By Massimo Ortolani
In outlining the defining path of the notion of economic security, within the broader meaning of national security and national interest (IN), it is useful to begin by referring to the constituent elements of Italian National Security, as presented in the DIS Security Information Department glossary.
First, because they emphasize its dynamic characterization, as it is linked to the historical-temporal context of reference. But also because they signal the strategic relevance assumed today by the concepts of economic security, environmental security and defense of the national interest, as they can be linked to Italy’s political, military, economic, scientific and industrial interests.
The heterogeneity of the elements thus listed could lead one to prefigure a vague, or even dispersive, analytical path, were it not for the fact that, to give investigative unity to it, a discipline of recognized strategic importance, subsidiary to that of geopolitical analysis, such as geoeconomics, comes to the rescue today. To which more recently have been added the three new approaches to political economy, outlined below.
Wanting to keep the analytical focus on informational elements necessary to avoid the widespread conceptual confusion between geopolitics and geoeconomics, a preliminary definition of the latter, which is considered meaningful and appropriate, is that geoeconomics is at once both a foreign policy strategy and an analytical approach.
In fact, geoeconomics harkens back to the school of Geopolitical Realism by emphasizing the notion of rivalry between states, but, without considering force and military conflict as a last resort in international politics, it lends itself to efficient outcomes with recourse also to the paraphernalia of economic measures. In this way, new conceptual tools for analyzing forms of power projection are configured. Thus keeping in mind that the way states define their national interests is not only a function of international structures, but also and above all the result of domestic political competition, dictated by the general satisfaction of the national interest.
A second defining pillar of geoeconomics rests on the strategy of multiple forms of spatial, rather than territorial, domination. Indeed, according to the thinking of the realist school political scientist J.J.Mearsheimer, it is difficult for a great power to become hegemonic without being able to exercise that hegemony in some area of the globe.
A condition that supports his belief that geopolitics trumps geoeconomics if a state has a relative amount of power, i.e., sufficient military capabilities to create the necessary deterrence and to “sell its skin dearly.” But, as Sholvin and Wigell have already pointed out, geoeconomics, insofar as it focuses on the geographical features inherent in foreign policy and international relations, can by the same token deal with the economic bases of power, that are extrinsic factors in the geographical dimension, as in the case of the geographical distribution of material resources, strategically crucial corridors and the opportunistic formation of international trade.
To these basic assumptions can also be added that geoeconomics is concerned with how economic instruments are used to control particular geographic areas, such as precisely the sphere of influence of a regional hegemonic nation, which can be used for geopolitical purposes, to prevent or facilitate foreign investment in the production of strategically important materials or apparatuses for the purpose of maintaining/increasing the same hegemony of power.
In any case, in the effort to explicate the foundational theoretical construct of geoeconomics, one can only begin with the contribution of E. N. Luttwak, who had rightly sensed how in a world where, after World War II, military conflict between major states becomes unlikely, it is economic power that becomes increasingly important in determining the supremacy or subordination of states. So much so that, in Luttwak’s initial theoretical framework, geoeconomics was supposed to replace geopolitics, if not become its predominant component in determining the hierarchy and rank among states. In this regard, the author explains that the logic of geoeconomic competition is that of war, while the grammar, i.e. tactics, is that of economics.
A statement that likely underlies a strategic-military approach to the economy, and which also leads to the identification of the new weapon of soft power as the means to achieve the growth of national welfare. However, Luttwak’s ideas have lost steam over time for two fundamental reasons. First, because interstate competition began to manifest itself in support for local military conflicts, the outcome of which would shift the balance of power in favor/disfavor of groups of states antagonistically allied with the local actors in conflict, not always represented by governmental armies, but also by insurgent or terrorist-motivated bodies.
