How the Contractualist Peace Overtook the Democratic Peace
Summary and Keywords
The democratic peace—the absence of war between democratic nations—shook the field of International Relations when it emerged as a widely accepted true fact roughly a quarter-century ago. In the context of the rapid spread of democracy that coincided with the end of the Cold War, the promise was vast: A world of democracies would be a world in peace. The democratic peace had a crucial weakness, however: a convincing explanation. While many potential explanations were developed, only a few produced supportive evidence, and not one yielded evidence supportive enough to render it widely convincing.
Into this void emerged the contractualist peace—the dearth of militarized conflict between nations with advanced market-oriented economies. Unlike the democratic peace, the contractualist peace was not discovered after the fact but predicted ex ante. Economic norms theory predicts societies that are market oriented to embrace democracy as the best means to ensure their state’s impartiality in the enforcement of contracts. These societies also seek global markets, and any nation interested in global markets can have no economic incentive of attacking another nation that abides by market rules. On the contrary, contractualist nations are friends, for among nations seeking global markets each is always better off when the other is better off, as wealthier nations make better customers than poorer ones.
Economic norms theory thus explains the democratic peace as spurious, with contractualist economy causing both democracy within nations and the peace among them. Early examinations of the economic norms explanation tested for an interaction of democracy and development as a proxy measure for contractualist economy and yielded supportive but not widely convincing results. Then a direct measure of contract-intensive economy was discovered, and the result was striking: Whereas prior studies showed that no two democracies ever fought each other in war defined as one thousand or more battlefield-connected deaths, it now appears that no two contractualist nations have ever experienced even a single battlefield-connected death. About half of all democracies lack contractualist economies, and these nations fight each other about as often as everybody else: There is no democratic peace.
Defenders of the democratic peace have made multiple attempts to rescue their observation, but the evidence against them remains overwhelming. Instead it appears that it is market-oriented development that causes both democracy and peace. The implications are more substantial than the democratic peace, since the contractualist peace is far deeper than the democratic one, rooted in common interests and perfect peace rather than mere constraints that only diminish the probability of militarized conflict. It is also more practical, suggesting that global peace can be achieved without a war-inducing crusade to democratize the world: It can be achieved by a peace-inducing campaign for global economic development.
With the end of the Cold War the world seemed to believe that liberal democracy was the final winner of the race between capitalism and socialism, that the “the end of history” was near (Fukuyama, 1992). Though the discovery that there have rarely been wars between democratic nations occurred much earlier (Babst, 1964, 1972; Rummel, 1979), it was with the end of the Cold War that the “democratic peace” took off as one of the most influential research programs in the field of International Relations. The “democratic peace” is the observation that democracies are less likely than other types of states to have militarized confrontations with one another, even though they may not be less likely than other types of nations to fight non-democracies.
In the context of the triumph of the Cold War, the democratic peace launched a widespread belief that democracy was the cause of the democratic peace. Some saw virtue in the democratic norms of peaceful conflict resolution; others suggested that constraints on war-making made democracies more careful in their foreign policy decision-making. American leaders began arduously promoting democracy abroad, as witnessed with both the Clinton and W. Bush U.S. administrations, in the hopes that democracy in other countries would enhance U.S. security at home. The results of these efforts have been less than satisfactory, however: as witnessed in recent years in such diverse places as Egypt, Pakistan, and Russia, democracy can bring to power regimes that exacerbate regional tensions and worsen relations with other democracies (Mansfield & Snyder, 2005).
What went wrong? Why is democracy seemingly associated with peace among the wealthy, developed, Western democracies, but seemingly not among other nations? It now turns out that the cause of the democratic peace may lie not in democracy, but in the economy. Starting in the early 2000s a series of studies brought forth an increasing array of evidence that showed that rather than democracy causing peace, it seems more likely that advanced market economy causes both democracy and peace.
