster. Absent this level of arbitrariness and evilness the consensus would be just impossible (as, a matter of fact, it was until the invasion).
You do need to objectively and truly deserve his level of punishment (as it this the case with Russia) for this “western alliance” being able to “deliver it”.
As a matter of fact, the Russia government tried to impose significant penalties on the Ukrainian people and government, and miserably failed (so far and I hope that also in the future) to do so.
Pierre Lemieux
Feb 28 2022 at 9:43pm
Jose: I now fear that my argument was not as clear as I thought. You are right but it is because a large cartel of states have to be assembled. Now, if there were a world government, that is, a existing monopoly, the cost of assembling this cartel (including persuading each member) would disappear.
Jose Pablo
Mar 1 2022 at 7:53am
But in that case the “Constitution” of that “world government” would be of crucial importance.
Ideally every single individual in the world would agree on the decision-making rules related with the provision of public goods and services by this universal government, but as a minimum this Constitution would prevent any “band” of “armed morons” arbitrarily attacking a group of neighbors living close by.
The barrage of sanctions against Russia are fully in line with the “minimum content” that should be expected from this “world government constitution”.
A lot of work to be done in going for the ideal constitution of the world government, but very happy that, at least, there is a coalition imposing the most basic rules on decision making that this constitution should, for sure, include.
We don’t want, by any means, stepping back to “wars of conquest”, to Tsars and to leaders with a “divine destiny”. That should be stopped and abolished from the face of earth.
Jose Pablo
Mar 1 2022 at 9:08am
Looking from a different perspective:
Let’s indulge, for a minute, in the “organic mistake” of considering nations as “individuals” and let’s look at the patchwork of international agreements as a kind of “world constitution”. This view has a lot of advantages: nations voluntarily agree on this “global constitution” and they negotiate their agreement with it (in a very Buchanan-Tullock way), and they have the very real option of not opting in or agreeing ex-ante only with parts of this constitutional order.
Within this “framework”, what is happening now can be interpreted as an individual not complaining with his constitutional obligation being punished and forced back to behave as agreed.
My point is that from the realization that this “global constitution” has the means to be imposed (I do hope so) on “not complaining individuals” you cannot infer that these same penalties would be arbitrarily imposed on any constitutional abiding individual.
Sure, it could still be the case, but this being the case does not follow from the fact that Russia (the “non behaving individual”) is being punished in this particular case.
Pierre Lemieux
Mar 1 2022 at 9:29pm
Interesting reasoning, Jose. But I am not criticizing the use of a temporary and imperfect cartel; I am raising the danger of a permanent monopoly. Just imagine that Putin had taken over the (previously ideal) world government!
Jose Pablo
Mar 2 2022 at 8:10am
I understand the danger of a permanent monopoly. My point is that even if this “world government” was led by angels, Russian’s Putin will still deserve a strong punishment thru even hardest sanctions.
Ultimately, Russian’s agression in Ukraine proves Hobbes right. This only already deserves the worst imaginable punishment.
Craig
Mar 1 2022 at 5:52pm
Another minor comment as to sanctions, I am reading stories about Russian oligarchs trying to hide their yachts and other assets. I am unsure what these oligarchs have done, but apparently applying the term oligarch to somebody makes their property subject to seizure by the US government?
Due Process? Can’t these oligarchs contest their designation by the US government as an oligarch?
Has anybody seen any article whatsoever that even remotely questions the authority of the US government to unilaterally seize the property of foreign nationals in the US? Or does the mere fact that you’re Russian and have assets in the US and Russia has invaded the Ukraine make your property subject to seizure in the US?
Jose Pablo
Mar 1 2022 at 7:00pm
Western governments are not “seizing” Russian oligarchs’ assets but “freezing” them. There is a legal difference between losing the right to use your assets and losing the ownership of this assets.
French Finance Minister said that the French government is “exploring ways not just to freeze assets but to seize them”. Not many reasons to praise the French government but here is one!!
https://www.wsj.com/articles/as-russia-sanctions-intensify-several-oligarchs-speak-out-against-ukraine-war-11646154428
Maybe the Russian oligarchs have a case. They sure will have the opportunity to dispute these seizures on the competent courts. That is far more legal rights than the owners of a bombed apartment in Kyiv or the parents of a killed kid will ever have.
