THE UNIVERSITY OF CHICAGO PLANNING FOR THE SHORT HAUL: EXPLAINING WARTIME TRADE BETWEEN ENEMIES A DISSERTATION SUBMITTED TO THE FACULTY OF THE DIVISION OF THE SOCIAL SCIENCES IN CANDIDACY FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEPARTMENT OF POLITICAL SCIENCE BY MARIYA GRINBERG CHICAGO, ILLINOIS AUGUST 2019 Copyright © 2019 by Mariya Grinberg All Rights Reserved ii Table of Contents LIST OF FIGURES .................................................................................................................... VI LIST OF TABLES .................................................................................................................... VII ABSTRACT .............................................................................................................................. VIII ACKNOWLEDGEMENTS ....................................................................................................... IX CHAPTER 1: INTRODUCTION ................................................................................................ 1 EXISTING EXPLANATIONS ............................................................................................................ 3 WARTIME COMMERCIAL POLICY ................................................................................................. 7 THE ARGUMENT......................................................................................................................... 10 SCOPE CONDITIONS ................................................................................................................... 12 EMPIRICAL ANALYSIS ................................................................................................................ 13 PLAN OF THE DISSERTATION ...................................................................................................... 15 CHAPTER 2: EVOLUTION OF THOUGHT ON TRADE WITH THE ENEMY ............. 19 WHAT IS TRADE WITH THE ENEMY? .......................................................................................... 21 What can Permission to Trade with the Enemy Look Like? ................................................. 22 Where to Look for Trade with the Enemy? ........................................................................... 24 How Can a Prohibition on Trade Be Enforced? .................................................................. 26 THE EVOLUTION OF THOUGHT ON TRADE WITH THE ENEMY ..................................................... 29 Development of Neutral Rights ............................................................................................. 30 Commercial Policy in a World without Neutral Rights ........................................................ 35 Commercial Policy in a World with Neutral Rights ............................................................. 37 FUNDAMENTAL PROBLEM OF TRADE WITH THE ENEMY ............................................................ 41 CHAPTER 3: THEORY ............................................................................................................ 42 FUNDAMENTAL PROBLEM OF TRADE WITH THE ENEMY ............................................................ 44 Security Externalities of Trade ............................................................................................. 45 First Theoretical Insight: Conversion Time ......................................................................... 48 Second Theoretical Insight: Loss of Revenue ....................................................................... 52 Solution to the Fundamental Problem of Trade with the Enemy .......................................... 55 Doesn’t a State Care about an Enemy’s Revenue from Trade? ........................................... 58 Doesn’t a State Care About Its Own Conversion Times? ..................................................... 59 SPECIFIC POLICY FOR THE SPECIFIC WAR .................................................................................. 60 Expected Length of War ........................................................................................................ 60 Expected Intensity of War ..................................................................................................... 63 Type of Wartime Commercial Policy .................................................................................... 65 WARTIME COMMERCIAL POLICY IN A SPECIFIC WAR ................................................................ 67 BILATERAL LEVEL OF TRADE BETWEEN ENEMIES DURING THE WAR ........................................ 70 Does Overlap Between Belligerent Wartime Commercial Policies Exist? .......................... 72 ALTERNATIVE EXPLANATIONS ................................................................................................... 73 CONCLUSION .............................................................................................................................. 76 CHAPTER 4: CRIMEAN WAR (1854-6) ................................................................................ 78 iii EXPECTATIONS ABOUT THE TYPE OF WAR ................................................................................. 79 Russia .................................................................................................................................... 80 Britain and France ................................................................................................................ 83 INITIAL COMMERCIAL PREFERENCES ......................................................................................... 87 Britain ................................................................................................................................... 87 France ................................................................................................................................... 90 DECLARATION OF THE RIGHTS OF NEUTRALS ............................................................................ 92 Britain and France ................................................................................................................ 92 Russia .................................................................................................................................... 99 WARTIME COMMERCIAL POLICY ............................................................................................. 100 Britain ................................................................................................................................. 101 France ................................................................................................................................. 108 Russia .................................................................................................................................. 114 OBSERVED LEVEL OF TRADE ................................................................................................... 118 ALTERNATIVE ARGUMENTS ..................................................................................................... 120 The Role of Domestic Politics ............................................................................................. 120 Maximum Economic Pain ................................................................................................... 122 CONCLUSION ............................................................................................................................ 123 CHAPTER 5: WORLD WAR I ............................................................................................... 124 FORMATION OF INITIAL POLICY ............................................................................................... 125 Assessment of Commercial Situation .................................................................................. 126 Expected Length of War ...................................................................................................... 129 Policy for War with Germany ............................................................................................. 130 CHANGES TO THE COMMERCIAL POLICY DURING THE WAR .................................................... 140 Expected Length of War ...................................................................................................... 141 Expected Intensity of War ................................................................................................... 147 Wartime Changes in Policy ................................................................................................ 150 Trends in Incremental Changes of the Wartime Commercial Policy ................................. 156 ALTERNATIVE EXPLANATIONS ................................................................................................. 159 The Role of Domestic Politics ............................................................................................. 159 Maximum Economic Pain ................................................................................................... 161 CONCLUSION ............................................................................................................................ 162 CHAPTER 6: WORLD WAR II ............................................................................................. 164 FORMATION OF INITIAL POLICY ............................................................................................... 165 The General Policy of Economic Warfare .......................................................................... 166 Economic