That is, to manifest themselves in the wake of nostalgic patriotic spirits and overweening aspirations to return the national territory to the greater size it once was, as in the Putin narrative of justification for the invasion of Ukraine. Secondly, because, at the same time, the Washington Consensus long ago seemed to have become entrenched in a vision of the international system of a more cooperative nature, so as to enable everyone to benefit from the advantages of globalization as a generator of economic growth and, for someone, also hopefully promoting change of a political-cultural nature suitable for creating the conditions for the spread of democracy in militarily powerful countries with autocratic regimes.
Indeed, the idea that the market could function as a matrix of democracy, peace and prosperity for all had been spreading on the back of the “World Trade Organization” agreement signed in 1994 in Marrakesh.
If the field of geopolitics is that of the discipline that studies the relationship between physical and human geography on the one hand, and domestic and international political choices on the other, it can rightly be argued that interdependence of geostrategic factors and connectivity have replaced division as the new paradigm of global organization, one thinks in particular of the Internet and geo-fencing, with the consequent intertemporal fading of the geographic-territorial factor on a global scale as the seat of geo-economic conflict.
It has, moreover, been matched by the trend toward the pursuit of national geo-economic ends through economic policy projects and measures homogeneous with a state’s ultimate goals, aimed in other words at achieving national stability and security.
Currently, the integration of technological advantage in defense instrumentation, based on regulatory limitation of trade in equipment and software, and aimed at maintaining military deterrence superiority, is a plastic example of factual interdependence of geopolitics with geoeconomics. Again, the approach to geoeconomics aimed at economic and normative warfare, while referring to the description of spatial economic strategies, also emphasizes a way of viewing economic relations on a globalist basis in which even “opportunistic” strategies are seen as plausible and desirable.
So much so that geo-economic actions for first-move advantage, i.e., making use of niches not covered by international economic rules, are permissible, including those that can be created by distorting those rules or by violating their content and purpose. Hence the emergence of the role of international institutions in the relevant narrative, as in that of M. Leonard, when he argues that there are three new areas in which conflicts between states take place: the economy, international institutions and infrastructure. Related to which, moreover, is the geo-economic intentionality to be able to influence the appointment of the heads of supranational bodies of trade supervision and regulation (WTO), or of financing on a global scale: IMF, World Bank, etc., or to partially block their functioning.
Circumstances that make explicit the ways in which the needs of geopolitics and geoeconomics on the one hand and the confusing fragmentation of the international order on the other are interdependent. With the emergence of a regional multilateralism forced into a continuous negotiation of the interests at stake, but which can prove very often unsatisfactory for all, or the main actors involved. With blatant evidence in the lack of agreed outcomes at the Climate Conference, those of the recent Indonesian G20, to end with geopolitically-geo economically managed decision-making entanglements within UN member countries.
Events that clearly signal the absence of a global sharing of leadership, the weakening of Western leadership, and in any case the limitations and weaknesses of a strictly Luttwakian interpretation of the role of multilateralism from a geostrategic competition perspective.
As clearly explicated in Sholvin and Wigell, other scholars in the field have provided interpretative hypotheses of geoeconomic processes that partially diverge from the Luttwakian groove insofar as, while focusing on trends and phenomena of international relevance, they signal that the overall object of geoeconomic analysis must be focused not only on the rules and practice of strategic competition in global markets, but also on the conditions and factors that prospectively ensure development and maintenance of the competitive capacity and economic growth of a country or its geographic areas, and/or specific productive sectors. And to this end, taking into account all productive factors at play, including policies to protect competition, industrial incentives and fiscal attraction of foreign investors, aimed at strengthening the country’s self-propulsive mechanism.
In conclusion of the foregoing, however, we only partially agree with the definition of geoeconomics provided by Sholvin and Wigell, for whom geoeconomics, as a foreign policy strategy, refers to the application of economic means of power to achieve strategic objectives. In the writer’s view, in fact, it is economic policy strategies in general that are the subject of geoeconomics. With the consequence of seeing this discipline inextricably associated more with those analytical models of the so-called New Political Economy (NPE) than with traditional political economy, which seem to provide investigative parallels to the approaches proper to geoeconomics. NPE scholars regard economic ideologies as relevant phenomena to be explained by political economy. It is worth mentioning in this regard how Charles S. Maier, one of the well-known proponents of this approach, a historian by profession and a profound scholar of the social sciences, has pointed out that NPE tends to interrogate economic doctrines to reveal their sociological and political premises. A claim amply supported by historical evidence.