Pierre Lemieux
Mar 1 2022 at 9:25pm
This is a good question, Craig, and I think that Jose is not critical enough of these extraordinary powers and he may overestimate what is left of the rule of law in our own countries. We have good reasons to be revolted by the behavior of the Russian tyrant, but this does not justify anything.
Jose Pablo
Mar 1 2022 at 9:38pm
Sure I might …
I am still extremely “moderate” compare with the very “liberal” Cochrane …
https://johnhcochrane.blogspot.com/2022/02/the-us-and-nato-must-fight.html#comment-form
Pierre Lemieux
Mar 2 2022 at 4:35pm
Jose: Thanks for the reference to the Cochrane post. His argument that if the Russian autocrat (and any other like him) cannot be stopped now, the cost of stopping him in the future will be higher is a serious argument.
Jose Pablo
Mar 2 2022 at 5:08pm
You actually raise a very interesting question; it can be argued that the “liberal west” kind of let China and Russia (and the oil producing countries of the Middle East) to be part of western commercial (and political) institutions despite their terrible human rights track records and flawed (to say the least) political institutions.
The idea (or at least the justification) was that this would lead to more “western liberal” kind of regimes there. That policy, it is clear now, was pure wishful thinking and has not worked at all. Quite the opposite, the non-liberal regimes have grown significantly to the point of being a serious real menace to “western liberal values”.
Generalizing on Cochrane argument, maybe blocking these regimes out of global institutions (political, sporting, commercial, banking, …) and global trade is a price worth to pay now, to avoid the much higher cost they could impose on “us” (meaning western liberal open societies) in the future.
Sure, the price of this shutdown will be huge now, but Ukraine offers us a glimpse of how much higher the cost could be in the future if we keep “hugging” this “untouchables”.
It is, I think, something worth to consider. Very likely we will regret not doing it now.
Pierre Lemieux
Mar 3 2022 at 11:41am
Jose: The problem is the following. There are not only states and tyrants in the world. There are ordinary individuals and businesses trying “to be part of western commercial … institutions,” that is, just to trade. There is no economic nor I think moral justification for preventing a private American to trade with a private Chinese–except perhaps temporarily in a war situation or or, to avoid actual war, in a near-war situation. Doing so is just imitating tyrants, becoming like “them.”
Jose Pablo
Mar 3 2022 at 2:04pm
“There is no (…) moral justification for preventing a private American to trade with a private Chinese”
That’s no so clear to me. If, as it is the case, a part of the benefit created by this trade, ends up financing the “Chinese State sponsored” killing of civilians and, maybe, the total destruction of the planet, I can’t see a higher “moral justification”.
Obviously the dificult part is that all the governments are potential sponsors of the killing of civilians, but pharaphrasing Orwell: “All Governments are dangerous but some governments are more dangerous than others” … and it is not that difficult to recognized the basic traits of the more dangerous ones.
And if these “individuals” support (actively or pasively) the “killing tyrant” they can not claim “total innocence” of the tyrant doings. Actually this is a very interesting “moral lesson” here to be learnt (one than also fully applys to the US): be careful which political leader you have. You could be held responsible for his doings.
Jose Pablo
Mar 3 2022 at 9:28am
Mr Sechin is happy with this kind of “endorsements” … so am I
https://www.wsj.com/articles/russian-oligarch-igor-sechins-yacht-is-seized-in-france-as-it-prepares-to-depart-11646313685
Pierre Simard
Mar 2 2022 at 11:02am
À mes yeux, gouvernement central ou une coalition, l’enjeu principal est de résoudre le problème du “free riding” qui anéantirait les efforts individuels des États.
Pierre Lemieux
Mar 2 2022 at 4:25pm
Pierre: Je ne comprends pas très bien ce que tu veux dire. Tu peux préciser?
Craig
Mar 3 2022 at 7:51am
Somebody like me might point to the security umbrella offered by the Pax Americana which places peculiarly burdensome taxation on Americans
Nhomoct Bol
Mar 9 2022 at 8:59am
The sanctions against Russia will automatically leads to “Negative effects on Climate Change Agreement” COP26 held recently, because countries young the effect of sanction on Russia Economics will tend to exploits more than agreed level of extraction or energy supply.
I am afraid Climate is under attack again.
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