Liabilities of Globalization: Sovereign Debt, International Investors and Interstate Conflict with Other People's Money


  • The views expressed in this report are the author's and do not necessarily reflect those of the Combating Terrorism Center, U.S. Military Academy, Department of Defense or U.S. government. I would like to thank Jim Morrow, Jude Hays, Benn Steil, and the reviewers for helpful comments. All errors are my own.

Scott Helfstein

Department of Social Sciences

United States Military Academy

West Point, NY



Foreign ownership of government debt has increased steadily over the past 30 years with the globalization of financial markets. The increased availability of foreign borrowing may make it easier for countries to pursue bellicose policies by altering the cost–benefit calculations associated with international conflict, giving rise to an underappreciated link between globalization and military action. This has not been addressed because globalization is most often approached through the income statement, such as trade flows, or the asset side of the balance sheet, such as foreign direct investment. A series of empirical tests using time-series cross-section analysis of militarized disputes, finds a strong relationship between foreign debt ownership and conflict.