In what follows we review how the advanced-market “contractualist” peace superseded the democratic peace. We appraise the state of knowledge, not the state of the field: Limited resources means that scholars’ images of the state of knowledge often lag behind the actual state of knowledge. This lag may be worse regarding the democratic peace correlation, which might have reached the status of stylized fact: accepted truth beyond the possibility of challenge. As we will see, defenders of democracy as the cause of the democratic peace correlation tenaciously deny the state of evidence against it, even as they have been unable to offer any clear-cut evidence that a correlation of democracy with peace exists controlling for contractualist economy.
We begin with the discovery of the democratic peace, followed by a review of the causal mechanism of the “contractualist” explanation for it. We then present the progress of knowledge as it unfolded with the empirical debate of the contractualist versus democratic peace. We conclude with the implications: The democratic peace may be best explained by advanced market economy.
The Emergence of the Democratic Peace
More than two centuries ago, Kant (1982) famously predicted that democratic states would not fight one another. For the next century no one knew whether this prediction could be true due to a combination of two facts: One, only a handful of nations could be called democratic; and two, most nations are in peace with most other nations most of the time, making war a rare event. With few nations democratic and war an uncommon occurrence, before the twentieth century the absence of wars between democracies could be attributed to chance (Bremer, 1993).
By the end of the Second World War the number of democracies had proliferated and the absence of war among them could be significant, but the shock of the war jolted the Realist paradigm back into supremacy in the field of International Relations (Vasquez, 1999). Realism downplays any systematic role for domestic conditions affecting foreign policy, including democracy. As a result, through the early Cold War period scholars of International Relations paid little attention to Kant’s ideas, and there is hardly any record of prominent research specifically investigating democracy as a cause of peace.
Given the then-dominance of Realism, it is not a surprise that the earliest published literature on democratic peace appeared outside the field of International Relations: Babst (1964, 1972), an American sociologist, can be credited as the first to observe the historical absence of war between democratic nations. Importantly, Babst took careful consideration of the odds of war: Observing World War I, he discovered that the odds of the democratic participants in this war all fighting on the same side were highly unlikely a result of chance. With the exception of Rummel (1979), early investigations of democratic peace within the field of International Relations were aimed at squashing the idea (Chan, 1984; Small & Singer, 1976; Weede, 1984). When they could not, Levy was prompted to make his now-famous observation that “this absence of war between democracies comes as close as anything we have to an empirical law in international relations” (Levy, 1988, p. 662; see also Doyle, 1986).
By the early 1990s the number of studies supporting the correlation of democracy with peace all but crushed opposition to the observation (e.g., Bremer, 1992, 1993; Maoz & Russett, 1992). While some Realist-inspired works continued to oppose the inference of causation from the observation (e.g., Elman, 1997; Farber & Gowa, 1995; James, Solberg, & Wolfson, 1999), others turned to explaining how democracy could cause peace. Pioneering works identified two rival general explanations: structural and cultural (e.g., Bueno de Mesquita & Lalman, 1992; Maoz & Russett, 1993; Morgan & Campbell, 1991; Morgan & Schwebach, 1992). The structural thesis credited causality in democratic institutions, which can constrain leaders’ foreign policy decisions; the cultural thesis credited causality in democratic norms of law and compromise. Over the course of the next decade a number of more precise and thoughtful explanations emerged within each camp. While several can be called theoretically progressive in that they could generate novel facts (e.g., Bueno de Mesquita, Morrow, Siverson, & Smith, 1999; Choi & James, 2006; Dixon, 1994; Fearon, 1994; Lake, 1992; Rieter & Stam, 2002; Schultz, 2001), none yielded corroborated predictions that have been clear-cut and novel enough to render them widely convincing (Ungerer, 2012).
