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Geoeconomics (sometimes geo-economics) is the study of the spatial, temporal, and political aspects of economies and resources. Although there is no widely accepted singular definition, the distinction of geoeconomics separately from
geopolitics Geopolitics (from Greek γῆ ''gê'' "earth, land" and πολιτική ''politikḗ'' "politics") is the study of the effects of Earth's geography (human and physical) on politics and international relations. While geopolitics usually refers to ...
is often attributed to
Edward Luttwak Edward Nicolae Luttwak (born 4 November 1942) is an American author known for his works on grand strategy, military strategy, geoeconomics, military history, and international relations. He is best known for being the author of '' Coup d'Ét ...
, an American strategist and military consultant, and Pascal Lorot, a French economist and political scientist. The Singapore Economic Forum has emphasized the increasingly dynamic, complex aspects of leaders' decisions in the “Age of Geoeconomics”. Policy makers and CEOs alike have to "assess constantly techno-economic returns and legal-political risks on a combined geoeconomic plane." Azerbaijani economist
Vusal Gasimli Vusal Afras ogly Gasimli ( az, Vüsal Əfras oğlu Qasımlı) is an Azerbaijani economist serving as the Executive director of the Center for Economic Reforms Analysis and Communication of the Republic of Azerbaijan (since 2016), was the Head of ...
defines geo-economics as the study of the interrelations of economics, geography and politics in the "infinite cone" rising from the center of the earth to outer space (including the economic analysis of planetary resources). In geopolitics, a common approach involves three levels of analysis. Geoeconomics can employ this three layers approach as well. There is a policy layer, as in international political economy; an integration layer, as in
economic geography Economic geography is the subfield of human geography which studies economic activity and factors affecting them. It can also be considered a subfield or method in economics. There are four branches of economic geography. There is, primary sect ...
and
industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perf ...
; and a transaction layer, as in the transactions exemplified in
financial economics Financial economics, also known as finance, is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on ''both sides'' of a trade". William F. Sharpe"Financia ...
.


"The logic of conflict in the grammar of commerce"

Luttwak argues that the same logic that underlies military conflict also pertains to international commerce: * States seek to collect as much in revenue as their fiscal codes prescribe and are not content to let other states tax commercial activity in the former's purview. This is a zero-sum situation. * States predominantly regulate economic activity to maximize outcomes within their own borders, rather than for a disinterested transnational purpose, even when the outcome is suboptimal for other states. The logic of state regulation then conforms, in part, to logic of conflict. * States and blocs of states strive to restrict their payouts and services to their own residents. Moreover, states design their infrastructure projects to optimize domestic utility, regardless of how other states are affected, as opposed to the transnational utility. * States or blocs of states promote technological innovation to maximize benefits within their own boundaries, rather than for the sake of innovation itself.


Geoeconomics vs. geopolitics

There is not yet an authoritative definition of geoeconomics that is clearly distinct from geopolitics. The challenge of separating geopolitics and geoeconomics into separate spheres is due to their interdependence: interactions among nation-states as indivisible sovereign units exercising political power, and the predominance of neoclassical economics' "logic of commerce" that ostensibly separates market dynamics from political power. The following descriptions of geoeconomics indicate the challenge of distinguishing it from the field of geopolitics: * Chatham House: "the use of economic tools to advance geopolitical objectives." * Pippa Malmgren for the CFA Institute Research Foundation: "One can try to refine the definition of geopolitics by exploring the terms geo-economics, geostrategic, and other such derivations, but in the end, geopolitics exists in reality even if it is not well dealt with by theory." * Merriam-Webster's Dictionary: "1. the combination of economic and geographic factors relating to international trade and 2. a governmental policy guided by geoeconomics" * Richard Nixon: "Still others contend that, as the cold war weaned, the importance of economic power and ‘geo-economics’ has surpassed military power and traditional geopolitics. America, they conclude, must beat its swords not into plowshares, but into microchips." * Robert D. Blackwill and Jennifer Harris in ''War By Other Means: Geoeconomics and Statecraft'': "The use of economic instruments to promote and defend national interests, and to produce beneficial geopolitical results; and the effects of other nations’ economic actions on a country's geopolitical goals." Moreover, the levels of analysis in geoeconomics (policy, integration, and transaction) are similarly entangled with national policy, which can range from tax incentives for particular industries to anti-money laundering laws or sanctions that constrain particular cross-border financial transactions.


