Sunday, 20 April 2014

What is the Point of NATO?

Tyler Cowen recently quoted a Financial Times article in which London City University's Michael Ben-Gad made the point that protective alliances such as NATO may not be credible in the long run. Quoth Ben-Gad:
"'Would the US and western Europe really go to war to defend the territorial integrity of Estonia? I think Estonia has reasons to worry. Narva is the most obvious place; it is almost completely Russian-speaking,' he says."
In other words, wars are really expensive and the fact that there is a military alliance is therefore not necessarily a guarantee that the alliance's members will be protected. I have made the rather elementary point before that countries risking loss of parts of their territories have every reason to avoid a costly war, and that if the rulers of the "aggressive" foreign country gain more than the present rulers lose, the former should simply compensate the latter in a peaceful way, rather than fight costly wars (see also this article by David Friedman, which touches upon similar issues).
Prospective members of NATO must, as far as I know, be approved by each current member, so there is some reason to suppose that members "care" more about each other than about outsiders. But there is nothing here to imply that bargaining about member countries' territories should follow principles different from the ones mentioned above. If the loss is sufficiently small relative to the compensation which may be offered, a NATO territory under dispute will be lost. What about territories outside NATO?
If NATO is interested in some region X, why should it matter to potential aggressors whether X is a member of NATO? Said territory can receive NATO backing provided the appropriate compensation schemes between NATO members are arranged. If not, the situation is qualitatively the same as NATO reneging on promises to its members in order to avoid expensive wars.

If this is true, what is the incentive to join NATO? More generally, what is the point of international organizations? Perhaps they are mainly a way to provide sinecures for politicians on hiatus from domestic issues? Maybe there is something in here akin to Ronald Coase's 1937 treatment of firms? Countries economize on transaction costs by being bound together in certain ways. Rather than seeking agreements on issues which members confront from time to time, general guidelines are drawn up which command certain actions.

If this is the case, one should have more confidence that recent agreements will be maintained than than that old ones will. Just like newly-hired workers are not likely to be laid off, it is unlikely that a recently agreed-upon treaty between nations will immediately fail since new circumstances are easier to foresee the nearer they are in time. However, many international agreements are non-binding. This fact would seem to throw the firm analogy out the window. At least it cannot apply to all collaboration between countries.

Some have suggested that declarations by international organizations can have ring effects, such that other actors will not associate as much as would otherwise have been the case with nations which have been condemned in one way or another by well-known international organizations. However, maybe follower-shunners would have done the same thing anyway, but make convenient use the first mover's actions?

So is protection by NATO credible? The stated rationales for international collaboration are not the actual reasons, but NATO could work anyway. In the end, I expect the bargaining issues in my previous post, mentioned at the beginning of this one, to hold. That wars occur at all is a queer fact from this point of view, but it should not change the conclusion that territories eventually end up within the political jurisdictions in which they are most valued. In the long run, and if NATO is truly about protection, there will be war. But this seems much too foolhardy and expensive an attitude to be real. So probably - and hopefully - NATO is not really about protection.

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