The Geopolitical Conquest of Economics
Although economics and geopolitics have never been completely separate domains, international economic relations were shaped for 70 years by their own rules. But the rise of China and its growing rivalry with the United States have brought this era to an end.
PARIS – From the Huawei affair to the AUKUS spat and beyond, a new reality is shaking up the global economy: the takeover, usually hostile, of international economics by geopolitics. This process is probably only just beginning, and the challenge now is learning how to live with it.
Of course, economics and geopolitics have never been completely separate domains. The post-World War II liberal economic order was designed by economists, but on the basis of a master plan conceived by foreign-policy strategists. Postwar US policymakers knew what they wanted: what a 1950 National Security Council report called a “world environment in which the American system can survive and flourish.” From their perspective, the free world’s prosperity was the (ultimately successful) conduit to containing and possibly defeating Soviet communism, and the liberal order was the conduit to that prosperity.
But although the ultimate objective was geopolitical, international economic relations were shaped for 70 years by their own rules. On occasion, concrete decisions were skewed by geopolitics: for the United States, providing International Monetary Fund financial assistance to Mexico was never equivalent to providing it to Indonesia. The principles governing trade or exchange-rate policy, however, were strictly economic.