ECONOMIC SANCTIONSEconomic Sanctions Have a Poor Success Rate
Economic sanctions have become the weapon of choice in the United States’ diplomatic and strategic arsenal. Trade tariffs, export controls and other financial penalties offer a quick means to punish ‘bad behavior’. However, sanctions have a poor success rate, have high economic costs, and may also have massive unanticipated consequences for innocent bystanders.
Economic sanctions have become the weapon of choice in the United States’ diplomatic and strategic arsenal. Trade tariffs, export controls and other financial penalties offer a quick means to punish ‘bad behavior’, whether by terrorist groups, drug cartels or national governments. Over the past two decades, the US has imposed more sanctions than the United Nations, the European Union and Canada combined.
From a government point of view, sanctions are low cost. They may be drafted by a handful of civil servants, but the burden of implementation falls on multinationals and banks. And sanctions tend to boost the approval ratings of the leaders who impose them. No wonder policymakers like to use them to fill the diplomatic space between ineffective declarations and high-risk military operations.
However, sanctions have a poor success rate, have high economic costs, and may also have massive unanticipated consequences for innocent bystanders.
North Korea is a case in point. Despite being subjected to some of the toughest sanctions ever applied, North Korea’s regime has remained in power and continued its weapons testing undeterred. In response to sanctions, Pyongyang has developed sophisticated illicit tools to generate foreign exchange and support the lifestyles of the country’s elite. Decades of sanctions have pushed North Korea deep into poverty. The burden is borne by the poor, many of whom live on the brink of starvation. By any yardstick, sanctions on North Korea are a failure.
As the use of sanctions has soared, so too have the compliance and opportunity costs for the private sector. Major deals have been lost and entire supply chains redirected due to ill-conceived measures.
By relying so heavily on sanctions, is the US shooting itself in the foot?
Agathe Demarais is the global forecasting director of the Economist Intelligence Unit. While working for the French Treasury in Russia and Lebanon she learned about sanctions firsthand. In Backfire: How Sanctions Reshape the World Against U.S. Interests, which will be published on 15 November, she examines the extensive downsides to US-led sanctions and suggests a way forward in a world that is increasingly polarized between liberal and authoritarian regimes.
