Next we turn, in Chapter 6, to the United States, surveying the country’s historical use of geoeconomics. The picture that emerges is, above all, a cautionary tale about the fallibility of historical memory. Period accounts show how U.S. policy makers have regularly (although not always successfully) employed geoeconomic means to achieve U.S. strategic interests since the country’s founding—and how clear-eyed these policy makers were about this fact. But somewhere along the way, America began to tell itself a different story about geoeconomics, its role in statecraft generally, and even its historical place in American foreign policy. Roughly around the time of the Vietnam War, and continuing through to later stages of the Cold War, U.S. administrations began to see economics as a realm with an authority and logic all its own, usually no longer subjugated to traditional state power realities—and something to be kept free of unseemly geopolitical incursions in any case. As this shift occurred, international economic policy making, except for economic sanctions, began to emerge as the near-exclusive province of economists and like-minded policy makers, no longer readily available to U.S. foreign policy strategists as a means of working America’s geopolitical will in the world.
So began a structural divide, and a corresponding departure from geoeconomics, that remains largely the case today. For a time, this bifurcation was not a pressing problem for U.S. foreign policy: during roughly the first two decades following the Cold War, the United States faced no serious international challenge that required considering whether this alignment between liberal economic ideas and the country’s foreign policy requirements still existed. But with this period of convergence now giving way to something else—arguably closer to the historical trend—the United States must come to grips with the reality that the geopolitical landscape is populated by a set of countries content to use the modern tools of economics and finance without regard for the liberal and neoliberal economic handling instructions and understandings that have traditionally accompanied their use. To recognize this new reality is not necessarily to advocate that the United States respond in kind. But Washington at least needs to recognize the degree to which markets and economics are indeed embedded in larger realities of state power. Policy makers’ capacity to understand this embeddedness and the historical arc of geoeconomics in U.S. foreign policy will prove critical to the shape American foreign policy ultimately takes (and in turn, how well it succeeds) in the coming decades.
We move in Chapter 7 to assess how the United States presently uses geoeconomics. It is clear that the United States, with the largest economy in the world, possesses a great deal to work with geoeconomically, if it so chooses. Moving toward a more self-consciously geoeconomic brand of foreign policy, however, would first require Washington to confront a series of questions about its basic level of comfort with restoring geoeconomics as a more considered part of American foreign policy.
These questions are not easy ones. Many geoeconomic approaches carry real trade-offs. But this is true for every foreign policy option. Too often, unlike debates around political-military statecraft, which tend to be argued and considered against a logic of best known alternatives—geoeconomic approaches are debated in isolation. Criticisms attacking a given sanctions program because “the costs outweigh the benefits,” for example, are silent on the more operative question of whether these costs and benefits would have been a desirable alternative to other available political or military options.16 Not only do policy makers fail to consider geoeconomic approaches against the best alternative, but they also tend to measure them using the wrong standards—judging them by their economic rather than geopolitical impacts. For Russia, waging pipeline politics might not amount to a sound economic strategy, but whether it represents an acceptable (or, more to the point, the best available) means of venting displeasure with the foreign policy choices of the European Union or the United States stands as an entirely separate matter. Dismissing potential geoeconomic approaches as unwise or unlikely simply because they do not fit within the confines of economic rationality is a bit like discounting the risk that a jilted paramour would exact his revenge with a gun on the grounds that the bullets would cost him money. After all, most wars, especially the most destructive ones, would fall into this category of “not particularly economically rational.” When it comes to considering the various foreign policy alternatives available to countries in a given situation, there is no reason to create a separate logical standard of review for options that aim at the same result by relying on other (in this case economic) means.
Still, even with a clearer understanding of how various geoeconomic approaches stack up compared to non-geoeconomic alternatives, it may be that the geoeconomic options available to Washington simply look much different from those available to other states. This is partly a function of America’s unique domestic political and legal makeup, and partly a result of its unique role and responsibility in the world. In simple terms, America is proudly a nation of laws, begun as an experiment in deliberately curtailing state power. These constraints mean that Washington will probably never be capable of using trade and investment tools to advance its foreign policy interests in many of the short-term transactional or coercive ways that suit other countries (with vastly different political and economic traditions) just fine. Moreover, the United States, as the leading supplier of global public goods, may well have a greater geopolitical interest than other states in keeping the geopolitically motivated uses (especially coercive uses) of certain economic instruments to a minimum.
At present, however, it is far from clear that Washington’s present relative discomfort with geoeconomics reflects either inevitable domestic constraints or any considered strategy, rather than the residual workings of a set of assumptions and habits honed during the post–Cold War era. It may or may not be the case that if U.S. policy makers begin using geoeconomic tools more or differently, the result could undermine larger, more important U.S. interests. Such games of line-drawing are inevitably fact-bound; answers will vary from case to case, and from policy maker to policy maker. Our point is not to argue for a certain outcome. What matters far more, we argue, is how policy makers construct these debates, and in particular the kinds of reasons that are allowed to count as valid arguments for or against a geoeconomic move by the United States. Too often, those opposing a given U.S. geoeconomic action do not couch their reasoning in terms of a concern for maximizing U.S. foreign policy interests; too often, their concerns lie elsewhere.
