Global sanctions are a tool for punishing countries for bad behavior like supporting terrorism or engaging in human rights violations. They can take many forms including trade blockades, restrictions on financial operations, and bans on imports or exports. While they are not a silver bullet, they can be a vital instrument in a foreign policy toolkit.
This essay aims to provide an overview of the economic impacts of these types of penalties as well as their effectiveness. It will also explore the use of incentives alongside or as an alternative to sanctions. Incentives can be particularly effective when aimed at specific sectors of society that have the potential to rally support for change within their communities. This is a key idea behind the work of behavioral economist David Baldwin, who argues that threats and sanctions send messages of hostility, while incentives communicate hope, cooperation, and goodwill.
As the essay illustrates, a sanctions’ impact depends on a number of factors, such as the extent to which they are designed to disrupt international trade, their duration, and the degree to which they are imposed by a single party. These variables can all impact the effectiveness of a sanction, especially when they are aimed at vulnerable populations such as children or the elderly. In addition, the extent to which the sanctions are evaded and diverted will also have a significant effect on their effectiveness. Despite these challenges, the authors believe that advanced economies have more tools at their disposal than they did in the interwar period to mitigate the negative effects of economic penalties.
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