A Peaceful International Order Needs Free Markets

The Ukraine war raises issues of the legitimacy and usefulness of the “rules-based” international order (RBO) that supposedly governs international relations. The United States and the North Atlantic Treaty Organization (NATO) have strongly condemned Russia’s invasion of Ukraine and its violation of international law and rules, and the US is also concerned about the economic and military rise of China and its alleged intentions to reshape the RBO.

In general, Western political analysts decry the perceived disintegration of the much-vaunted liberal international architecture promoted by the US. At the same time, both Russia and China reject both the West’s allegations and its international rules. However, what is the solution for a lasting peaceful international cooperation?

Pax Americana and the Liberal RBO

The US emerged from World War II as the world’s dominant economic and military power and sought to devise a new global balance of power to maintain peace. It imposed a Pax Americana, which applied primarily in the West and attempted to contain communism during the Cold War. The predominant view in the West is that the US upheld a global rules‐​based order fostering peace and prosperity for more than eighty years.

The new order has been considered “liberal,” because the US was founded on liberal values. Franklin D. Roosevelt and Winston Churchill expounded the fundamental principles for international cooperation in the Atlantic Charter in 1941. International institutions like the United Nations—together with its supreme authority, the UN Security Council—and the Organization for Security and Co-operation in Europe were set up to underpin international peace and security. The Bretton Woods Agreement, which created the World Bank and the International Monetary Fund, and the General Agreement on Trade and Tariffs were established to promote international free trade and economic prosperity. Both aspired to be global but were dominated by Western powers and interests.

Critics of the postwar “liberal” order declare it was neither liberal nor orderly. A wide gap emerged between the lofty ideals of benign interest and consensus building championed by the US and historical reality. Coercion, compromise, and power politics were part of the game, and the US often stretched and broke the rules of the system, in particular during the post-Cold War period. Many considered the NATO military intervention against Serbia in 1999 and the US-led invasion of Iraq in 2003, carried out without a mandate from the UN Security Council, as violations of international law.

The US and NATO military actions in Afghanistan in 2001 and Libya in 2011 also remain highly controversial. Efforts to spread liberalism were often illiberal, including unjustified external military interventions and the weakening of democratic institutions and free markets at home. NATO countries broke the international rules when they saw it in their own interests and protested when other powers, in particular Russia and China, challenged the RBO.

The Quest for a Multipolar World

Russia and China are contesting not only NATO’s behavior, but the very existence of the US-backed international order. The two, together with other nonaligned countries, are striving for a multipolar world in which more countries will have a say in a new global order reflecting not only US values and interests.

Vladimir Putin claims that international rules advocated by the West apply only to the rest of the world while, at the same time, it allows the West to live without rules as a global hegemon. Even some Western analysts concur that Putin may be right when he says that the West holds Russia to standards to which the West does not abide, a grievance used by Russia to justify the invasion of Ukraine.

China also denies US accusations, countering that the US is advancing its own interests under the guise of “multilateralism.” Beijing is particularly irked that the US is turning other Asian countries against it, particularly on the topic of Taiwan. China’s Ministry of Foreign Affairs recently stated that the meeting in Japan of the Group of Seven (G7) maliciously smeared China and brazenly interfered in its internal affairs. China urged the G7 not to become an accomplice to the US in curbing China’s economic development.

Most importantly, both China and Russia reject the “rules-based order” promoted by the West as an unfair alternative to international law. They claim that the liberal international order includes soft law, i.e., standards and recommendations by international organizations, with the purpose of replacing and interpreting international law in keeping with Western interests.

International rules represent mostly values that are undefined regarding their legal enforceability. Their indeterminate nature, together with the apparent violations of international law by the US, could also explain the preference by the US for international rules rather than law. The US has not only refused to sign numerous important multilateral treaties that constitute an essential feature of international law, but it is also unwilling to hold some allied countries, such as Israel, accountable for perceived violations of international law.

Such views are not only restricted to China and Russia or to the rest of the BRICS—Brazil, India, and South Africa—but are held by many other countries making up the global south. Nearly twenty countries including Argentina, Iran, Algeria, Egypt, Saudi Arabia, Uruguay, Venezuela, and Thailand have also applied to join the BRICS. Thirty-five countries, accounting for half of the world population and one-third of the global gross domestic product (similar to the combined economies of the US and the European Union), also did not vote to condemn Russia’s invasion of Ukraine at the UN and are resisting the sanctions.

While most Western pundits still praise the virtues of the RBO principles, they also admit that the American-led order is imperfect and has eroded its legitimacy in many ways. As the global south increasingly questions US intentions, analysts believe that the West should be ready to use the RBO framework to build a more open and multilateral order. At nineteen thousand words, the recent communiqué from the Hiroshima meeting of the G7 heads of government reads like a manifesto for a world government. However, with only 10 percent of the world population and a share in global output that has gradually shrunk to 30 percent, the G7 needs to adjust its expectations to reality and accept it cannot rule the world.

Peaceful Cooperation through Market Relations

The current political and economic strife between the US and the global south reminds us that international law and institutions cannot do away with the inherent international rivalry and conflicts between governments. Broader and softer constructs like the post-World War II “liberal” international order can be more divisive and ineffective than international law. Reconciling the multitude of individual interests at the global level is more likely due to voluntary market relations rather than political and military solutions.

Ludwig von Mises has argued that the only peaceful way of human cooperation in society is based on contractual market transactions. These are voluntary exchanges under the division of labor, with respect for property rights, which preclude the violent intervention in the market either by private individuals or by government. There is no compulsion and coercion in the operation of the market where both sides of a transaction gain to their mutual satisfaction. That is why market democracy, where every penny spent counts, is superior to political democracy, where only the majority influence the state of affairs in a forceful way.

The same applies to international relations where government intervention undermines harmonious cooperation. As Mises put it in Human Action: “What is needed to make peace durable is neither international treaties and covenants nor international tribunals and organizations like the defunct League of Nations or its successor, the United Nations. If the principle of the market economy is universally accepted, such makeshifts are unnecessary.”

Regrettably, instead of heeding Mises’s advice, world politicians are constraining international trade and moving away from the prevalence of business interests. Driven by national security concerns, the decoupling and derisking from China and other global competitors risk splitting the world into rival blocks again, gravely undermining prosperity and peaceful international cooperation.