War by Other Means

by Robert D Blackwill

  POINT 3

  Geoeconomic attempts at power projection can take many forms. And just as not all states are created equal in their capacity to project geopolitical power, there are certain structural features—or geoeconomic endowments—that dictate how effective a country is likely to be in the use of geoeconomic tools.

  Not only do states deploy geoeconomic tools against a broad range of noneconomic ends, they also use these tools in a variety of ways. The most obvious distinction here is between positive and coercive forms of geoeconomic leverage. But geoeconomic attempts differ across a range of other scores: objectives can be shorter-term or longer-term; some measures are more transactional (where objectives are narrowly construed and anticipated benefits are fairly well identified), while others are more general (where objectives are broader and benefits are less understood); and the range of geoeconomic techniques during wartime will differ from those in peacetime or in the absence of active military conflict.

  The decision by President Carter to impose a grain embargo against the Soviets in response to the USSR’s 1979 invasion of Afghanistan and the Truman administration’s offer of concessionary loans to U.S. allies to purchase war materials in World War II were both targeted measures, enacted in response to particular events and intended to elicit a specific set of responses. The push in the late 1970s by the Federal Republic of Germany to adopt a single European currency (which it saw as necessary to preempt Western fears over Germany’s increasing strength at the time) and the advent of the European Union itself were both longer strategic plays, where the goals were broad, involving multiple targets, and where the benefits, while understood to be powerful, went mostly unforeseen among the chief proponents of these policies at the time. The $8 billion Qatar invested in Egypt between President Mubarak’s fall in early 2011 and President Morsi’s ouster in mid-2013 probably falls somewhere in the middle, bearing some reciprocal, shorter-term, specific assurances, if still coming with a fairly broad set of objectives and some expectation of benefits over an extended time horizon.

  Second, geoeconomic power, like geopolitical power, is a function of certain structural factors and policy choices. Much as states differ in their capacity to project geopolitical power, there are certain structural features—or geoeconomic endowments—that shape how successful a country is likely to be in the use of geoeconomic tools. Indeed, compared to the vast literature on the inputs and workings of geopolitical power, no similar analytic framework exists for geoeconomics; there is no consensus as to the range of geoeconomic tools that presently exist or to the set of factors that make states more or less suited to wield them effectively.42 Are nondemocracies better suited to apply geoeconomic tools? Are small countries just as disadvantaged when it comes to geoeconomics as with geopolitics? Absent any sort of conceptual blueprint or predictive logic for these instruments, it should hardly be surprising that foreign policy makers seem far more reluctant to analyze their choices in geoeconomic rather than geopolitical terms. We take this up in more detail in Chapter 3.

  POINT 4

  There are some fuzzy, borderline cases.

  When it comes to applying this conception of geoeconomics to real-world cases, no matter how carefully constructed the parameters, inevitably certain fuzzy, borderline examples will arise. Most analysts—although not all—would share David Baldwin’s intuition that bombing a factory should be excluded from any conception of geoeconomics, seeing this as belonging more to the realm of traditional military application.43 But what about using elements of force—a naval blockade, perhaps—to impose an economic embargo, which itself comes as part of larger war-fighting? What of state-sponsored cyberattacks targeting banks or critical infrastructure as a means of venting disagreement over another country’s foreign policy decision?

  There are no bright-line answers. Broadly speaking, the actions and policies of interest here are economic techniques of statecraft; sometimes these techniques will involve tools that are straightforwardly economic in nature (for example, coercive trade measures, economic aid, or sovereign investment), and on other occasions they will involve mechanisms that are not purely economic in nature (such as state-sponsored cyberattacks) but where the means by which states are trying to influence the behavior of other states are economic. By this logic, certain cyberattacks—say, those targeting the critical economic or financial infrastructure of another country—would be considered geoeconomic, whereas other types of cyberattacks (against military and other government targets) would not.

  Like anything, the liminal cases are the hardest. Some might argue, for example, that this logic could be stretched to include bombing a factory as a geoeconomic technique of statecraft. After all, basic market mechanisms of supply and demand are being manipulated—dampening a country’s productive output, or causing supply shortages—to produce geopolitical results. What accounts for the widely shared instinct to exclude bombing a factory from the realm of geoeconomics, however, is not the fact that bombing is a noneconomic tool; it is rather that questions of military targets belong to a whole different set of social and normative practices around the conduct of war. That is not to say that geoeconomic techniques of statecraft cannot exist in conditions of warfare; of course they can. But the choice to counterfeit an enemy’s currency during wartime, for instance—a clear form of geoeconomic statecraft—stands as an enterprise substantially separate from questions of military targets and war-fighting strategy.

