When Globalization Discontent Turns Violent: Foreign Economic Liberalization and Internal War

One of the disputed consequences of global economic integration is the possible effect that foreign economic liberalization exerts on social cohesion. Proponents of commercial liberalism see stabilization as an indirect consequence of growing economic interdependence, while globalization critics are much more skeptical. They expect, at least during the liberalization process, destabilizing effects. We examine in this paper the contradictory claims in the light of what we call the distributional theory of civil war. This variant of commercial liberalism qualifies the peace-throughtrade hypothesis and expects, based on political economy models of trade policy making, that the redistributive struggle associated with foreign economic liberalization can culminate in violent forms of protest. We demonstrate that a higher level of economic openness is indeed associated with a lower risk of civil war. At the same time, economic liberalization increases the chances of instability weakly. None of the following factors are found to exert any compensatory influence on instability: social spending, foreign aid, and financial flows from the International Monetary Fund. Discontent over the process of globalization is thus a destabilizing force despite the pacifying effect that the level of economic integration exerts.