Indeed, at the time of the geopolitical blocs of the Cold War, conflicts and insurgencies in developing countries were often fueled and sustained by powers belonging to one of the two ideological blocs in order to establish governments aligned with or supportive of those same ideologies. This has long since ceased to be the case, as the acceptance of the laws of capitalist economics has prevailed over ideological diktats, even in nations once radically opposed to free market economics, albeit realized with imperfect contaminations and in hybrid and original forms, as in the case of Chinese market socialism.
In this regard, mention should also be made of IPE (International Political Economy), which deals with the interaction between economics and politics in the global arena by focusing both on how political decisions influence market operations and how economic forces shape political decisions. As well as to the field of emerging academic studies traceable to the strand of Political Economics, an interdisciplinary field that focuses on the collective and political activity of both nations and groups of individuals.
With avenues of inquiry in which, far from focusing on the normative theory of economic policy and methods of maximizing collective economic welfare, the analysis of traditional formal models of rational choice, collective action and political institutions is instead coupled with that of behavioral politics and political and economic competition, including the identification of causal effects.
It is not at all difficult to identify diachronically, in the global geographic landscape, examples of how geopolitics and geoeconomics have become inextricably intertwined, given the most striking outcomes of geoeconomic policies activated by major and medium-sized powers, whether with defensive or offensive intent. The forum of top-level meetings meeting under the auspices of the G20, which at the end of 2022 accounted for more than 80 percent of the world’s GDP and more than 60 percent of the globe’s population, is certainly the group with the greatest potential geoeconomic depth. Although today it is showing obvious limitations of this due to the fading prospects of international cooperation, threatened by the ongoing war and the risky hegemonic confrontation between the US and China.
While the CIS agreement between a number of independent states formed in the aftermath of the dissolution of the Soviet Union, with the intention of ranging from military assistance policies to socio-economic ones, it has certainly fostered over time the emergence of agreements with a purely economic/commercial matrix, such as the Eurasian Economic Union (EEU). Likewise, the Shanghai Cooperation Organization (SCO), a body that brings together among its many member nations, two powers such as Russia and China, operates with an institutional mission aimed at both security and economic cooperation, particularly related to energy development. For the adhering countries to such agreements, the mixture thus created between institutional, economic-financial and defense commitments aims to strengthen constraints and operational projects that amplify for each of them the elaborative paradigm of the meaning of national security.
But the most qualifying examples in this sense can be found in the actions with geostrategic impact that can be traced back both to the BRICS association, which brings together within it five countries characterized by an emerging and relatively booming economy-Brazil, Russia, India, China and South Africa-as well as to the well-known BRI agreement conceived and proposed by China.
In the case of the BRICS, the interest of India, Brazil and South Africa, which are not allies of Russia even geopolitically as is the case with China, the power of joint and coordinated geo-economic actions provides them with degrees of operational freedom that with individual policy initiatives they could not afford. The goal is fundamentally to remove from their national sphere all the threats that geofinance, the new driver of the world economy, continues to generate, starting with the hegemony of the dollar, the exchange rate and interest rates linked to loans in that currency, which constitute for their national economic policies a source of potential imbalances and a cumbersome “external constraint.” Reasons why they are preparing to create their own international reserve currency, knowing however that the geostrategic effect that would follow would benefit China the most, due to the ongoing strategic geopolitical competition with the US.
In this context of “cold” geo-economic peace, U.S. concern for the strengthening of its own secure economics, as it can be guaranteed by hegemony or dominance in the technological field, is the main operational motive of the protection of ‘national interest. For its part, Beijing has for about a decade been running on the BRI’s predominantly infrastructural investment initiatives to cultivate connections and influence with intentions of both economic (overt) and political (underground) diplomacy.
