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OpEdNews Op Eds    H2'ed 8/6/21

On Geoeconomics, International Law, and Peace

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GeoEconomics and the Emerging World Order with Joseph E. Stiglitz Held on August 19, 2020
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Economics is a discipline usually discussed by people who are economists and by certain actors in the political sector.

Diplomacy, international law, peace, and security are discussed in international relations departments and by certain political actors. However, much of the time there's little effort given to putting all these things together, as stated by writer Michael Lind in his story "The Return of Geoeconomics."

The rise of the People's Republic of China has forced our country to change its thinking. Lind recommends foreign policy realists, a school for foreign policy that views states as entities that work for their own self-interest, and economists must team together to contribute to future challenges. Lind said we'll have a revival of what's called geoeconomics.

The central idea of the realist school of foreign policy is "the security dilemma." In a world defined by nothing but anarchy, each state is responsible for its own defense. The problem is that militaries can be used for offense and defense. If one country arms itself, the second country can never be certain the other country won't use its military for offense. So, the second country arms itself which alarms the first country. This sets off an arms race, making the international system less secure.

When countries monitor each other, they must look at more than just armies and navies. They must also look at their adversaries' industrial capacity, as factories can be used to make weapons. Also, individual states must look at the entire economy of a rival state - energy, telecommunications, resources, workforce, and the financial system. In the geopolitical struggles of the past, whole economies were mobilized for this or that state. In his "Report of Manufactures," Alexander Hamilton, the United States' first secretary of the treasury, thought we must be independent of other countries for essentials, military or not. He scorned Thomas Jefferson's views that America should be an agrarian country and wanted to protect our industrial base from other European powers.

Economics in some sectors are defined by increasing returns to scale, despite what free market economists say. An artisan is unlikely to make as many automobiles as an efficient factory due to economies of scale. This makes capital intensive firms important to the individual nation-state and city state. In theory, the world's goods could be scattered around the world with China making iPhones, Europe's Airbus making airplanes, Japan could make all the automobiles, and South Korea could make all the ships. Those who are traditional economists will see nothing wrong with this, as economists sometimes see this is just a matter of economic efficiency and ignore that national economy as a facet of the nation state or city state. Economists often think if one country is more efficient at making this or that, then it should make this or that.

The real problem, not addressed by academic economists so prevalent in our country since the 1970's, is when industries are in countries that might be geopolitical rivals. Despite enthusiasm for the concept in many circles, free trade has been an aberration throughout history and not the norm. Economist Adam Smith, who was from the United Kingdom, promoted it in "The Wealth of Nations." However, the U.K. only practiced free trade after it became the dominant player in several industries, being protectionist before that. Smith served as an advocate for a worldview that would have kept the U.S. and other parts of the world in a subservient position, supplying raw materials for British factories. This would have been fine with Thomas Jefferson and the slave-owning plantation oligarchs in the South who sent cotton to British factories. Hamilton and German immigrant Fredrich List represent a rival school called national developmentalism which holds that economies are an outgrowth of the nation state. The world experienced a period of free trade in the mid-1800's and another in the mid-1900 during the Great Depression and after World War II when the U.S. started to preach free trade. We still preach it this today. Keep in mind, our country's industrial sector was not destroyed by World War II like other countries.

Our policy since the collapse of the Soviet Union has been to engage in free trade with many countries while continuing to keep a network of military bases across the world. We've let consumers and business build up the power of our rivals like China. Providing security for this arrangement is very expensive!

The corporate sector, or at least sections of it, have reaped the benefits of free trade. A high technology company like Apple makes cell phones in China (with cheaper inputs than in the U.S.) and sells those same phones around the world in the large market of China, Wall Street has access for foreign stock markets, agribusiness wants to sell food products around the world, and a retailer like Walmart imports cheap Chinese goods for sale, as stated by Lind. President Donald Trump moved away from our free trade strategy by engaging in a clumsy attempt to fight a trade war against both China and our allies. Our country needs something more sophisticated than this.

President Barack Obama tried another strategy in creating the Trans-Pacific Partnership, an Asian trading block designed to counter the power of China. Another option would be to incorporate Europe and the United States into a trading block, as stated by Lind. This would not work because Europe can't decide if China is a rival or a source of profit for European companies.

Our country experienced a reality shock in the Covid-19 pandemic when we didn't have the capacity to make ventilators and other equipment needed to fight the pandemic. It also shows how our flawed our view of security is. All the military spending in the world doesn't bring ventilators to the people who need them!

This brings us to the study of geoeconomics. Edward Luttwack is considered the primary theorist in this field. The principle of geoeconomics is defined by five points - states are designed to collect as much revenue as possible, states regulate economic activity to maximize outcomes in their borders, blocs of state strive to restrict payouts to their own residents, and blocs of states strive for technological innovation within their own blocks. In other words, economics strengthens the power of the state, something Hamilton would agree with. One could fall into the trap of being a military power and not have a productive economy, from the geoeconomics standpoint.

Our country should rebuild so much of its manufacturing capacity - in critical areas- and prevent the temptation of fighting a war in China, or with another geopolitical rival, for the sake of corporate America's profits. Various geoeconomics blocks should emerge around the world with a transactional approach being applied. Let's split up the capital-intensive, economies of scale industries (autos, computers, cell phones). It will lighten the security load of all the countries in a particular bloc by not having to spend so much money securing trade routes.

Now let's come back to international relations. The emergence of economic blocs doesn't mean that diplomatic relations between the blocs break down. Admitting to political and economic differences, powers like the U.S., U.K., China, and the European Union can work to prevent tensions from spilling over into the military realm.

The main powers should form a concert of powers, as suggested by Charles Kupchan and Richard Haass in "The New Concert of Powers." We must realize the world is now multipolar and ideologically diverse and there's much that separates us. However, we can agree on the importance of human life, regardless of your nation or trading bloc. The concert should be patterned after the 18th century Concert of Europe. Perhaps this could be a revamped United Nations or a successor organization. The purpose, like the Concert of Europe, should be to curb geopolitical and ideological competition. Through this concert, the world's powers can agree on some rules, or international law, that will keep the world peaceful and stop the ongoing arms races!

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Jason Sibert worked for the Suburban Journals in the St. Louis area as a staff writer for a decade. His work has been published in a variety of publications since then and he is currently the executive director of the Peace Economy Project.
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