The Hidden Harm of Sanctions

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Dexter Samida and Martin Zelder

Foreign Affairs Minister Lloyd Axworthy's recent statement that the US government's imposition of sanctions on Talisman's oil project in Sudan "changes nothing" was right in more ways than one. It was right in the sense that these sanctions would change nothing in terms of Canadian foreign policy. But his statement was also correct in a different context: the economic evidence on sanctions suggests that they will likely change nothing in Sudan.

This is not to say that the Sudanese situation is anything other than horrifying. Sudanese armed forces are accused of terrorizing and enslaving Christians and animists in southern communities that resist conversion to Islam. Some groups claim that one-fifth of the Sudanese population has been displaced by civil war. Furthermore, the UN Commission on Human Rights alleges that the government has firebombed and forcibly moved people from oil-rich regions to prevent sabotage.

Those in developed nations cannot help but be dismayed by these reports, and our strongest inclination is to look for some way to help. Sanctions punishing foreign governments for their misbehaviour seem like the obvious solution. But are they?

No. Thorough economic analysis concludes that sanctions are typically unsuccessful, eliciting favourable changes in at most one-third of the circumstances in which they are applied. The South African experience, while typically hailed as an example of the benefits of sanctions, is an instructive example.

The Institute for International Economics, a group that has extensively studied sanctions, concluded that sanctions in South Africa were "unsuccessful." Sanctions were only able to reduce slightly the country's GDP and did not stop repression. A recent study of South Africa by Yale University economist Phillip Levy further concludes that, rather than through public or private sanctions, apartheid was vanquished by three factors: growing intolerance of labour-market distortions institutionalized under apartheid, domestic political activism, and the fall of communism.

If sanctions are not the answer to Sudanese repression, what is? The answer is the elimination of sanctions, along with other barriers to free economic activity. Distinguished Harvard University economist Robert Barro found that improvements in a country's standard of living—including expanding the level of economic activity—substantially increase the likelihood that political freedoms will grow. Consequently, enhanced investment and work opportunities for the people in the Sudan are to be encouraged, not sanctioned.

Barro's research is part of a larger area of study which finds that restrictions on economic activity, whether imposed domestically or by some foreign potentate, have profound adverse effects. Fraser Institute research, which examines 23 types of restrictions on economic activity, finds that the countries with the least restrictions are not only the wealthiest nations, but also grow the fastest. Conversely, those countries with the most extensive restrictions are not only the world's poorest, but are even becoming poorer over time, that is, experiencing negative growth!

Because research indicates that democracy becomes more likely as standards of living improve, the humane policy for the long-run welfare of the Sudanese people is to encourage economic activity in Sudan. Those who support sanctions are recommending, instead, that we squelch such activity. With tragic irony, a desire to help the Sudanese people has been transmuted into a policy which may well harm them.

The case for trade sanctions is much weaker than its advocates would suggest. If the purpose of these restrictions is to better the life of those in repressive regimes, all the good intentions in the world cannot replace careful analysis. On balance, the evidence suggests that government sanctions do very little to obviate or ease human rights violations, and may slow the coming of democracy. Sanctions, therefore, should be the exception and not the rule.

References

Barro, Robert J. (1999). "Determinants of Democracy." Journal of Political Economy, 107:S158-S183.

Gwartney, James, Robert Lawson, with Dexter Samida (2000). Economic Freedom of the World: 2000 Annual Report. Vancouver: The Fraser Institute. (Available free of charge at http://www.freetheworld.com.)

Hufbauer, Gary Clyde, Jeffrey J. Schott, and Kimberly Ann Elliott (1990). Economic Sanctions Reconsidered: History and Current Policy (2^nd ed.). Washington: Institute for International Economics.

Levy, Phillip I. (1999). "Sanctions on South Africa: What Did They Do?" American Economic Review 89:415-420.

Morgan, T. Clifton, and Valerie Schwebach (1997). "Fools Suffer Gladly: The Use of Economic Sanctions in International Crises." International Studies Quarterly 41:27-50.

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