In the former case, it is a matter of being able to more easily get one’s hands on strategic as well as simply agricultural raw materials that China needs for its consumption, domestic production and export needs. While the indirect effects on the geopolitical level can be found in the easier obtaining of locations abroad for Chinese military bases and, above all, in the support or non-support by the beneficiary countries for the enactment of acts or regulations at supranational bodies that may positively, or negatively, impact Beijing’s national interest. Also of note is the recently demonstrated Chinese assertiveness in intensifying economic and financial cooperation with 5 Central Asian countries, (Xian Declaration, May 2023) and to optimize China’s quest for greater energy and food security.
For content precision, in defining the role of geopolitics and geoeconomics on a global scale, however, it is also necessary to mention the relevance of the neo-non-aligned countries, so-called pragmatists, or transactionalists for some, or borderline, according to the writer. In fact, if we consider the composition of the BRICS group of countries, we note how Brazil, India and South Africa do not appear politically close to the anti-US bloc of China and Russia. Moreover, India is a participant in QUAD, the informal strategic military alliance, with Australia, Japan and the United States, aimed at containing Chinese geopolitical and geoeconomic influence in the Indo-Pacific region. India’s role in such an alliance is explained militarily and geopolitically because of the not entirely dormant border warfare confrontations with China in the Himalayan Mountains, but mainly because its geographical location would more easily allow military fleets to close the Indonesian straits, and the Malacca Straits specifically, to Chinese ships.
Also to be considered, however, is the growing assertiveness of Saudi Arabia, recently shown in its quest for diplomatic autonomy for international relations that would allow it to move more freely in this multipolar phase.
Like India, Erdogan’s Turkey also operates with intentions definable as geostrategic opportunism, exploiting the inherent limitations of the so-called “alliance trap” to its advantage. As a NATO member Turkey, and as a QUAD member India, both assert toward the U.S. that alliance on the defense side to gain a free hand in geoeconomic relations with both China and Russia. Notorious is Delhi’s purchase of Russian oil and gas at discounted prices, thanks to its decision not to impose sanctions on Moscow in connection with the invasion of Ukraine.
Also of note is a pivotal role, diplomatically, that Turkey has sought to exert on this conflict. The attraction exerted by the current group of 5 BRICS members is such that 13 other nations have formally applied for membership. The reasons for each appear obvious by reflecting on the more or less recent geopolitical track that characterizes them, from Iran (need to extricate themselves from the impact of sanctions) Argentina (financial crises), Saudi Arabia (oil and financial power, China’s potential competitor in that sphere).
A diverse conglomeration, therefore, of national interests and geopolitical aims that could in power create tensions over shared coordination of actions with geostrategic relevance, such as the common use of a currency other than the dollar, or other initiatives of equal standing but still antagonistic to the influence of the U.S., and more generally of Western countries allied to them. However, it is conceivable that joint Brics initiatives could more easily materialize, however, in strategically guiding the geofinance initiatives of the Contingent Reserve Arrangement, their financial vehicle aimed at helping countries with financial and budgetary problems, to a good extent in an alternative or complementary form to those of the IMF, but also of China itself, in the case of BRI member countries.
The exemplification made about certain Brics members, in the opinion of the writer, is sufficient to show that each country, including of course the European Union member states, tends to orient their economic security projects in symbiotic modes between geopolitics and geoeconomics. And the driver or criterion-guide in that direction can then only be found in the intertemporal pursuit of National Interest. A term, “Interest”, that even if conjugated in relation to the national living space, still remains polysense, and temporally dependent on the ‘evolution” of the relationship between geostrategic competition and economic security.
Author: Massimo Ortolani – Lecturer, economist, and international consultant. He advises on risks and opportunities arising from cross-border investment/exports-assessment of geo-economic risks-training coaches on appropriate techniques and tools to mitigate these risks.
Image Source: Trieste Marine Terminal