  By this reasoning, economic blockades that rely on aspects of military power arguably pose something of a hybrid case, but they are worth including within the realm of geoeconomics for at least two reasons: such economic blockades can exist in conditions short of a hot military conflict, and, more important, the variable doing the work in this case is the policy of economic denial, not the fact that it is achieved in part through relying on military power.44 Finally, many would place military and humanitarian aid outside the scope of geoeconomics. Certainly both are well-developed fields, populated with experts who do not seem to regard themselves as engaged in a particularly economic technique of statecraft. But it is also the case that, especially where states and governments are concerned, money is fungible—meaning cost savings in one area can help offset expenses in another. This fact argues for including all forms of aid—including military and humanitarian aid—as part of a conceptual understanding of geoeconomics, even while admitting that military and humanitarian aid are among the most well understood, least interesting aspects of geoeconomic instruments; as such, we touch on them only intermittently in the coming chapters.

  Whether a given case falls just inside or outside of geoeconomics, the larger point is that certain cases are fuzzy. They demand greater attention as a result. But the lack of bright-line answers in some instances speaks to a muddle of circumstances, not definition or practice.

  POINT 5

  Geoeconomics is distinct from foreign (or international) economic policy, mercantilism, and liberal economic thought.

  Finally, it is worth distinguishing geoeconomics from foreign economic policy (or international economic policy), mercantilism, and liberal economic thought.45 Benjamin Cohen and Robert Pastor define foreign economic policy as governmental actions intended to influence the international economic environment (as opposed to the geopolitical environment). And while many use the terms interchangeably, Stephen Cohen sees “international economic policy” as distinct from and preferable to “foreign economic policy,” precisely because the former can and should remain beyond the reach of foreign policy makers. By Cohen’s telling, “international economic policy must be viewed as being a separate phenomenon, not a tool for use by either foreign policy or domestic economic policy officials.”46

  Many of the most common and insidious misperceptions about geoeconomics actually stem from a separate set of misunderstandings involving two other economic concepts—namely, a tendency to view mercantilism and liberal economic thought as direct opposites and a corresponding tendency to vie
w geoeconomics as some repurposed form of mercantilism and therefore as somehow inherently in tension with or opposed to liberal economic thought. The tendency to contrast the liberal emphasis on limited state involvement in private markets against the mercantilist emphasis on heavy state intervention in economic life, as if the two occupied opposing ends of some spectrum, “easily leads to portrayal of liberalism as postulating economics and politics as separate, distinct, and autonomous spheres of social life.”47

  History tends to credit Adam Smith with severing the mercantilist link between politics and economics.48 But this amounts to a massive misreading.49 Smith knew well the limits of economic logic, always clear that what was mutually beneficial in economic terms might not be so in political terms. According to him, “the wealth of a neighboring country” might be “dangerous in war and politics” even though “certainly advantageous in trade.”50 Smith saw no contradiction between his views on free trade and his belief that “the great object of the political economy of every country, is to increase the riches and power of that country.”51

  Indeed, Smith’s writings offer little support for a portrait of economic liberals as bent on separating politics and economics and intent on seeing economic rationality as determining political relations. For Smith, “the first duty of the sovereign … [is] that of protecting the society from the violence and invasion of other independent societies.” “Defence is more important than opulence,” he wrote, and “the capricious ambition of kings and ministers has not … been more fatal” than “the impertinent jealousy of merchants and manufacturers.”52

  Of the many mistaken distinctions between mercantilism and liberalism, however, the one that most hinders clear thinking about geoeconomics surfaces around the question of whether “subservience of the economy to the state and its interests” differentiates the two doctrines.53 As Baldwin rightly cautions, that mercantilists viewed extensive state intervention in the economy to be in the national interest and liberals did not does not mean that liberals were unconcerned with state interests. On the contrary, most liberals saw laissez-faire as merely a better means of advancing the interests of the state.54 Even their critics recognized how motivated economic liberals were by matters of war, peace, and state interests. “What did the nineteenth-century free traders … believe that they were accomplishing?” Keynes once remarked.55 “They believed that they were serving not merely the survival of the economically fittest, but the great cause of liberty … and … they believed, finally, that they were the friends and assurers of peace and international concord and economic justice between nations.”56 For economic liberals such as Adam Smith and Norman Angell, laissez-faire was but a form of geoeconomics; they differed from the mercantilists only on the tactics. For both camps, the question was how, not whether, to shape economic policies to serve state interests.57

  Like anything, though, the practical boundaries of geoeconomics tend to be shaped through disagreements—that is, in cases where a state’s economic and geopolitical interests diverge. For early liberal economists such as Jacob Viner, a tendency to assume congruence across economic and political interests meant they seldom found themselves forced to choose between them. For these early liberals—as for many policy makers today—free trade was the surest route to achieving both economic welfare and national security.58 Gilpin’s characterization of mercantilism as “the striving after security by economic means” hardly differentiates it from liberal beliefs that regarded free trade as the surest route to national and international security.59

  Not only did early economic liberals actively take up geopolitical questions, but where liberals did confront divergent economic and political goals, they usually reconciled the conflict by privileging politics over economics. Depression-era historian Edward Mead Earle, a founding father of the field of security studies, spent considerable energy on this question of how economic liberals reconciled their theories with national security interests of the state. For Earle, the “critical question in determining [Smith’s] relationship to the mercantilist school is not whether its fiscal and trade theories were sound or unsound but whether, when necessary, the economic power of the nation should be cultivated and used as an instrument of statecraft. The answer of Adam Smith to this question would clearly be ‘Yes’—that economic power should be so used.”60

