Capitalist Development and Civil War

Abstract

Capitalism has emerged as a force for peace in studies of interstate conflict. Is capitalism also a force for peace within nations? This article shows how a market-capitalist economy—one where most citizens normally obtain their livelihoods contracting in the market—creates citizen-wide preferences for universal freedom, peace, and the democratic rule of law. Prior research has corroborated the theory's predictions linking market-capitalism with liberal preferences, human rights, and peace among nations. Here, Granger tests of causality show that market-capitalism causes higher income, but higher income does not cause market-capitalism, and from 1961 to 2001 not a single civil war, insurgency, or rebellion occurred in any nation with a market-capitalist economy. Market-capitalism is the strongest variable in the civil conflict literature, and many of the most robust relationships in this literature are spurious—including income, state capacity, and oil-export dependency.