Keynes warned the world against using economic sanctions. His alternative is worth considering
The United States has come to rely on economic sanctions more than ever before. Following its retreat from Kabul in August, Washington has maintained economic pressure on the Taliban. The treasury’s freezing of $9.5bn in Afghan state assets has left that impoverished country facing starvation this winter. Two weeks ago, US officials warned Iran, already under heavy economic pressure, that it will face “snapback” sanctions unless Tehran restrains its nuclear ambitions.
Most prominent of all is the sanctions threat that the Biden administration issued against Russia last month. In the face of a large Russian military buildup on the borders of Ukraine, Joe Biden announced on 8 December that Vladimir Putin will face “severe consequences, economic consequences like none he’s ever seen or ever have been seen” if he escalates into open conflict.
In all three cases, advocates of economic pressure argue that sanctions will deter aggressive action and compel better behavior. But the reality is that both the deterrent and the compellent effect of US sanctions have fallen dramatically amid rampant overuse.
Iran has been under US sanctions on and off since 1979. It has such longstanding experience resisting external pressure that further coercion is unlikely to work. Putin’s Russia has adapted to western sanctions imposed since 2014 by building up large financial reserves, promoting agricultural self-sufficiency, and designing alternative payments systems.
Western supporters of sanctions now face a gridlock that is in part of their own making. Instead of cooling tensions, their implacable and impulsive resort to the economic weapon has aggravated the very conflicts that it is meant to resolve.
Sanctions were created as an antidote to war.
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