During the most recent presidential debate, President Barack Obama congratulated himself on a continuation of the United States’ policy of economic sanctions against Iran. “We … organized the strongest coalition and the strongest sanctions against Iran in history, and it is crippling their economy,” he said. “Their currency has dropped 80 percent. Their oil production has plunged to the lowest level since they were fighting a war with Iraq 20 years ago. So their economy is in a shambles [sic].” Republican presidential candidate Mitt Romney, for his part, enthusiastically joined the president in his analysis. “It’s also essential for us … to dissuade Iran from having a nuclear weapon through peaceful and diplomatic means,” Romney said. “And crippling sanctions are something I’d called for five years ago. … It’s absolutely the right thing to do to have crippling sanctions. … I would tighten those sanctions further.”
It is obvious from the tone of such statements that both President Obama and Gov. Romney pride themselves on the American policy of trade sanctions against Iran. This is perhaps because they misunderstand the basic nature of economic sanctions, thinking them a devastating blow to the Iranian state when, in reality, they are a devastating blow to an innocent civilian population.
It is important to begin by understanding that, when one government initiates sanctions against another, it is actually doing little more than initiating force against its own people. Since the idea of a nation is itself an (admittedly useful) abstraction, and since all economic action takes place only at the level of the individual, it is helpful to view economic sanctions as a phenomenon in which a nation’s ruling or political class forcibly prevents its productive class from trading with the productive class of another nation. Although it should be obvious already that a description of sanctions as “peaceful,” “diplomatic,” and “the right thing to do” is utterly absurd, there are even greater realizations to be had here.
A basic law of economics tells us that any trade takes place because both parties feel that it is to their benefit. If I desire your sunglasses, for example, and you desire my wristwatch, then a trade will occur in which we both give up an item of lesser personal subjective value in order to gain one of higher value. If we apply this axiomatic truth to trade between the citizens of the United States and those of Iran, of course, we can draw the exact same conclusion: Americans trade with Iranians because they feel that it is to their benefit, and vice versa.
This may seem like a simple statement, but its implications are profound. In fact, it leads us to the realization that a moratorium on trade between Americans and Iranians—forcibly imposed by the unilateral fiat of the relatively small American political class—will necessarily decrease the standard of living for both populations, by forcing them to forego desirable trades and thus resort to less optimal alternatives. An Iranian population that imports substantial foodstuffs from the United States, for example, will subsequently be forced to search for alternatives that most likely are characterized by inferior quality or higher prices, or both. And their American counterparts, of course, will be forced to sell to a less desirable consumer base.
In fact, one does not have to look far for evidence of the economic illiteracy behind the policies of men like Obama and Romney. U.S. sanctions against Iran have, for example, prevented Iranian airlines from importing replacement parts for commercial planes. As the commercial fleet has aged without repairs, there has been an acceleration in the rate of plane failures and civilian deaths as a direct result of this policy. On a less morbid—but still critical—level, all Iranian businesses that relied on imports of American raw materials have been crippled, if not toppled, by these trade policies. This, along with the 80 percent drop in currency of which President Obama seems so proud, has the effect of further impoverishing an already oppressed population, and of pushing it, needy, directly into the hands of the same totalitarian government that the sanctions were intended to weaken in the first place.
On top of these considerations, there is also the basic reality that economic sanctions have tended to serve in the past as preludes to armed conflict. In the case of World War I, for example, it has been suggested that the British starvation blockade of Germany—which was responsible for the deaths of hundreds of thousands of innocent civilians and continued for a full five months after the end of hostilities in November of 1918—established an enduring psychological trauma on the part of German youth that was later exploited as part of the Nazi rise to power. Later, after the outbreak of World War II, the United States pursued a policy of trade sanctions against Japan, which had the calculated effect of starving the Japanese industrial war machine into its infamous attack on Pearl Harbor. “The question,” as then Secretary of War Henry L. Stimson confessed to his personal diary, “was how we should maneuver [the Japanese] into the position of firing the first shot.” The answer, of course, was the same policy of economic sanctions, used in both cases as tools of suffering in the interim and gateways to rampant armed conflict and death in the long run. It was this very nature of economic sanctions that caused Frederic Bastiat to point out, as far back as the 19th century, “If goods don’t cross borders, armies will.”
If President Obama and Gov. Romney were truly interested in liberating people like the Iranians, they would abandon the current strategy—which bizarrely endeavors to foster peace by forcibly preventing peaceful exchange—for one of unrestricted free trade. A free trade policy would create wealth and enrich the Iranian population, thereby rendering the citizens less dependent on their oppressive government and strengthening a business class that would contest state predations on private property and individual freedoms. And it could only be advantageous to an American economy that continues to struggle through a slow and dubious recovery.
I suspect, however, that such basic economic analysis and historical awareness will fall on deaf ears. History, it seems, may once again be doomed to repeat itself.
Chris Bassil, Trinity ’12, is currently working for Dana Farber Cancer Institute in Boston, Mass. His column runs every Wednesday. You can follow Chris on Twitter @HamsterdamEcon.