A crucial weakness shared by most theories of democratic peace is the assumption that democratic leaders make their foreign policy decisions according to their perceptions of other nation’s regime types. This assumption is necessary to explain the puzzle of peace among democracies even as these countries fight other nations at normal levels. In the cultural explanation, democratic leaders invoke the domestic norms of law and compromise only with nations perceived as also democratic (Dixon, 1994). In the structural explanation, democratic leaders are deterred from escalating with other democracies because each perceives the other, being democratic, as highly resolved (Bueno de Mesquita et al., 1999), at least after making a threat (Fearon, 1994); or as having a free press that facilitates greater confidence in assessments of resolve (Choi & James, 2006).
There is little investigative evidence that supports the idea that democratic leaders make their foreign policy decisions according to other nations’ regime types, and most of the evidence suggests that they do not (James & Mitchell, 1995; Layne, 1994). In addition, Oren (1995) has showed that even if they do consider other nations’ regime types, they may be doing so inaccurately: He documented how the American perception of Imperial Germany’s regime type changed sharply from democracy at the end of 1890s to autocracy just before World War I, even as Germany’s regime status did not change. This suggests that it may be more likely that relations affect perceptions of regime type more so than regime type affects relations.
In summary, the democratic peace is an observation that has few challenges: There is a wide consensus in the field that democracies rarely fight each other. There is no consensus, however, on explaining it. While a number of thoughtful and creative explanations on how democracy can cause peace have emerged, none have yielded widely convincing evidence in their favor, and few can explain the phenomena without invoking the problematic assumption that democratic leaders act on accurate perceptions of other nation’s regime types.
Several accounts for the democratic peace have emerged explaining it with factors other than democracy. Gartzke showed how finance capitalism can cause peace, and reported evidence that finance capitalism may account for the democratic peace correlation (2007). However, for a third factor to account for a correlation, it generally must be able to explain both factors in a relationship (Blalock, 1979, p. 469–477). Gartzke did not offer an explanation for how finance capitalism could cause democracy. Nor has the state of evidence been supportive of finance capitalism explaining the correlation (Dafoe, 2011; Mousseau, 2013). Similarly, McDonald showed how the size of a nation’s public sector can affect peace, but his explanation does not account for democracy nor, empirically, the democratic peace correlation (2007, 2009). More promising as an explanation for the democratic peace is the “territorial peace,” which suggests that settled borders can cause both democracy and peace (Gibler, 2012; Owsiak, 2012; Vasquez, n.d.). The territorial peace does not depend on the assumption that democratic leaders act on accurate perceptions of other nation’s regime types, and evidence for it appears to be cumulating (Gibler, 2012; Owsiak, 2012; Vasquez, n.d.).
Like the territorial peace, the contractualist peace also offers an account for both democracy and peace and is unburdened by the regime-perceptions assumption. We will see in the next section that the contractualist peace has accrued a large array of evidence in its favor.
The Emergence of the Contractualist Peace
There is nothing in the democratic peace research program that precludes a third variable from explaining both democracy and the peace, rendering the democratic peace spurious (Gates, Knutsen, & Moses, 1996; Thompson, 1996). In fact, scholars of Comparative Politics have long identified market-oriented development as the foremost correlate of democracy (Gassebner, Lamla, & Vreeland, 2013; Lipset, 1959). If market-oriented development can cause peace as well as democracy, it can explain the democratic peace.
Economic norms theory shows how market-oriented development can cause both peace and democracy (Mousseau, 2000). The theory starts with the observation, well-documented by economists and sociologists, of two kinds of economies in history, “contractualist” and “clientelist” (Mause, 2000; Polanyi, 1957). Contractualist economy is market-oriented development, characterized with extensive and regularized transactions among strangers that require an element of trust. Contractualist economy prevails today in those nations usually described as “developed,” “market-oriented,” and “Western,” including Europe, North America, Japan, and Australia and New Zealand, though a large number of other nations have also become “contractualist” in recent years. As can be seen in Table 1, examples representing every continent include Botswana, Chile, Malaysia, and South Korea.
Table 1. Nations with Contractualist Economies, 1776 to 20071
Year of Transition or Sovereignty2
Year of Transition or Sovereignty
German Fed. Rep.
