Even though countering the threat of Communism was the central impetus behind the European Recovery Program, Marshall mentioned neither Communism nor the Soviet Union in his remarks. In a secret memorandum prepared the previous month, George Kennan had advised him to counter a prevalent impression among Americans that “the effort to restore sound economic conditions is … not something we would be interested in doing if there were no Communist menace.”40 Kennan’s careful efforts to hide the geoeconomic underpinnings of the new U.S. policy—even at a time that was essentially the high point of geoeconomic thinking in U.S. foreign policy—illuminates how rarely geoeconomic motives are plainly stated (and why, consequently, conceptual frameworks for geoeconomics cannot reasonably be expected to rely on states explicitly acknowledging when geoeconomic factors are indeed driving policy).
All the same, Truman administration officials—including Kennan—certainly understood the Marshall Plan’s geoeconomic objectives. In his secret memo, Kennan argued that “American effort in aid to Europe” should attempt to redress “the economic maladjustment which makes European society vulnerable to exploitation by any and all totalitarian movements and which Russian communism is now exploiting.”41 That October, Undersecretary of State Robert Lovett warned that Western European countries “would go to the Soviet [Union]” if the Marshall Plan was not implemented.42 On August 22, 1949, Truman observed that “the military assistance program and the European recovery program are part and parcel of the same policy. There is the closest relationship between economic recovery and military defense.… [E]conomic recovery will lag if the haunting fear of military aggression is widespread.”43 Kennan argued that U.S. policy should not aim to develop Western European satellites but rather to ensure that “elements of independent power are developed on the Eurasian land mass as rapidly as possible, in order to take off our shoulders some of the burden of ‘bi-polarity.’ To my mind, the chief beauty of the Marshall Plan is that it had outstandingly this effect.”44
Around the same time, U.S. and European allies agreed on a joint embargo against the Soviet Union. Enacted through a coordinating committee known as COCOM, the embargo initially prohibited the export to the Soviet Union of about 130 items deemed strategic. But a constellation of factors—the Chinese Communist victory over Chiang Kai-shek, the successful test of the first Soviet atomic weapon in 1949, the shift in Washington toward a more assertive strategy of “containment” (building largely from Kennan’s ideas), and the outbreak of war on the Korean Peninsula in June 1950—would combine to push COCOM to expand its embargo. Overcoming European reluctance, the United States succeeded in extending the COCOM embargo to China and in expanding its scope to include not only certain strategic items, but also those with significant economic potential (“selected items in key industrial areas contributing substantially to war potential”45).
Whatever assumptions concerning the Cold War had emerged by January 1953, many of them were gone by July. In January, President Eisenhower succeeded Truman, the first U.S. presidential transition since the onset of the Cold War; in March, Stalin died; and in July, the Korean War ended with the establishment of the demilitarized zone. Faced with a much different strategic landscape, U.S. foreign policy considerations—while still the sole driver of East-West trade policy—soon began to push things in the opposite direction. President Eisenhower came into office committed to the idea of achieving relative gains through East-West trade, a prospect that would require him to liberalize aspects of the embargo. Within eight months, Eisenhower established the Commission on Foreign Economic Policy on precisely these grounds: “The national interest in the field of foreign economic policy is clear. It is to obtain … the highest possible level of trade and the most efficient use of capital and resources. That this would also strengthen our military allies adds urgency. Their strength is of critical importance to the security of our country.”46
Eisenhower prevailed. Between 1953 and 1954, COCOM reduced the number of items on its Soviet Union embargo list by 50 percent. But the China embargo remained unchanged—partly out of a desire to keep maximum pressure on China during the Korean armistice, and partly because of a compromise to assuage opponents of Eisenhower’s push for expanded East-West trade.