Mercantilism

Geo-economics is not to be confused with mercantilism or neo-mercantilism. Under mercantilism, the goal of which was to maximize national gold stocks, when commercial quarrels evolved into political quarrels, which could then lead to military conflicts. Therefore, mercantilist competition was subordinate to military competition, as the former modality was governed by the ever-present possibility that the ‘loser’ in a commercial quarrel could then challenge the outcome militarily. For example:
"Spain might decree that all trade to and from its American colonies could only travel in Spanish bottoms through Spanish ports, but British and Dutch armed merchantmen could still convey profitable cargoes to disloyal colonists in defiance of Spanish sloops; and, with war declared, privateers could seize outright the even more profitable cargoes bound for Spain. Likewise, the Dutch sent their frigates into the Thames to reply to the mercantilist legislation of the British Parliament that prohibited their cabotage, just as much earlier the Portuguese had sunk Arab ships with which they could not compete in the India trade."
In the new era of geo-economics, however, there is no superior modality: Both the causes and the instruments of conflict can be economic. When commercial disagreements do lead to international political clashes, the disputes must be resolved with the weapons of commerce.


The "weapons" of geoeconomics

States engage in geo-economic competition through both through assisting or directing domestic private entities, or through direct action opposing foreign commercial interests: * States assist private entities through supporting high-risk research and development, initiating overseas market-penetrating investments, and through production over-investment for market-share forcing. * More directly, states impose taxes and quotas on foreign products, bolster regulatory or covert impediments to imports, engage in discounted export financing, initiate national technology programs, and collect economic and technical intelligence. According to Luttwak, offensive weapons are more important in geo-economics, as they are in war. Moreover, state-sponsored research and development is the most important of these weapons.
"Just as in war the artillery conquers territory by fire, which the infantry can then occupy, the aim here is to conquer industries of the future by achieving technological superiority."
The "infantry" in this analogy corresponds to commercial production, which can also be supported by the state through various forms of subsidies. Yet another geo-economic weapon is predatory finance. If operation subsidies are insufficient to allow domestic exporters to overcome strong competitors, states can offer loans at below-market interest rates. The United States’ Export-Import, for example, provides loan guarantees to finance exports, and equivalent institutions exist across all major industrial countries.
"Thus foreigners routinely pay lower interest rates than local borrowers, whose taxes pay for the very concessions that foreigners receive. That already amounts to hunting for exports with low-interest ammunition, but the accusation of predatory finance is reserved for cases where interest rates are suddenly reduced in the course of a fought-over sale. Naturally, the chief trading states have promised to each other that they will do no such thing. Naturally, they frequently break that promise."


"Weaponized interdependence"