United Arab Emir.
Trinidad & Tobago
1Source: Mousseau (2016).
2 < data missing in prior years.
The key distinction of contractualist from clientelist economy is not the proliferation of any kind of contract, such as retail contracts, but the proliferation of what are called “non-self-enforcing” contracts (North, 1990): those where the commitment of one party does not coincide in time with the commitment of the other. Examples of non-self-enforcing contracts include investments, loans, and insurance contracts.
In economic norms theory the proliferation of non-self-enforcing contracts is said to produce the democratic rule of law because it creates the need for a strong state that enforces contracts with impartiality. No one can automatically trust the commitments of strangers, so when a society is highly contract intensive, elections by all those in the market serve as the best-known way to render credibility to the state’s effectiveness, reliability, and impartiality in the enforcement of contracts (Mousseau, 2000). Economic norms theory thus reverses the causation of property rights theory (North &Thomas, 1973), which assumes that the state enforcement of contracts causes the proliferation of contracts. Studies have shown that non-self-enforcing contracts can proliferate even with weak contract enforcement mechanisms (Acemoglu & Johnson, 2005, p. 953). In this way, it can be rising markets that ultimately trigger the evolution of states and markets.
If economic norms are habit forming and affect cognition, we would expect that in contractualist societies the idea that the state should enforce contracts is widely perceived as obvious and even natural. However, we know that the state enforcement of contracts is not natural, since through most of human history the impartial state has not existed. In economic norms theory this is because most of human history is characterized with traditional clientelist economy, where transactions that require an element of trust are based not on dependency on an impartial state but on the strength of personal relationships. This is arguably why clientelist societies today, such as those of Mexico, Nigeria, and Turkey, tend to have stronger and more-extended families compared with the contractualist societies, as family ties are an important indicator of trust. Often families are in turn linked with larger groups that enforce trust among members. While traditional group ties have often taken clannish, tribal, and religious identities, today with globalization and urbanization, group identities are more fluid and wide ranging, with ethnic, political, labor, guild, and criminal ties added to the mix.
In clientelist economy there is no need for a strong state, because for most individuals security is obtained in loyalty to groups that have some militant capability. Groups form coalitions based on personal relationships of leaders, with hierarchies among them negotiated according to their capacities to accrue and pass on tribute. Primogeniture, in property, debts, and leadership, is the best-known way to maintain order when leaders die, passing on to first-born children the carefully cultivated personal relationships of leaders. This is the economic norms explanation for why the “republics” of nations like North Korea and Syria became absolutist monarchies, as Europe once had during its clientelist period.
This theory can also explain why most nations today with weak markets tend to have weak states. Many regions in the world today would not even have states, defined as institutions that are supposed to be separate from the identities of rulers, but for the mimicry of Europe’s state structure that occurred during the period of decolonialization. With clientelist norms and weak markets, these new postcolonial “states” quickly emerged as the primary source of income for many in these societies. This caused feudal-clientelist systems to emerge in much of the developing world based not on the distribution of agricultural produce, as in pre-modern Europe, but on the distribution of state rents. This is the economic norms explanation for why most states in the developing world today are not only weak but also highly corrupted. This is also why democracy usually fails or, if it survives, survives in an illiberal state: Compared with voters in contractualist societies, voters in clientelist societies care more about the distribution of state rents than the impartiality of government and the democratic rule of law.
In this way, contractualist economy causes democracy, as market norms create a more-widespread desire in the population to constrain the state from preying on citizens (Olson, 2000). How does contractualist economy cause peace? Just as voters in contractualist societies widely believe that the job of the state is to enforce contracts impartially, they also widely believe that the job of the state is to promote market growth. Individuals in clientelist societies are comparatively more dependent on groups, so they care more about the distribution of wealth among groups than market growth. Individuals in contractualist societies are comparatively more dependent on the market, so their preferences are reversed: They care more about the market than the distribution of wealth among groups.
