Sanctions are a common tool used by countries to prevent terrorist funding. These financial restrictions prohibit most countries from buying from or selling to a country that is known to condone and support terrorist groups. This prevents funds from being sent to these groups to fund future terror attacks.
Global sanctions can have a massive impact on economies and affect citizens around the world. They can affect peoples’ ability to access goods and services they need in their everyday lives, as well as the government’s capacity to generate income and raise capital on international markets. The most common types of sanctions include trade boycotts, embargos and visa restrictions.
During the Great Depression, economic coercion produced devastating effects, diminishing world exports, fragmenting currency blocs and driving global price deflation. The interwar period showed that sanctions can bring change, but success depends on how they are deployed and the overall economic context in which they occur. Sanctions are most effective when they target specific industries and can reduce the political legitimacy of a regime. They are less effective when they target the economy as a whole or lead to widespread smuggling.
Today’s economic integration is far greater than in the 1930s, reducing risks of deglobalization and lowering the likelihood of military escalation. But more broad-based market integration also multiplies the avenues through which sanction shocks ripple across the global economy, increasing costs, supply bottlenecks and trade losses. These changes should not obscure the fact that the hope of using economic coercion to promote global norms has returned. Nevertheless, our thinking about sanctions must catch up with the realities of global economic stability.
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