European allies continued to agitate for further liberalization in the Soviet embargo. There was by that time widespread acknowledgment that the embargo was neither restricting growth in the Soviet Union nor hindering its war-fighting potential (a point punctuated by the successful launch of Sputnik I in October 1957). Strikingly, while European members of COCOM seized on this lack of economic impact in their arguments for further liberalization of the Soviet embargo, it did not seem to much enter U.S. discussions of whether to liberalize; if anything, rationales simply shifted to justify the embargo on moral and symbolic grounds.47 In 1958, on the heels of significant Allied pressure, the COCOM Soviet embargo list was reduced further, bringing the total down from the 282 items agreed upon in 1954 to 155. One salient feature of the debates over liberalizing the COCOM embargoes was the singular focus on security and foreign policy considerations—disagreements turned only on how best to achieve these aims, not whether these geoeconomic aims ought to be considered against other concerns. There was, in particular, no debate over a lack of capitalist, free-market principles in U.S. policy toward China and the Soviet Union.
When President Kennedy assumed office in 1961, he brought his own geoeconomic reasons for supporting COCOM liberalizations. For Kennedy, further easing the embargoes made sense not because they were having no real economic impact but because he thought it a potential means of eliciting quid pro quos from the Soviets. The strategy, known as “flexible response,” was coined by State Department policy planning director Walt Rostow (also, incidentally, a top-notch economist and one of the few economists to hold that post since).48 “Flexible response” did take hold in NATO regarding the nuclear defense of Europe, although not to any effect on the economic front. Its emphasis on a quid pro quo presented a first-mover problem, making the plan reliant on some showing of good behavior from Moscow that never came (or, at least, was preempted by the Cuban missile crisis in 1962).
Around this time the importance of the rest of the world came into geoeconomic focus for U.S. Cold War policy makers. In 1960, a task force commissioned by President-elect Kennedy argued for liberalization in East-West trade, and assistance to developing nations as a means of keeping up with the Soviet Union (the task force’s recommendations became known as the Ball Report, named for committee chairman George Ball).49 Compared to 1950, when trading capacity in the Soviet bloc countries was negligible, by 1960, Ball argued, these countries had developed “the ability to export surpluses, which they are now beginning to use in furthering their external commercial and political objectives.”50
While strict economic logic might welcome a pickup in trade between the Soviet Union and the non-Communist world as a heartening trend, this was not how Washington saw matters at the time. Between its commitment to liberal economic principles and fears over expanding Soviet influence, the U.S. government viewed Communist trade penetration of these markets with real concern, though the feeling was more one of reluctant acknowledgment than outright alarm: “if it had to happen, then the U.S. would try to ensure that the USSR abided, as far as possible, by free market rules.”51 Here again, the Ball Report, like earlier discussions of East-West trade, is striking for its sole focus on U.S. foreign policy aims (fidelity to principles of capitalism and free markets does not enter as an animating concern) and for its matter-of-fact subordination of economic instruments firmly in the service of U.S. geopolitical objectives—in short, a geoeconomic approach.
America’s geoeconomic reflexes continued in ample force under President Johnson. In 1964, for instance, the United States seized upon the split between Moscow and Bucharest by offering Gheorghe Gheorghiu-Dej, president of the Romanian State Council, a package of commercial incentives and normalizing trade relations.52 On the
matter of East-West trade, the State Department by 1964 advocated loosening the embargo on the forthrightly geoeconomic grounds that “the amount of the trade, whatever it is, be substantial enough to make it available as a tool of United States foreign policy in advancement of United States objectives towards the Communist countries.”53
Sensing growing U.S. public support for expanded East-West trade, President Johnson pledged in his 1965 State of the Union address to “explore ways to expand peaceful trade with [Eastern European] countries and the Soviet Union,” establishing a task force on the issue. The deliberations and conclusions of the task force (known as the Miller Committee, named for chairman J. Irwin Miller, of the Cummins Engine Company) further underscored a basic comfort with employing trade policy as an effective and appropriate tool to advance U.S. foreign policy; even more striking is that this subordination of economics to geopolitical aims was seen as perfectly in keeping with the committee’s explicit embrace of free-market capitalism.54 At least for the historical moment that encompassed the Miller Committee and its work, geoeconomics and liberal, free-market economic policies coexisted quite comfortably.
