Geo-economics is an extension of geopolitics, it is the use of economic means to have a geopolitical advantage over strategic competitors. The high costs of conflict, have reduced the willingness of states to use conflict as a tool when politics doesn’t work for them.
Geo-economics instead adds a new form of strategic competition, the old strategies of controlling trade routes, choke points, where supply chains flow are all still relevant. Owning key industrial sectors (which China has done recently with their national champions), controlling markets (USA controlling semi-conductors and being allied with Taiwan who controls the chip market), and controlling the financing of companies around the world (USA again).
These are just a few examples of how Geo-economics is used as a philosophy to control parts of a strategic competitor’s economy, even if controlling this aspect of the economy of another state, it causes losses to your own economy. The goal is to always have a bargaining chip that you can use as leverage against another state when it is needed in the future.
Geo-economics is not:
- Not the use of economic might to build their military
- The use of the state for economic goals (boost gdp etc)
- The use of politics to gain favorable trade deals
Here are a few other geopolitical analysis articles I’ve written:
- China’s possible attack on Sydney Australia
- Who could China possibly Nuke?
- What the AUKUS alliance means for Asia
- Why China will NOT invade Taiwan
What is the meaning of geo-economics?
What does the term “geo-economics” actually mean? Simply put, it is the research in physical geography and its relation to economics.
Geoeconomics refers to research that explores the relationship between geographic elements and economic activities. This research takes place in several disciplines, including geography, economics, political science, anthropology, development studies.
However, there are some differences when geo-economics is being studied by economists or researchers in this field of study. Economists tend to focus more on resources, while research groups outside of economics seem to look more on social and political effects and how to exploit them for geopolitical purposes.
Geoeconomics may also be described as “the study of economic activity at a global scale.
It is unarguable that the world we live in now has become increasingly globalized, in order to have influence over our neighbors, we need to have economic levers we can pull for political purposes in the future.
There are readily available resources worldwide, such as goods made in China and sold on Amazon. Increasing interdependence between states through international trade agreements, such as TPP or NAFTA, creates dependencies. The goal of every country is to have multiple leverage points within this globalized economy, that can be used for political purposes at any time. When other countries are aware of your ability to pull these levers, this is also used as a deterrent to other states.
Globalization & International Trade Agreements
The vast majority (estimates show over 90%) of international trade happens within regions – for example, between members of NAFTA.
Countries tend to only export and import from other nations within their region, reinforcing regional ties, leading to increased peace and stability. While simultaneously looking for advantages within each of these agreements, so they have leverage in the future.
Just because countries have solid trade with each other, does not mean that conflict cannot break out. It always starts with geo-economic coercion first, trade wars, currency wars, then static wars.