"Weaponized interdependence" is a term defined by
Henry Farrell Henry Farrell (September 27, 1920 – March 29, 2006) was an American novelist and screenwriter, best known as the author of the renowned gothic horror story '' What Ever Happened to Baby Jane?'', which was made into a film starring Bette ...
and
Abraham L. Newman Abraham L. Newman (born 1973) is an American political scientist and professor in the Edmund A. Walsh School of Foreign Service and Government Department at Georgetown University and Director of the Mortara Center for International Studies. His r ...
. Farrell and Newman do not address geoeconomics directly, however, their article addresses core factors for how power is exercised in the
framework A framework is a generic term commonly referring to an essential supporting structure which other things are built on top of. Framework may refer to: Computing * Application framework, used to implement the structure of an application for an op ...
of geoeconomics:
"Specifically, we show how the
topography Topography is the study of the forms and features of land surfaces. The topography of an area may refer to the land forms and features themselves, or a description or depiction in maps. Topography is a field of geoscience and planetary sc ...
of the economic networks of interdependence intersects with domestic institutions and norms to shape coercive authority. Our account places networks such as financial communications,
supply chain In commerce, a supply chain is a network of facilities that procure raw materials, transform them into intermediate goods and then final products to customers through a distribution system. It refers to the network of organizations, people, activ ...
s, and the
internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, p ...
, which have been largely neglected by
international relations International relations (IR), sometimes referred to as international studies and international affairs, is the scientific study of interactions between sovereign states. In a broader sense, it concerns all activities between states—such ...
scholars, at the heart of a compelling new understanding of
globalization Globalization, or globalisation (Commonwealth English; see spelling differences), is the process of interaction and integration among people, companies, and governments worldwide. The term ''globalization'' first appeared in the early 20t ...
and power."
The framework used by Farrell and Newman is based on
network theory Network theory is the study of graphs as a representation of either symmetric relations or asymmetric relations between discrete objects. In computer science and network science, network theory is a part of graph theory: a network can be de ...
, and frames the structure of
power Power most often refers to: * Power (physics), meaning "rate of doing work" ** Engine power, the power put out by an engine ** Electric power * Power (social and political), the ability to influence people or events ** Abusive power Power may a ...
as a network of asymmetric interrelationships that enable central actors to "weaponized the structural advantages for coercive ends." States which obtain a sufficient structural advantage will be able to exercise either or both a "panopticon effect" and a "chokepoint effect". The panopticon effect is based upon
Jeremy Bentham Jeremy Bentham (; 15 February 1748 ld Style and New Style dates, O.S. 4 February 1747– 6 June 1832) was an English philosopher, jurist, and social reformer regarded as the founder of modern utilitarianism. Bentham defined as the "fundam ...
's
Panopticon The panopticon is a type of institutional building and a system of control designed by the English philosopher and social theorist Jeremy Bentham in the 18th century. The concept of the design is to allow all prisoners of an institution to be o ...
, which enables a few central central actors to observe the activities of others due to the information access afforded by the network structure. The chokepoint effect is the ability of states with an advantageous position to limit or penalize the use of key information nodes (sometimes referred as " hubs") by others.


"The laws of geo-economic gravity"

M. Nicolas J. Firzli of the Singapore Economic Forum has argued that "adhering to the laws of geo-economic gravity" including the need for financial self-sufficiency and the existence of advanced, diversified transportation infrastructure, are now essential to ensure the effective sovereignty of a state: "the government of Qatar is now paying an incommensurate price for having thought it could defy forever the laws of geo-economic gravity." From that perspective, investment attractiveness and the capacity to project soft power across considerable distance as China has done through its Belt and Road Initiative are also viewed as a key determinants of geo-economic strength. Here, large private sector asset owners such as pension funds are expected to play an increasingly important part, alongside US and Chinese state actors:


See also

*
Economic geography Economic geography is the subfield of human geography which studies economic activity and factors affecting them. It can also be considered a subfield or method in economics. There are four branches of economic geography. There is, primary sect ...
* International political economy *
Industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perf ...
* Geopolitical ontology *
Financial economics Financial economics, also known as finance, is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on ''both sides'' of a trade". William F. Sharpe"Financia ...
*
Geostrategy Geostrategy, a subfield of geopolitics, is a type of foreign policy guided principally by geographical factors as they inform, constrain, or affect political and military planning. As with all strategies, geostrategy is concerned with matching m ...
*
International relations International relations (IR), sometimes referred to as international studies and international affairs, is the scientific study of interactions between sovereign states. In a broader sense, it concerns all activities between states—such ...


Further reading

*Luttwak, Edward N. (1999).
Theory and Practice of Geo-Economics
from ''Turbo-Capitalism: Winners and Losers in the Global Economy''. New York: HarperCollins Publishers. * Solberg Søilen, Klaus (2012).
Geoeconomics
'. Bookboon, London. *Ankerl, Guy (2000). '' Coexisting Contemporary Civilizations: Arabo-Muslim, Bharati, Chinese, and Western.'' INUPress, Geneva. *Gasimli, Vusal (2015)
''Geo-Economics''
Anadolu University, Turkey, 207 p. *Chohan, Usman W. (2015).
Geostrategic Location and the Economic Center of Gravity of the World
'. McGill University, Canada. *Blackwill, Robert D., Harris, Jennifer M. ''War by Other Means: Geoeconomics and Statecraft''. Harvard University Press. Cambridge, MA. *Munoz, J. Mark (2017). ''Advances in Geoeconomics''. Routledge : NY.


References

{{Reflist Geopolitics Interdisciplinary subfields of economics International relations