Finally, even as senior U.S. policy makers trained much of their attention toward Europe and the Soviet Union during these early post–World War II decades, Washington was also greatly preoccupied with the economic vitality and geopolitical stability of South Korea and Japan. After fighting a war to defend South Korea, the U.S. policy toward that country was guided by a strong interest in avoiding its political or economic collapse and the possibility of a Communist revolution. Thus the U.S. geoeconomic chose to pour aid into South Korea—aid shifted from grants to concessional loans to Ex-Im Bank loans.55 Dynamics were different in Japan, however, as Tokyo resisted repeated U.S. efforts to get Japan to open its markets more to foreign goods and to change other economic practices seen as adverse to U.S. economic interests. But even here, U.S. geopolitical preoccupations, centered as they were on the Soviet Union, led Washington to restrain itself from a full-fledged trade war with Japan.
War in Vietnam, the Defeat of Communism, the Rise of Terrorism, and the Steady Decline of Geoeconomics
The earliest origins of America’s current preoccupation with political military measures over geoeconomic instruments trace back to the Cold War. Even as U.S. geoeconomic statecraft was at its prime, some of the country’s most important Cold War policies were unintentionally helping to cultivate a bias toward military and political military statecraft. Containment and détente offer two such examples. In his seminal 1946 “Long Telegram” from Moscow and the article he published under the pseudonym “X” in Foreign Affairs in 1947, George Kennan concluded that Soviet foreign policy would reflect “persistent pressure toward the disruption and weakening of all rival influence and rival power.” As such, he advised the United States to adopt a “policy of firm containment, designed to confront the Russians with unalterable counterforce at every point where they show signs of encroaching upon the interest of a peaceful and stable world.”56
During this period, it was far from clear that the doctrine of containment was to be construed primarily in terms of military force. To Kennan’s dismay, it slowly became so, but this narrowing process was gradual—elaborated largely through various refinements to containment. It was, for example, another historic document, known as NSC-68 (often seen as a corollary to Kennan’s earlier containment concept), in which State Department policy planning director Paul Nitze and his colleagues in 1950 assessed that the United States would have to “possess superior overall power in ourselves or in dependable combination with other likeminded nations” to confront the Soviet Union. Without “superior aggregate military strength, in being and readily mobilizable,” they explained, “a policy of ‘containment’ … is no more than a policy of bluff.” NSC-68 went on to warn that America’s “military strength is becoming dangerously inadequate.”57 It was clear that containment was increasingly interpreted and prosecuted as an overwhelmingly military exercise, embodied in NATO. At the same time, the Soviet Union’s minimalist international economic activity meant that although geoeconomic levers were routinely deployed throughout much of the Cold War, they were understood in Washington as having low overall impact on Moscow’s policies or the cohesion of the Warsaw Pact nations.
