My Dreams of Geoeconomics - and Why They Should Be Yours
It’s a terrible word, but we won’t get the right answers if we don’t ask the right questions
With 63 days to go, Americans now dream of a new administration with either Kamala Harris or Donald Trump as their president. I back Harris for a (very) long list of reasons, but I also harbor a deeper – admittedly geekier - dream that the next U.S. administration will embrace an agenda of more coherent geoeconomics.
Yes, jee-oh-eek-on-o-micks.
It’s a terrible word, but we must recognize that most of the challenges in making the world more secure and prosperous have an economic dynamic at their core. Taiwan’s future would be easier to negotiate if global trade flows weren’t so badly distorted by the rising tide of Chinese manufactured goods. Any Ukraine settlement will present more thorny questions around sanctions, trade and reparations than about future arms supplies. Even the Middle East would look less knotty if we had better ideas about an economic model that works for both Palestinians and Israelis.
This is not a Marxist vision that all political conflict has economic roots, but America can’t expect to get the right answers for its foreign policy if it doesn’t ask the right questions. If this decade will be shaped by political, technological and demographic forces that are re-wiring the global economy, then we’d better start thinking at least as hard about setting the right economic incentives for the new world order as we do about where to place a military base and who gets a state dinner.
In ministries and think tanks, geoeconomics gets tossed around loosely with its cousin, geopolitics, even if it has barely made it into most authoritative dictionaries. Merriam-Webster defines it as "the combination of economic and geographic factors relating to international trade." The brains at Chatham House say it’s "the interplay of international economics, geopolitics and strategy."
Better to think of geoeconomics as the collection of forces that shape the most important flows in the global economy: money, goods, services, data and energy. The prefix signals that these are issues in the realm of high politics and “strategery,” as well as a reminder that political considerations will always have a government thumb on the scale. The suffix is a reminder that the less these flows are managed and encumbered, the better off we all are.
So, think of a foreign policy agenda that is less defined by current or potential crises (South China Seas, Kursk, Gaza) and less shaped by the separate agendas of government departments (State, Defense, Treasury). Think, instead, of a series of policy initiatives aimed at managing the incentives for key geoeconomic flows.
Goods: Trade is clearly at the heart of the global economy and for all the talk of de-globalization as tensions with China rise, the United States needs a strategy for re-globalization. “Near-shoring” for key supplies may make sense, especially if we can shape those new flows to expand relations with key emerging markets like Mexico or India. Tariffs and subsidies may make sense to respond to a rising flow of subsidized manufactured exports from China. But none of it makes sense if it turns into an era of blind protectionism with tariffs we bill to consumers. So, sure, protect clean energy and semiconductors, but not home electronics and garden furniture.
Money: Dollar financial markets remain the world’s largest and most sophisticated, with nary a rival in sight. Financial sanctions have also become a powerful tool for punishing criminals and aggressors, even if they don’t stop all crime or aggression. But cryptocurrencies are transforming the way money moves around the world, and regulators must embrace technologies that can help them track bad guys with as little burden as possible on the good guys.
Data: Expanding flows of personal, corporate and government data command expanding attention at the heart of inter-state relations. Efficiency and innovation demand that data flow freely, but privacy and national security concerns fuel arguments for protection and localization. Artificial intelligence and blockchain technologies will make these trade-offs all the more vexing, but all the more important to manage actively and deliberately.
The prefix signals that these are issues in the realm of high politics and “strategery,” as well as a reminder that political considerations will always have a government thumb on the scale. The suffix is a reminder that the less these flows are managed and encumbered, the better off we all are.
People: Immigration flows that have become so polarizing in the United States and Europe are fundamentally economic issues that have been ignored too long. Heartbreaking pictures of desperate people crossing the Rio Grande or the Mediterranean are far more a failure of trade and development policies than any rules around how to process migrants at the border.
Energy: Even if America has achieved energy independence, oil and gas supplies remain crucial to the global economy and continue to create windfalls for bad leaders (See Putin, Vladimir). Meanwhile, expanding government incentives to bolster renewable energy will create their own frictions and chokepoints. America and Europe look headed for collision over Europe’s carbon adjustment charges on imports, while the scramble to secure access to lithium and cobalt will soon overshadow the hunt for the next big oil discovery.
This is not a proposal to reorganize the U.S. government, even though there is also much to be done to better coordinate and deploy all the economic carrots and sticks in Washington’s grasp. Rather, this is a suggestion to think much more about the country’s biggest international problems in terms of geoeconomics rather than traditional geographic or administrative buckets.
The challenges themselves won’t automatically be easier to solve, but they may be easier to manage.