Consider it this way: The most common of these objections tends to cite some vague, unspecified threat to the “rules-based order” as a reason against undertaking a given geoeconomic action. But if indeed this rules-based order were understood to be such a valuable geopolitical asset for the United States (and if indeed it were the reason the United States has not pursued a more conspicuously geoeconomic foreign policy in recent years), then one would expect to see U.S. foreign policy engaged in a more all-hands undertaking—stretching across U.S. military, diplomatic, and economic lines—to shore it up. Not only is there no evidence of this sort of undertaking, but there is plenty of evidence of the converse: the United States remains the international laggard in its contributions to the IMF, and Washington seems unwilling to put even a fraction of the diplomatic muscle it routinely expends on political and security crises in the Middle East toward curbing China’s plans for a multilateral alternative to the World Bank.
But gaps between stated beliefs and demonstrated priorities are hardly new to U.S. foreign policy. For many policy makers it may well be that, so long as upholding the rules-based system is still seen as geopolitically advantageous for the United States, most forms of geoeconomic power will need to be at least neutral in their impacts on this rules-based system for them to pass muster. Adhering to this standard will constrain the United States far more than many other states, especially in more coercive, shorter-term cases. But even working within this exacting standard, there remains much room for geoeconomics to pla
y a larger role in U.S. foreign policy.
Unsurprisingly, for U.S. policy makers these normative questions outlining the boundaries of acceptable use are more easily confronted for some geoeconomic tools than for others. American use of sanctions has seen a profound revolution in thinking and approach in the years since 9/11, for example, while trade and investment remain regarded as an almost exclusively economic exercise. Often U.S. trade officials take pains to downplay the strategic stakes for the United States, fearing an encroachment of geopolitics onto trade. For instance, when the Obama administration decided to go ahead with the Trans-Pacific Partnership (plans that were incubated during the final months of the Bush administration), the agreement’s name was changed, with the term strategic dropped from what was initially the Trans-Pacific Strategic Economic Partnership, concluded in 2005 between Brunei, New Zealand, Chile, and Singapore.
For all of the difficult questions of line-drawing and acceptable use where geoeconomics is concerned, one of the most promising areas of U.S. geoeconomic potential is in the energy realm. The North American shale revolution is remaking geopolitical realities around the world, with dominating economic and strategic benefits for the United States. We examine this in detail in Chapter 8. Beyond economic gains, the shift toward more diversified and oftentimes more localized energy sources will diminish the geopolitical leverage that certain energy suppliers have for decades sought to use to their advantage. No longer as dependent on Gulf energy supplies as it has been in the past, the United States will be freer to influence the terms of its engagement with the Middle East. All the great powers will ultimately be touched by these developments. One of the most important, if overlooked, features of the U.S. energy revolution is the way in which it reinforces several other geoeconomic assets available to Washington: sanctions targeting Iran’s (and potentially other countries’) oil sectors are made easier by the growing abundance of North American energy supplies, trade pacts with the United States are made more attractive by the prospect of accessing these supplies, and the dollar’s continued status as the world’s reserve currency is made more certain by the prospect of the United States coming online as a net energy exporter.
There are signs that the United States may be waking up to its geoeconomic potential, even if the process is too slow and often not yet fully conscious. Chapter 9 begins by reviewing the evolution of this realization. Much of the progress seen to date has been primarily in diagnosing the challenge and developing an initial conceptual framework—amounting to little more than a down payment on what is needed.
Coming up with a specific geoeconomic vision for U.S. foreign policy and translating it into initial lines of action is obviously a complex task. It clearly requires specific policy solutions; we outline our own recommendations at the end of Chapter 9. But because reasonable minds can and no doubt will differ on the specifics, it is worth ensuring they derive from the right framework. We therefore preface our specific recommendations with four stylized lessons drawn from the previous chapters. Lastly, beyond the specifics of any affirmative policy agenda, and beyond the more universal assumptions that ought to underpin these specifics, any meaningful effort by U.S. administrations to reengage with geoeconomics ought to start with a certain educational diplomacy regarding geoeconomics as such. At a minimum, these leaders need to explain in detail to the American citizenry and to the country’s allies and friends what today’s brand of geoeconomics consists of, publicly call out geoeconomic coercion when it takes place, develop responses together with like-minded partners, and more generally discuss with these countries the rightful role of geoeconomics in Western grand strategy.
