Abstract

This chapter focuses on the relation between economic instruments of statecraft and broader foreign policy goals and strategies of states. In general, it is difficult for economic sanctions to achieve major foreign policy objectives, despite their popularity as a foreign policy strategy. The end of the Cold War led to an increase in the use of sanctions, but not necessarily in their relative effectiveness. However, even if sanctions do not always succeed, governments still find them useful as part of a broader foreign policy strategy to signal their intentions, send important messages, and complement military action or diplomacy. The chapter also argues that the positive use of economic incentives has considerable promise as an instrument of statecraft and deserves more systematic attention in the study of foreign policy. It concludes with the enduring question of whether economic interdependence leads to harmony, as liberals expect, or conflict among states, as realists expect, and finds that it depends on the future expectations of policy makers, the nature of the military balance, and the form that economic interdependence takes.