But this is not to say that American geoeconomic efforts did not at times cause a stir in the Soviet Union. In the early 1960s, the supposedly contradictory behavior of the United States—its deviation from laissez-faire principles of capitalism in the name of national security—sparked an angry outburst from Soviet leader Nikita Khrushchev. At the time the Soviet Union was hyper-focused on developing its oil industry, partly for strategic reasons but also in the hopes of exporting oil and gas to the West in exchange for hard currency, which Moscow needed in order to purchase Western technology. Unfortunately, one of the production pitfalls involved a certain kind of wide-diameter steel pipes (made only in the West) needed to move oil from the wellhead to refineries and on to the market.58 Rather than obliging the Soviets and selling large quantities of piping, the United States orchestrated concerted opposition through COCOM, through NATO, and via bilateral avenues with countries such as Japan.59 Exasperated, Khrushchev reportedly burst out to his advisors, “Who the hell do these capitalists think they are, to believe that they can go around and not act like capitalists?”60
Whatever precipitating role earlier Cold War policies such as containment and its refinements might have played in the U.S. prioritization of military and diplomatic approaches against the Soviets, it was not until the Johnson and Nixon years that geoeconomics noticeably began to wane. This is attributable in large part to Vietnam; in an era of nuclear weapons, it was perhaps inevitable that the outbreak of armed conflict and U.S. troops on the ground in Southeast Asia would shift policy makers’ attention in the direction of military use of force.61
But there was more to it. During the mid-1960s, a domestic commercial constituency for East-West trade began to emerge. By the December 1969 passage of the East-West trade bill, it was clear that this was not the legislation that Johnson or the Miller Committee had hoped for and proposed back in 1965. Strikingly, the 1969 bill was framed in far more liberal terms than either Nixon or Kissinger wanted; for the first time in the Cold War, Congress led the administration in promoting liberalization of East-West trade. In its reporting on export controls for the new act, the Senate Banking Committee expressly noted that circumstances had changed since the Export Control Act had been enacted; trying to control Soviet economic growth was now untenable, and as a result, the existing Export Control Act served only to disadvantage U.S. companies.62 (It is noteworthy that exactly the same argument has been reprised by those who oppose economic sanctions against Russia regarding its behavior in Ukraine). Mere economic significance to the Soviet Union would no longer serve as a justification for export control.
Nixon himself seemed to have little affection for geoeconomics. Like Eisenhower, Nixon was skeptical of trade as a tool to spur political liberalization in the Soviet Union (as he once explained the relationship, “I do not accept the philosophy that increased trade results in improved political relations. In fact, just the converse is true. Better political relations lead to improved trade”).63 At the same time, though, it was not as if Nixon had alternative geoeconomic-minded strategies, either on the issue of East-West trade specifically or as part of his Cold War efforts more broadly. On the contrary, Nixon and his advisors viewed détente as a largely geopolitical exercise, with very little geoeconomic content.64 Economic issues took a decided backseat in Nixon’s foreign policy. For earlier administrations more inclined toward geoeconomics—those of Truman, Kennedy, and Eisenhower—the steady disintegration of the Bretton Woods system of exchange rates anchored by the U.S. dollar would have marked a “primary threat to United States interests and the health of the anti-Soviet coalition in 1969—a threat far greater than anything Ho Chi Minh could ever assemble in the far-off jungles of
Indochina.”65 For Nixon, though, worrying about monetary coordination was hardly the stuff of first-order foreign policy. “I don’t give a shit about the value of the lira!” as Nixon once expostulated to his staff.66
Nixon was not alone. Slowly but unmistakably, the mood in Washington had begun to turn away from geoeconomics. As political scientist I. M. Destler summarized it, the change in temperament progressed steadily, showing itself in the early 1960s, when “congressional leaders complained that the State Department neither understood nor represented U.S. economic interests.”67 In 1962, Congress forced JFK to establish a trade coordination office in the White House (rather than the state department) as a precondition for launching a major new trade liberalization effort. But a more palpable shift came in 1971, when Nixon ended the dollar’s convertibility into gold and pushed allies into difficult U.S. economic interests.68 Indeed, with his decision on the gold window, Nixon demonstrated his unwillingness to subordinate economic interests to geopolitical aims. (Kissinger was absent from the room when Nixon made the decision and informed the European allies—a slight that Kissinger would later recount as among the most difficult of all his years in government.)69
Similarly, when U.S. farmers, eager to turn their crop into cash, won the hotly debated question of whether to hold grain sales to the Soviets hostage to political concessions, U.S. foreign policy makers were put on notice. For Kissinger, who argued that “the U.S. grain crop was a tremendous asset,” “merely pouring out grain for gold” was “very painful” when it “could have bought a year or so of Soviet good behavior.”70 The episode, which became known as the “Great Grain Robbery of 1972,” made clear that no longer could policy makers expect geoeconomic approaches to be as readily available to them. Gone were the days when economic instruments could be exercised purely for geopolitical advantage.71
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