Chapter 10 concludes on precisely this question of where geoeconomics fits within the broader context of U.S. grand strategy and American national interests. Beginning with the “Germany first, then Japan” approach to World War II, continuing on to containment and deterrence during the Cold War, and moving into the decade of “global war on terror” following 9/11, U.S. grand strategies were developed to guide America’s most important foreign policy decisions and to help policy makers avoid the temptation, as former Secretary of State Warren Christopher once put it, merely “to careen from crisis to crisis.” Far from the singular, strategic clarity of any of these eras, the United States presently faces a blizzard of international problems: the rise of Chinese power, what now seems to be the return of Russian systematic destabilizing policies in Eurasia and beyond, chaos in the Middle East, and the continuing danger of terrorism involving weapons of mass destruction. We return in this final chapter to a discussion of using American national interests as a compelling compass for U.S. external behavior and grand strategy, and we examine briefly again how geoeconomic instruments, as informed by history and illuminated in these pages, might promote these interests.17
The research and writing of this book necessarily entailed an inductive process. The relative lack of any widely accepted conceptual framework to guide questions of how states use economic tools to pursue geopolitical aims required building a picture from the ground up. Generalizations and counterfactuals are a necessary element of any such attempt. Considering what would have happened absent various geoeconomic displays may amount to little more than educated guesses, “but this is preferable to ignoring the problem,” as David Baldwin pointed out.18
Second, as with any inductive approach, questions of relative scale and importance can be difficult to pinpoint. It is obviously the case that some of the geoeconomic examples presented here matter more than others. Even those cases that may not rise to systemic global importance—Russian swipes at Moldovan wine as part of the Kremlin’s larger campaign to shore up its regional dominance, for example—may nevertheless hold unknown precedential importance, boosting the odds that similar tactics may be replicated in the future by other states in ways that carry greater systemic stakes.
Likewise, just as not all shows of geoeconomic power are created equal, some practitioners carry greater global significance than others. As both the largest and most consequential practitioner of today’s brand of geoeconomics, China serves as the book’s central example (apart from our focus, in the book’s second half, on the United States). For the same reasons, Russia and the Gulf states also warrant particular focus. Regrettably, this approach means that some other avid if systemically less significant practitioners of geoeconomics—Norway and Singapore, for example—go only peripherally highlighted.
To suggest that geoeconomics is reemerging as a favored form of geopolitical combat for some of the world’s most powerful states and is shaping outcomes across some of the world’s most important strategic challenges is, of course, not to suggest that the modern return of geoeconomics is a universal phenomenon. There are plenty of states that are not evincing a particularly new or robust role for geoeconomics, and many challenges that will be decided primarily on non-geoeconomic variables. Nor does this book attempt to predict whether today’s brand of geoeconomics can be expected to spread further—only that it has already risen to a level of systemic importance that foreign policy practitioners, especially those in the United States, minimize at America’s peril.
Lastly, and perhaps most important, this book seeks to explain how, not what, to think about geoeconomics.19 Each case and crisis is different, and it is impossible to say ex ante whether geoeconomic approaches should be adopted in any given scenario. But geoeconomics should at least be given more regular, rigorous, and sophisticated consideration by U.S. policy makers, especially since so many of today’s greatest strategic challenges cannot be fully understood, let alone addressed, without appreciating the considerable geoeconomic forces driving them—a subject we begin to address in Chapter 1.
CHAPTER ONE
What Is Geoeconomics?
War and commerce are but two different means of arriving at the same aim, which is to possess what is desired.
—BENJAMIN CONSTANT, FRANCO-SWISS POLITICIAN
THE TERM geoeconomics is in much use today,
but almost always without a specific working definition.1 Some authors tend to focus on the use of geopolitical or military power for economic ends.2 Others tend to define geoeconomics more broadly, as “the entanglement of international economics, geopolitics, and strategy,” a kind of catch-all definition that obscures more than it clarifies.3 Still others primarily stress trade and the protection of industries.4
In the particular context of U.S. foreign policy, those who use the concept have likewise primarily confined themselves to traditional examinations of international trade and sanctions.5 Typically, these inquiries depart from a narrow understanding of U.S. trade policy—trade, done well, strengthens America’s economic standing, and thus, at least in theory, enhances its power projection accordingly—but have no specific geopolitical dimension, apart, perhaps, from a widely held belief, rooted in the early twentieth-century liberalism of Norman Angell and others, that expanded trade promotes peace.6 It is essentially trade for trade’s sake. Others apply the term to almost all American economic activity, domestic and foreign.7 These analysts sometimes begin by connecting U.S. power projection in a general way to the strength or weakness of the U.S. economy or even American society.8
Indeed, these calls are finding purchase, as the two most recent U.S. national security strategies attest.9 A strong domestic economy over the long term will of course remain a general requirement for any country’s power projection, the United States included. History has not looked kindly on any country that has allowed its geopolitical responsibilities to outstrip its economic wherewithal for long. It is as good a universal law as one could hope to find in politics. And just as with physical laws of nature, there are no exceptions for size: great powers have found their economic constraints no more pliant in the face of geopolitical burdens than any other country.
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