Governments of contractualist nations have traditionally adopted two strategies for pursuing market growth, one internal and one external. The internal strategy largely involves the maintenance of public goods, such as spending on education, infrastructure, and defense, and various redistributive and regulatory policies, such as deficit spending during recessions and antitrust legislation. The external strategy for market growth is the pursuit of foreign markets.
It is the pursuit of foreign markets that lies at the root of the contractualist peace. With deeply embedded norms of market exchange at home, individuals in market cultures are more likely than clientelist ones to roam the world seeking contracts of exchange. Their states, pressured by voters to pursue market growth, do whatever they can to facilitate foreign trade, including the promotion and adoption of a seemingly ever-increasing array of international organizations and treaties aimed at facilitating cooperation in international trade and development.
Clientelist leaders, steeped in the zero-sum-like and low-trust norms of clientelist culture, inherently distrust all offers of cooperation by others. Many clientelist minor powers, dependent on the contractualist powers, join international organizations, but few will initiate them. Contractualist regimes, in contrast, easily form cooperative economic arrangements, at least with each other. Steeped in market norms and under constant pressure from voters to achieve market growth at home, each cares little about relative gains between nations as each pursues foremost their own absolute gains of market growth that result from international trade and cooperation.
Herein lies the root of the contractualist peace: Since the foremost goal of contractualist leaders is market growth at home, among them there can be no war. To promote exports, each wants every other state’s economy, if they are not an enemy, to do better rather than worse, and war can only make another’s economy worse. Stronger contractualist powers could in theory seek to impose imperial (unequal) trade terms on weaker ones, but in the long run doing so would harm their own exports. It would also violate their deeply embedded norms of equal law in the marketplace.
Beyond democracy, scholars of international relations have tended to credit the peace in the developed world to the extensive trade ties among them, with the idea that trade interdependency constrains nations from fighting (Russett & Oneal, 2001). Economic norms theory reverses this causation, identifying how contractualist economy promotes interests in both trade and peace. Actual trade interdependency can have no pacifying effect among nations that already have no incentive of fighting one another. In fact, because they have large economies as a result of their market cultures and extensive trade ties, it has been shown that nations with advanced markets are not substantially more trade interdependent than other nations (Mousseau, 2013, p. 193).
Contractualist economy leads to contractualist peace without any assumption that leaders make foreign policy decisions according to their images of other nations. Contractualist nations have no economic incentive of attacking any nation that abides by the rules of global trading order, regardless of its internal political and economic characteristics. The U.S. imposition of imperial/unfair trade on clientelist Mexico would in the long run impede U.S. exports, and violate market norms, in the same way that such an imposition on contractualist Canada would in the long run impede U.S. exports and violate market norms.
The contractualist peace is simply more reliable among contractualist nations than it is between contractualist and clientelist nations. This is because clientelist nations are inherently expansionary, as leaders seek rents and conflict abroad in order to promote wealth and unity at home (Mousseau, 2013, pp. 188–189). These ambitions conflict with the goals of the contractualist nations, whose interest in global markets causes them to prefer order and equal access to global markets. Fearing each other, many clientelist nations seek security in alignment with the contractualist nations, which grant them security, access to capital, and the capacity to trade on equal terms on the condition that they refrain their expansionist tendencies. Since clientelist nations that ally with the contractualist ones tend to face pressure from them to democratize, there is a correlation of democracy with peace in contractualist-clientelist relations. But in these dyads it is peace that explains the democracy, as it is the decision by leaders of the clientelist state to ally with the contractualist ones that causes their democracy.
