Is it the time to re-think the use of economic sanctions?

It is fairly clear that our foreign policy will change significantly in the next year.  This leads to plenty of speculation about trade, alliances, and so on.  

How effective are economic sanctions in forwarding US interests?  There is no question that they can harm a lot of people and re-align both trade and cultural exchange between countries, but does this actually help us achieve our goals?  

If you think about it, vibrant middle class populations tend to be a moderating force in countries.  Middle-class people want to raise families, plan for the future, and tend to shy against radical change that could threaten to upheave their world.  Economic sanctions punish the middle class of a country while those in power use them to effectively shift the blame for a country’s problems squarely on the US.  The regime can then dig in with it’s offending behavior in defiance of the big US bully.  Remember that the countries on which we impose sanctions always have a large voice in and often significant control over of their own news agencies.  This merely creates a self-feeding cycle of anti-US behaviors and stances that make us less and less relevant to the country’s decision-making process.

After the Cold War, the US began to use economic sanctions much more often as a forceful approach to achieve diplomatic goals without the direct threat of war.  The article below has the interesting soundbite:  

The United States’ economic strength, combined with a reluctance to deploy its military force to address economic, moral, or political problems resulted in a sharp increase in unilateral sanctions. In 1998, one commentator estimated that “two-thirds of the world’s population [was] subject to some sort of US sanctions.”

While economic sanctions can be effective in some situations, they do cause significant collateral damage and it is good to question their effectiveness particularly when they become long-term.  Below is a link to the government website listing all countries currently under economic sanctions by the US:


About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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