Summary: The New Economic Security State: How De-risking Will Remake Geopolitics by Henry Farrell and Abraham Newman

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Recommendation

National security involves more than just protection from war and terrorism. Economic clout plays a significant role in what has become a highly interconnected and interdependent world. The United States must therefore rethink its national security strategy, write professors Henry Farrell and Abraham Newman in this astute essay. America’s reliance on Cold War-era approaches raises risks, as adversaries can weaponize national resources and industry. Students of foreign policy will find value in this exposition of a new geostrategic reality.

Take-Aways

• The transition from the Cold War to international economic integration spawned a new set of challenges.
• The United States’ recent attempts to bolster its economic security rest on outdated premises.
• America should learn from other nations’ approaches to the new realities of national security and economic growth.

Summary

The transition from the Cold War to international economic integration spawned a new set of challenges.

Economics and national security have become intertwined. No longer limited to issues of combat and terrorism, security now encompasses inflation, climate change and energy resources. As markets increasingly interlink, governments can no longer separate trade from security. Economics is the new geopolitical weapon.

“A simplistic faith in the magic of markets had hollowed out US industry, welcomed a rising adversary (China) into free trade arrangements and riddled global supply chains with critical security vulnerabilities.”

China’s and America’s economies are mutually dependent. There is no effective way to unravel this interdependency without a cost to US well-being. Nations must manage the competing challenges of maintaining a stable global economy with mitigating threats to national security.

The United States’ recent attempts to bolster its economic security rest on outdated premises.

America still struggles with the mindset of the Cold War and its aftermath. Export controls and the Defense Production Act undergirded US management of the security economy by bolstering the military-industrial complex and depriving its enemies of resources. The Cold War era prioritized national security over economic growth to contain the Soviet Union and its charges behind the Iron Curtain. But the subsequent era of globalization emphasized economic integration as a means to achieve peace and reduce global tensions. Post-Soviet-era thinking argued for markets that governments would not restrain. Growing economic interconnectedness, so the argument went, would bring greater well-being for all.

“The original ‘Washington consensus’ recommended that the state retreat from direct involvement in the economy and embrace the free movement of capital…Great-power competition seemed a relic of antiquity, and expanding interdependence the wellspring of a better world to come.”

Tensions could scupper economic prosperity and lead the United States into sanctions-laden exchanges with other large economies. Rather than leaning on past experience – now outdated in today’s inextricably linked global economy – policymakers must reevaluate how best to manage the economic security state.

America should learn from other nations’ approaches to addressing the new realities of national security and economic growth.

A more permissive economic environment that believed in private industry working on national security projects, such as space travel and satellite technology, has proven less than ideal. The COVID-19 pandemic laid bare the weaknesses of many businesses, as supply chains struggled. Russia weaponizing natural gas against its neighbors after it invaded Ukraine provoked an economic backlash in Europe, with America denying access to Russia’s overseas central bank reserves.

An economic feedback loop of the free flows of information, money and supply chains has engendered geopolitical susceptibility. America lacks enough know-how to assess where the intersections of technology and national security are most vulnerable.

“The government also needs to draw on new ideas and new sources of expertise, as do the universities and think tanks that supply Washington with talent. That means hiring fewer economists and political scientists and more people who understand logistics, cybernetics and material sciences.”

The United States must develop agencies and practices to formulate policies, and it should employ those with scientific and technological expertise. It can learn from its allies’ experiences: In a dust-up with China, which threatened to eliminate access to rare earth minerals, Japan transitioned to mining the seabed, and it pursued trade arrangements with different suppliers. It also secured a technology alliance with South Korea to reduce its dependence on China. Lacking American-style defense capabilities, the European Union has continuously redesigned market regulations to satisfy geostrategic goals, and it has developed a process to evaluate the degree of risk created by specific trade linkages.

About the Authors

Henry Farrell is a professor of international affairs at Johns Hopkins University. Abraham Newman is a professor of government at Georgetown University.

Genres

Technology, Science, Business, Economics, Finance, Innovation, Strategy, Management, Artificial Intelligence, Data Science

Review

The article argues that the United States and other countries are shifting from a market-oriented approach to a security-oriented approach in their economic policies, in response to the challenges posed by China and other adversaries. The authors call this new approach “de-risking”, which involves reducing economic vulnerabilities and dependencies, strengthening domestic industries and supply chains, and diversifying trade and investment partners. The article analyzes the causes and consequences of de-risking, and offers some recommendations for how the United States can pursue a coherent and effective economic security strategy.

The article is well-written, informative, and persuasive. It provides a clear and comprehensive overview of the changing landscape of global economic relations, and how they affect national security interests. The authors draw on a wide range of sources and examples to support their claims, and they acknowledge the trade-offs and challenges involved in de-risking. The article also offers some original and insightful perspectives on how de-risking will reshape geopolitics, such as the emergence of new alliances and rivalries, the potential for cooperation and conflict, and the implications for global governance and norms. The article is relevant, timely, and important for anyone interested in the intersection of economics and security in the twenty-first century.