Since clientelist powers that do not refrain from their imperial tendencies earn the wrath of contractualist nations pursuing global order, clientelist nations frequently engage in militarized conflict with both clientelist and contractualist nations. In this way the theory can account for the greater likelihood of autocracies to initiate risky wars (Bueno de Mesquita et al., 1999), and for the tendency for democracies to win them (Lake, 1992; Reiter & Stam, 2002). Examples of clientelist nations seeking expansion that results in conflict with the contractualist nations include the Soviet Union during the Cold War, and other clientelist nations choosing to ally with it, such as Cuba; and nations as diverse as Qaddafi’s Libya, Mao’s China, Saddam’s Iraq, revolutionary Iran, and Putin’s Russia.
Most agree that the existence of the democratic rule of law and property rights requires a certain set of societal preferences and attitudes (Acemoglu & Robinson, 2006; Dahl, 1997; North, Wallis, & Weingast, 2009), even as social science has not mustered an explanation for where these preferences and attitudes come from (Abdollahian, Coan, Oh, & Yesilada, 2012, p. 839; Acemoglu & Robinson, 2006, p. 316; Dahl, 1997, p. 35; North et al., 2009, p. 262). Economic norms theory identifies how these preferences and attitudes may be rooted in the economy (Mousseau, 2000). In this way, market-oriented development can explain both democracy within nations and the peace among them, rendering the observation of democracy with peace spurious.
How the Contractualist Peace Overcame the Democratic Peace
Initial efforts to examine the economic norms explanation for the democratic peace were hampered by a lack of data on non-self-enforcing contracting in nations. As a result, Mousseau (2000) proxied contractualist norms with the interaction of democracy with gross domestic product (GDP) per capita, since developed democracies should be the democracies with the highest intensity of contract norms. The interaction term corroborated the novel expectation that democracy, alone, cannot account for the democratic peace (Mousseau, 2000). Subsequent tests then corroborated the novel expectations that democracy, alone, cannot account for cooperation among democratic nations (Mousseau, 2002) or for foreign policy agreement among them (Mousseau, 2003).
These initial supportive results prompted a collaboration among three scholars aimed at testing three opposing interaction terms (Mousseau, Hegre, & Oneal, 2003). While Mousseau predicted the interaction of democracy and GDP per capita as conducive to peace, Hegre offered the interaction of trade and GDP per capita (Hegre, 2000); and Oneal sought to test Gelpi and Grieco’s proposed interaction of democracy and trade (Gelpi & Grieco, 2008). Working together in a combined test, only Mousseau’s interaction of democracy and development proved significant, a result subsequently collaborated a third time using different data (Mousseau, 2005).
About this time a direct large-N measure for the economic norms causal mechanism surfaced in the field of finance: life insurance contracts (Beck & Webb, 2003). Life insurance contracts are perhaps the most-reliably non-self-enforcing type of contract there is because the delivery of service is expected only after the death of the policyholder: Being deceased, the policyholder cannot possibility sanction the insurance company for failure to comply (Mousseau, 2009, pp. 64–66). Cashman describes this insight as “rather ingenious” (Cashman, 2013, p. 273). North and colleagues also identified life insurance contracting as the epitome of contractualist economy (2009, p. 159).1
Initial tests with the direct data on non-self-enforcing contracts yielded a startling result: There has never been a single militarized conflict with a fatality between two nations with above-median levels of per capita life insurance contracting (Mousseau, 2009). Moreover, about half of all democratic nation-years have coincided with clientelist economy, and among these clientelist democracies there is no peace.2 These same results hold whether conflict is gauged with interstate crises (Mousseau et al., 2013; Mousseau, Orsun, & Ungerer, 2013) or wars (Mousseau, 2009, 2012a, 2013).
The unanimous results of these multiple tests, all predicted ex ante, could hardly have been more supportive of the proposition that the contractualist peace supersedes, and thus explains, the democratic peace. For knowledge to progress, however, all empirical claims should be subject to scrutiny, and defenders of democracy as a cause of the democratic peace conceived of several ways the correlation of democracy with peace might be restored while controlling for contractualist economy. Dafoe and Russett (2013) noted that the tests overturning the democratic peace did not show that the difference in the democracy coefficients, with and without the inclusion of contractualist economy, is statistically significant. Dafoe, Oneal, and Russett (2013) claimed to show that the evidence for democratic peace is restored with multiple imputation for missing data on contractualist economy, or with an alternative measure for conflict. They also stated that in one study an interaction term is misinterpreted. Ray (2013) offered that the causation in economic norms theory may be reversed, with democracy causing contractualist economy.
