The Berlin Decree, issued by Napoleon on November 21st, 1806, declared economic warfare on Britain. The British Order in Council of six months earlier had started a blockade of French ports; now France responded by banning all contacts and commerce with Britain. British subjects found in France or its allies were to be seized, as were British goods and merchandise. Vessels violating this order were to be confiscated along with their cargoes.
Napoleon thought to force Britain to surrender by stopping its industries from trading with continental Europe. The lack of foreign gold coming in for its exports would bankrupt Britain’s Treasury, he supposed. His “Continental System” might have looked plausible in theory, but was difficult to enforce in practice over the large landmass he controlled. Furthermore, it was unpopular among the peoples of Europe, and some nations unilaterally ceased to comply with its terms.
Smugglers readily exploited the blockade because British goods were welcomed on the Continent. This was especially rife in Spain and Portugal, prompting Napoleon to invade Spain to enforce it, then Russia when the Tsar withdrew his country from it. His big defeats in both Spain and Russia ultimately led to his demise.
The British economy suffered much less because Britain had command of the seas and could engage in transatlantic and colonial trade. The Continental ports never recovered their position because of the loss of trade and the industries dependent on it, such as sugar refining and shipbuilding. Far from ruining Britain, the Continental System ultimately ruined France.
The fate of Napoleon’s Continental system calls into question the whole effectiveness of economic warfare, which today takes the form of sanctions. Sanctions against a country designed to pressure its government generally hurt its poorer peoples most by depriving them of cheap goods, and hurting its financial ability to provide the public services that poorer people often depend upon.
This is the main reason why sanctions today are often applied to named individuals in foreign governments, and to particular corporations, rather than to countries as a whole. There is much dispute over their effectiveness. They seem to work in some cases, but not in others, and it seems to depend on the size and type of economy involved. Some analysts doubt that sanctions against Russia following its annexation of the Crimea have had much effect on restraining the actions of its government. On the other hand, sanctions against Iran seem to have had a major impact on its economy, stirring up resentment of its government by its people.
When a country violates international law, or reneges on agreements it entered into, there is a strong desire of those affected by this to do something in response. Short of armed intervention, the imposition of sanctions presents itself as a form of punishment, or a means of forcing the recalcitrant government to the negotiating table. It is a blunt instrument, though, and generally harms both sides. The countries that use them sometimes commit the fallacy of “We must do something,” feeling that to do something ineffective is better than doing nothing at all. In reality, it isn’t.