The logic of economic sanctions

[Tahuti]

I see a lot of talk about economic sanctions, and while I do not wish to talk about particular cases, I do want to talk about the logic behind them in general. A lot of proposed sanctions against countries that are allegedly 'bad' do not seem to make a lot of sense to me from the perspective of stopping that country.

For instance, a popular measure is divestment. Unless I am missing something, such appears abundantly stupid to me: Since you sell shares, the collarary is that someone will buy it. Furthermore, burning the shares will especially not help since it will simply release corporations from the obligations they have towards you while keeping the upsides. Wouldn't it make a lot more sense to buy them en masse and then force the board of directors to side against their host country? I guess that's too hard to explain.

What about embargoes and boycotts? Unless a country's government is dependent on revenue from fossil fuels, I suppose the only thing it would do is make the economy more autarkic and thus even more insulated from pressure. Currency sanctions seem to be rather counterproductive as well, especially against countries that are dependent on fossil fuels, since it would make wage labour cheaper, shield them from the Dutch disease and allow them to diversify the economy in the process.

So what does seem to work? As mentioned earlier, could it be investment with the goal of convincing the board to back your politics? Withdrawing support that already is? Is economic warfare really as effective as it is made to look?

 

[Cutlass]

They don't really work all that well. At least not in most circumstances. However, the next level of escalation is war. When a nation isn't prepared to take that step, sanctions are really the only option to pressure another nation to change.

 

[Perfection]

I think it's the threat of sanctions that inspire change not the sanctions themselves. Once they're put in place the targeted nation will seldom back down out of fear of looking weak. The real reason why we carry through with the threat is so that when we attempt to strongarm a different nation in the future we'll have credibility in our willingness to carry out sanctions. Otherwise we'd just be making empty threats.

 

[traius]

Outside of war, sanctions are pretty useless. They tend to have the opposite desired effect. Totalitarians can demonize the sanctioners, bringing the populace together against a common enemy (unless they begin starving... at which case, sanctions seem effective but ruthlessly immoral). Furthermore, without trade, contact with other nations drops, and valuable routes for change are cut off, and isolation breeds ignorance and xenophobia.
All this is USUALLY. The most recent example which you apparently don't want to get into was perhaps the most successful round of sanctions of all time (of course, HIGHLY affected by oil prices). No starvation, just lower quality of life for citizens and the popping of a previously ever-soaring economy, and one hopes a lowering of support for Vlad. The last part hasn't happened yet and may still simply be source for further demonization of the West. We'll have to wait and see.

Inside war, they are critically important. Stopping the US from trading with Germany was critical for the Pre-1942 allies.

 

[Tahuti]

Inside war, they are critically important. Stopping the US from trading with Germany was critical for the Pre-1942 allies.

What's the exact mechanism behind that? Less materials in the absolute sense?

 

[El_Machinae]

Economic sanctions are great, but can only be used for two things. Keeping an enemy weaker than you (with strong sanctions), or as part of a negotiation process (with light sanctions). It's a self-inflicted injury that only makes sense if it hurts them more than it hurts you

Sanctions slow economic growth in both countries, compared to the counter-factual. IF your country has better economic growth prospects, then the cost of having a sufficient military will go down over time, mainly because your economy is growing faster than theirs. It never improves the lot of the peasants. It nearly never encourages the tyrant to be less evil. Despite propaganda, it's a very hard tool to use to help "their" oppressed people. It's used to keep an enemy as weak as possible, if only in a relative sense. The idea that if you torture the peasants enough, their tyrant will eventually let the Hebrews go is not well-supported.

If economies are more integrated, then light 'tit-for-tat' sanctions can be used for political jousting. Or, short-term protectionist efforts as a variant of welfare that's more politically acceptable.

Your points about shares are a strong reason why the financial sector has mostly tricked us. We increasingly shovel our savings into a rising stock market, and the financial sector tells us that it's engaging in wealth creation. Meanwhile, it's mostly the opposite, where you're sequestering the profit of your labour into a money-pit that only (at best) obliquely turns that money into production or creation.