On geoeconomics

This article examines the idea of geoeconomics, its offensive deployment against Pakistan, and how a defensive response can be organised.

Conceptually, geoeconomics encapsulates one premise and two recommendations. By the late 1980s, when the US had become a global hegemon, American strategists felt that rather than further expanding their military and diplomatic advantage, they should turn to consolidating their considerable but diminishing superiority in the world economy. So, they argued that the US should now (1) employ international economic relations to advance geopolitical ends; and (2) conduct these relations not in cooperative pursuit of mutual advantage (as in plain economics) but as an adversarial, winner-take-all war. This was geoeconomics.

To be clear, the suggestion wasn’t to abandon geopolitics for geoeconomics; rather, that geopolitical ends should be pursued by economic means. So, geoeconomics isn’t about the state pursuing economic instead of political goals. Nor, that economic concerns should drive foreign policy. Nor, that the economy should be the oil for the military machine. Instead, the thought is that economic suasion can also be used, solely or additionally, to achieve geopolitical objectives. America’s current relations with Pakistan—geopolitical disengagement, with economic control through multiple means (FATF, IMF, Arab allies)—are an excellent example of offensive geoeconomics in action.

The term was coined in 1990 by Edward Luttwak, an adviser to US president Reagan (“From Geopolitics to Geo-Economics,” The National Interest, Summer). “Except for those areas of those unfortunate parts of the world where armed confrontations or civil strife persist,” the article began (thus, specifically excluding geoeconomics for places like Pakistan), “the waning of the Cold War is steadily reducing the importance of military power in world affairs.” Consequently, the new battlefield should be economic relations, which now should be conducted like war. “This neologism [geoeconomics] is the best term I can think of to describe the admixture of the logic of conflict with the methods of commerce.”

By “the logic of conflict,” Luttwak was highlighting the crucial difference between ‘strategic’ and ‘mechanical’ engagements (elaborated in his earlier book, Strategy: The Logic of War and Peace, 1978). “The essential difference,” he had quoted Clausewitz, “is that war is not the exercise of the will directed at inanimate matter, as is the case with the mechanical arts… In war, the will is directed at an animate object that reacts. It must be obvious that the intellectual codification used in the arts and sciences is inappropriate to such an activity.”

The engineer building a dam can dig a dry construction pit besides the river, safe in the knowledge that the river will not change its course to foil his efforts. Not so, in war, where seizing an unoccupied enemy post is sure to provoke an enemy reaction. Consequently, the ordinary logic of science, engineering or economics is worthless in situations of conflict, which have a paradoxical logic of their own. In this, the unexpected, seemingly irrational course of action—the longer, more difficult route to the enemy headquarters, rather than the direct one—becomes the rational road to success by surprise, aided by deception, disinformation, and psychological operations.

But “Not all states are equally inclined or equally capable of participating in geo-economic struggles.” Luttwak had reiterated in 1999, “Just as there is no successful warfare without effective armed forces, so there can be no successful geoeconomics action without ambitious industrialists and effective economic bureaucrats.” Specifically, “In the Balkans, the Persian Gulf and other unfortunate parts of the world, old-fashioned territorial struggles continue as they did throughout history. In those backward zones of violence actual or threatened, military strength remains as important as it ever was.”

Consequently, old-fashioned geopolitics—diplomacy, military strength, and combat readiness—must continue to be the core of Pakistan’s non-nuclear security strategy. But this has not been and will not be effective against the ongoing economic war on Pakistan. So, instead of adopting the available blueprint of offensive geoeconomics in an imitative symmetric response, we must design and put in practice an original, asymmetric, defensive geoeconomics for Pakistan. This won’t be easy. For, this is a large, uncharted territory in which the first step, to quote Sun Tzu, is to: “Recognise the enemy,” and “Know his purpose.”

Nothing is so tragic as unrequited love. The greatest impediment to our national security is our visceral, abiding attachment to the English-speaking race, which was always unreciprocated and turned dangerously hostile some decades ago. “Perhaps the Pakistanis never understood,” US president Kennedy had commented in a cabinet meeting, “that our alliance with them was aimed at the communists, not at the Indians.” Or, as a Biden administration official recently put it in crystal clear terms: “We don’t see ourselves building a broad relationship with Pakistan, and we have no interest in returning to the days of

hyphenated India-Pakistan. That’s not where we are. That’s not where we’re going to be.” This is a tectonic change, which we ignore at our existential peril.

What is their purpose? For some years, the Americans have seen Afghanistan-Pakistan not as two countries but as one theatre of operations. Their global aim is to gain pre-emptive control over the remaining (Pacific and Indian) oceans, to counter the Sino-Soviet effort to consolidate power by integrating the Eurasian (or Afro-Eurasian) landmass. In an extended Carter Doctrine, the theatre objective is to hold Sino-Soviet power to north of the Afghanistan-Pakistan border by offensive geoeconomics and deny them access to the coastline by military force, if necessary.

Like force (firepower) in geopolitics, capital (financial and physical) is the proximate determinant of power in geoeconomics. Offensive geoeconomics aims at denying us access to foreign markets and seizing control over our markets (especially, capital). The battle for the State Bank of Pakistan (see: ‘Gaya’ Pakistan?, BR, 25 Mar 2021) is a battle for control of our money and capital markets (which, if we lose, would make any future defence a near impossibility). Apart from resisting this, the immediate task of our defence is to proactively renegotiate our debts, rather than passively wait for our lenders’ proposals. The longer-term task is to transform and expand the economy into geopolitically significant sectors that also yield tax revenues and foreign exchange receipts and savings, by reviving public and private investment.

In sum, then, national security today requires a significant, cost-effective increase in conventional military strength, by a total review of military doctrine (deeply held beliefs about the nature of war), with enhanced naval strength, increased attention to intelligence, and an end to divisively managed colonial governance. Equally, despite weak governance and crooked markets, it requires a reversal in economic doctrine (deeply held beliefs about economic structure and dynamics) toward greater control and intervention by government over markets; as befits a developmental state (like Germany, Japan, South Korea, China), rather than a neoliberal (conceptually, rules-based free-market) one, foisted upon us since the 1990s by our lenders.

This is an institutional, all-of-government task, to be undertaken jointly by the highest leadership. In our present predicament, to amend Clemenceau, “Geoeconomics is too important to be left to economists.”

(The writer is a retired economist, who has served as Senior Economist with the World Bank and as Chief Economist of the government of Pakistan)

Copyright Business Recorder, 2022