The defenders of democratic peace did not, however, back up their claims with evidence. Dafoe and Russett (2013) did not actually show that the difference in the democracy coefficients, with and without the inclusion of contractualist economy, is statistically insignificant. Dafoe and colleagues (2013) did not actually report any evidence supporting their claims that the democratic peace is restored with multiple imputation (Mousseau, 2016, p. 4), or with their preferred measure for conflict (Mousseau, 2016, p. 4). Their alleged misinterpreted interaction term does not appear to exist (Mousseau, 2016, p. 7). Ray (2013) offered no evidence for reverse causality apart from an erroneous research design that arbitrarily excluded most possible counter-cases to his view (Mousseau, 2016, pp. 8–9).
Mousseau and colleagues then investigated all of the unsupported assertions and found no support for any of them. Mousseau, Orsun, Ungerer, & Mousseau (2013) compared tests with and without contractualist economy and showed that the difference in the democracy coefficients is highly significant. Mousseau (2016, pp. 5–7) showed that democracy is not a force for peace whether using multiple imputation or Dafoe and colleagues’ preferred alternate measure for conflict. While Dafoe and colleagues (2013) reported a number of tests of fatal militarized conflicts that support a correlation of democracy with peace, Mousseau (2016, p. 10) documented that everyone includes an explicitly invalid or otherwise highly controversial practice.
In a subsequent attempt to save the democratic peace correlation, Ray and Dafoe (2017) objected to Mousseau’s (2016) life insurance measure. They say the measure should include data on actual trade and that it is too complex to believe that people can consistently perceive and recognize each other as contract intensive. But these objections are not valid: As discussed above, the contractualist peace has nothing to do with actual trade or people having to believe they are in a contract culture. Moreover, Ray and Dafoe (2017) voice no objection to Mousseau’s second measure for contractualist economy, per capita investment, which also supersedes the democratic peace (Mousseau, 2016). They also appear to concede that there is little evidence for Ray’s (2013) claim that democracy causes contractualist economy, since they argue only that evidence for reverse causality will one day appear in the future (Ray & Dafoe, 2017, pp. 3–5). As of this writing, defenders of democracy as a cause of the democratic peace have yet to show that the correlation exists in analyses of fatal disputes unencumbered by controversial practices.
The only evidence that exists today that the democratic peace has not been superseded by the contractualist peace is the observation that a correlation of democracy with peace appears when nonfatal militarized interstate disputes are included with the fatal ones in the measure for conflict (Mousseau, 2016, pp. 12–13). How can democracy be a significant force for peace in analyses of all disputes when it has zero effect when conflict is measured with fatal-only disputes, militarized crises, and wars? It has been shown that the data on nonfatal disputes may be less accurate than those of fatal-only disputes, crises, and wars, as nonfatal disputes among clientelist nations appear to be underreported (Mousseau, 2016, pp. 12–13). In addition, most militarized interstate conflicts occur among neighbors, and Mousseau has shown that democracies with clientelist economies are less likely to be neighbors than those with contractualist economies, and in analyses of all disputes among neighbors only, there is no democratic peace (Mousseau, 2016, pp. 12–13). The conclusion seems clear enough: The cumulative state of evidence today is that the democratic peace has been superseded by the contractualist peace.
Flushed with the triumph of democracy at the end of the Cold War and believing that democracy causes peace, a generation of American leaders sustained a global crusade for democracy. The results of these efforts proved costly, however, as insurrections for democracy seemed to provoke civil war or state failure in a number of nations, including Iraq, Libya, and Syria, or the rise to power of uncooperative and illiberal regimes, as in Egypt. Across the globe many democratic or semi-democratic regimes have been explicitly hostile to Western interests, including those of Iran, Pakistan, Russia, and Venezuela.