  The same is true of Richard Cobden, once hailed as “the towering figure among the free traders and internationalists in the first half of the nineteenth century.”61 But Cobden was also quite comfortable subjugating economics to politics where necessary. He opposed free trade in cases where it threatened to undermine peace, as with loans to foreign governments to purchase arms.62 As World War II British intelligence officer turned Cambridge historian Harry Hinsley once summarized Cobden, “He worked for free trade because he wanted peace, not for peace because he wanted free trade.”63

  In sum, the real divides between mercantilism and liberalism concern how best (not whether) to pursue geoeconomics. “Its fundamental characteristic is simply that economic policy be deliberately formulated so as to promote the foreign policy goals of the state—whatever those may be,” wrote Baldwin.64 Mercantilism thus stands as only one of many forms of geoeconomics. By the same token, to the extent that leaders pursue prescriptions of economic liberalism (minimal state intervention, free trade, etc.) in the belief that these policies serve geopolitical interests, liberalism, too, falls comfortably among the many shades of geoeconomics.65

  CHAPTER TWO

  Geoeconomics and the International System

  Power turns out to depend less on common displays of charisma and strength, and more on unseen manipulations of markets and money.

  —JEREMI SURI, AMERICAN HISTORIAN

  IN 1991, a full two decades before writing his influential essay “GDP Now Matters More than Force,” Leslie Gelb urged the United States to “replace the historic anti-Soviet focus of U.S. Asian policy with a new emphasis on geoeconomics, to forge new economic bonds and use them to resolve political problems and prevent economic disputes from exploding into political confrontations.”1 Reginald Dale, a specialist in European affairs, noted that “with the end of the Cold War and the advent of the global economy, geopolitics and geoeconomics are becoming ever more closely intertwined.”2 Appealing to those who waxed nostalgic for the clarity of the Cold War—mutual assured destruction focused U.S. and Soviet policy makers’ minds—historian Thomas Stewart called upon the United States to “create the geoeconomic equivalent of deterrence: that is, a way to project economic power so as to prevent quarrels, win those the U.S. cannot avoid, and encourage nations to seek prosperity together rather than beggar their neighbors.”3

  Yet even as geoeconomics is perceived as newly important, there remains no common consensus or even discussion as to the motivating factors that might explain it. If geoeconomics has indeed returned to occupy a decisive place in the foreign policies of many states, why?

  Geoeconomics owes its modern resurgence primarily to three factors. The first is that today’s rising powers are increasingly drawn to economic instruments as their primary means of projecting influence and conducting geopolitical combat in the twenty-first century. Compare, for instance, present debates about the rise of Chinese power, dominated as it is by calculations of economic strength, to analogous Cold War debates regarding the Soviet Union. For American policy makers who dealt over the decades with the Soviet challenge, the notion of according great-power status to China, a country lacking a credible blue-water navy and decisively outmatched militarily by the United States, would have seemed baffling.

  Central as China’s rise is to this reemergence of geoeconomics, focusing too narrowly on China risks obscuring what is a larger, more complex phenomenon. Emerging powers of all kinds look to geoeconomic tools as foreign policy instruments of first resort across nearly every conceivable type of aim—from the transactional and immediate (for Qatar, a country with only 250,000 citizens, paying the salaries of rebel fight
ers in Syria and Libya was the surest way to achieve its desired outcomes) to the longer-term and nonspecific (for Mexico and Colombia, curbing the influence of regional heavyweights Brazil and Argentina is best achieved through a new trade grouping, known as the Alliance of the Pacific, which presently excludes Brasilia and Buenos Aires). These countries use geoeconomics in ways that run from positive inducements meant to charm, such as major purchasing decisions or investments timed to coincide with certain diplomatic campaigns, to punitive measures meant to coerce, such as a cyberattack on a hostile state’s banking sector.

  At least among nondemocratic rising powers, tendencies toward certain, often more coercive geoeconomic behaviors may arise out of an inability to achieve other, more preferable geoeconomic alternatives. The fact that these regimes do not have the luxury of convincing their neighbors, almost always wary, of any sort of economic integration premised on mutually advantageous agreement means they must fall back on other strategies. While Moscow or Beijing might ideally prefer to replicate the success of the European Union as a means of coalition building, “relations between authoritarian governments are based on oppression and subordination, not compromise,” as one press report put it.4 President Vladimir Putin’s Eurasian Union project would not have come this far had it not been underwritten by the coercive financial might of the Russian state. By some estimates, support for the Lukashenko regime in Belarus costs Russia between $7 billion and $12 billion annually, while Lukashenko’s periodic threats to withdraw from the Eurasian project are typically met with further Russian economic assistance. President Almazbek Atambayev of Kyrgyzstan has proven a particularly quick study in adapting to Moscow’s geoeconomic methods, demanding a $200 million loan from Moscow in addition to trade and economic preferences; when he did not get all he wanted, Atambayev delayed his country’s entry into the Eurasian Union.5