What went wrong? Why did democracy not bring forth the expected peace and stability its proponents told us to expect? It now seems the most likely cause of the democratic peace is not democracy but something else. The most likely candidates today are the territorial peace (Gibler, 2012; Owsiak, 2012; Vasquez, n.d.) and the contractualist peace. This article reviewed the progress of how the contractualist peace overtook the democratic peace. Contractualist economy causes democracy because it creates the need for a strong state, and elections by all those in the market are the best-known way to constrain a state to enforce contracts with impartiality. Contractualist economy causes peace among nations because it constrains a state to adopt as its foremost foreign policy goal equal treatment in foreign markets. Having interests in being treated equally in each other’s markets, there can be no economic incentive for war among contractualist nations. Democracy without contractualist economy, on the other hand, produces regimes that must provide rents for supporters and repress opponents. Picking fights with neighbors and others is one way to obtain rents and undermine domestic opposition.
We have shown that the evidence for the contractualist peace superseding the democratic peace is overwhelming. About half of all democratic nation-years lack contractualist economy, and these nations engage each other in fatal militarized disputes, crises, and wars at normal levels. We have documented how multiple determined efforts to restore the evidence for a democratic peace have failed. The correlation of democracy with peace is not only statistically insignificant: In analyses of fatal disputes, crises, and wars it is zero or even positive, meaning there is no relationship, significant or insignificant, of democracy with peace. The evidence is crushing: Without contractualist economy, there is no democratic peace.
Still, the correlation of contractualist economy with peace no more establishes the causality of the contractualist peace than the prior correlation of democracy with peace established the causality of the democratic peace. With historical analyses, evidence for causality rests not in correlations but in the successful prediction of novel nontrivial fact. The economic norms prediction that the democratic peace may be spurious and explained by market-capitalist economy could hardly have been more novel and nontrivial when it emerged at the start of the millennium (Mousseau, 2000), when most if not all opposition to the existence of the democratic peace correlation had evaporated and capitalism, if anything, was widely assumed to promote war (e.g., Bremer, 1992, p. 317).
Since then, the number of other corroborated novel and nontrivial predictions has only grown. As predicted ex ante after the attacks on New York and Washington on September 11, 2001 (Mousseau, 2002/03), contractualist nations are largely immune from anti-American extremism and popular support for groups that adopt terrorist tactics (Boehmer & Daube, 2013; Krieger & Meierrieks, 2015), and in developing nations urban (but not rural) poverty fuels domestic and anti-U.S. terrorism (Meierrieks, 2012; Mousseau, 2011). It now appears that the peace in Europe is best explained by contract norms rather than trade or democracy (Nieman, 2016). Other predictions include that contractualist nations have comparatively higher levels of impersonal trust (Mousseau, 2009, p. 61); better records on human rights (Mousseau & Mousseau, 2008); are immune to the resource curse (Aytac, Mousseau, & Orsun, 2016); and are immune from civil war, lower levels of civil violence, and insurgency (Mousseau, 2012b). This record of corroborated novel predictions would seem to compel continuing consideration and exploration of the theory.
If the theory is accurate, the implications for building a better world could hardly be clearer: Rather than promote democracy through pressure and conquest, the contractualist powers should promote democracy by propping up the markets of nations at risk. They can do this by providing a ready market for the goods produced by developing nations, whatever these goods may be. In the long run, this will transform these nations into contractualist democracies, rendering them reliable and lucrative markets for their own exports. In this way, the market democracies can achieve their long-term aspirations for a secure, stable, and robust global marketplace.
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(1.) Mousseau’s contractualist and clientelist economic types are conceptually close to, if not identical, to what North and colleagues later called “open access” and “natural” orders (2009).