Geopolitics

ISSN: 1465-0045 (Print) 1557-3028 (Online) Journal homepage: http://www.tandfonline.com/loi/fgeo20

The Increasing Importance of Geoeconomics in

Power Rivalries in the Twenty-First Century

Gyula Csurgai

To cite this article: Gyula Csurgai (2017): The Increasing Importance of Geoeconomics in Power
Rivalries in the Twenty-First Century, Geopolitics, DOI: 10.1080/14650045.2017.1359547

To link to this article: http://dx.doi.org/10.1080/14650045.2017.1359547

Published online: 27 Oct 2017.

Submit your article to this journal

View related articles

View Crossmark data

Full Terms & Conditions of access and use can be found at

http://www.tandfonline.com/action/journalInformation?journalCode=fgeo20

Download by: [Tufts University] Date: 28 October 2017, At: 11:50

 GEOPOLITICS
https://doi.org/10.1080/14650045.2017.1359547

The Increasing Importance of Geoeconomics in Power

Rivalries in the Twenty-First Century
Gyula Csurgai
Geneva Institute of Geopolitical Studies, Geneva, Switzerland

ABSTRACT
Relations between states in the post-Cold War period have been
shaped by an increased economic competition including ‘non-
market’ factors such as intelligence sharing between state agencies
and private businesses, successful economic diplomacy and differ-
Downloaded by [Tufts University] at 11:50 28 October 2017

ent techniques to influence and manipulate non-governmental

organisations to weaken an economic adversary, among other
things. The considerable influence of these non-market factors
illustrates the limits of the liberal economic theories that emphasise
the dominant role of market forces. Geoeconomics is an interdisci-
plinary analysis that includes geopolitical factors, economic intelli-
gence, strategic analysis and foresight and has the objective to
provide a tool for states and businesses to develop and implement
successful strategies to conquer markets, and protect strategic
segments of the domestic economy, among other things. This
article argues about the growing significance of geoeconomics in
contemporary power rivalries, presents some strategic aspects of
the role of state in the establishment and coordination of a national
geoeconomic disposition, and highlights briefly the importance of
the strategic management of information to support geoeconomic
strategies. Some arguments of the article ‘Geoeconomic Analysis
and the Limits of Critical Geopolitics: A New Engagement with
Edward Luttwak’ are briefly discussed as well.

Introduction
At the end of the Cold War Edward Luttwak, a US expert in strategy, claimed
that ideological rivalries between Western liberal and communist collectivist
models of societies would be replaced by a worldwide economic rivalry, in
which trade, finance, and the mastering of important technologies often
prevail over military power.
1
Indeed, relations between states in the post-Cold War period have been
shaped by an increased economic competition including ‘non-market’ factors
such as intelligence sharing between state agencies and private businesses,
successful economic diplomacy and different techniques to influence and
manipulate non-governmental organisations to weaken an economic adver-
sary, among other things. The considerable influence of these non-market

CONTACT Gyula Csurgai [email protected] Geneva Institute of Geopolitical Studies, CP 2587,

Geneva 1211, Switzerland.
© 2017 Taylor & Francis Group, LLC
 2 G. CSURGAI

factors illustrates the limits of the liberal economic theories that emphasise
the dominant role of market forces. Moreover, as Antto Vihma states,2 the
2008 financial crisis, the increasing use of financial means by China to gain
geopolitical influences worldwide, the Russian strategy to use energy as an
instrument in foreign policy, the state-capitalist models of economic devel-
opment and the growing competition for scarce resources necessitate re-
considering the role of the state in economic security.
Geoeconomic analysis questions the validity and usefulness of the main
theories and paradigms of International Relations (IR). Theories, such as,
functionalism, constructivism, post-structuralism, Marxism, liberalism,
among others, have the common feature of constraining the interpretation
of international relations to an oversimplified framework for analysis. These
theories are often based on mono-causality and subsequently interpret poli-
tical and economic phenomena according to a rather limited ideological
Downloaded by [Tufts University] at 11:50 28 October 2017

filter: Marxists emphasized the importance of class struggle; Liberals, the

promotion of the free market economy and free trade, for instance.
Geoeconomics is an interdisciplinary analysis that includes geopolitical
factors, economic intelligence, strategic analysis and foresight and has the
objective to provide a tool for states and businesses to develop and imple-
ment successful strategies to conquer markets, and protect strategic segments
of the domestic economy, among other things. Therefore, geoeconomics can
be considered as applied research and it can be understood as both an
analysis and practice by states and businesses. In spite of its increasing
role, geoeconomics does not substitute geopolitics. The two concepts are
closely linked and therefore to examine contemporary power rivalries both
geopolitical and geoeconomic analysis must be carried out.
This article argues about the growing significance of geoeconomics in
contemporary power rivalries, presents some strategic aspects of the role of
state in the establishment and coordination of a national geoeconomic dis-
position, and highlights briefly the importance of the strategic management
of information to support geoeconomic strategies. Some arguments of the
article ‘Geoeconomic Analysis and the Limits of Critical Geopolitics: A New
Engagement with Luttwak’3 are briefly discussed as well.

Geoeconomics
Although the concept of geoeconomics appeared at the end of the Cold War,
thanks mainly to the works of Edward Luttwak, the interrelations between state
power, economy and international trade had been taken into consideration
throughout history.4 Controlling trade routes, gaining access to natural resources
and conquering markets have been important factors in international economic
relations. Venice became gradually a powerful geoeconomic actor from the
eleventh century. In spite of its small geographic configuration, this city state
 GEOPOLITICS 3

became a considerable trading power thanks to its strategy of alliance building

combined with an efficient diplomacy, the mastering of advanced technologies in
ship building, the use of economic espionage, and a well-developed financial
sector, among others. Mercantilism, closely associated with the rise of the nation
state in Europe during the period spanning from the fifteenth to eighteenth
century, advocated state intervention in the economy for the sake of the security
of that state. Protectionist trade and monetary policies were used to achieve trade
surplus that increased the wealth and power of the state. The German economist,
Friedrich List (1789–1846), advocated economic nationalism to support state
policies to help industrialization, and in general, to build domestic economic
power in order to gain security and independence. Economic warfare was applied
in both periods of peace and war against countries to weaken their economy and
thereby reduce their political and military powers and or to influence a given state
to change its behaviour. Some of the instruments of economic warfare are trade
Downloaded by [Tufts University] at 11:50 28 October 2017

embargoes, boycotts, sanctions, and tariff discrimination, freezing of capital assets,

suspension of aid, prohibition of investment and other capital flows and expro-
priation, blocking the access to natural resources. Economic rivalries had often
resulted in geopolitical competition and led to different types of conflicts including
military ones. In both Word War I and II economic warfare played an important
role to weaken military adversaries. For instance, before the Pearl Harbour attack,
a US financial embargo was implemented against Japan in tandem with an oil
embargo in the immediate aftermath of Japan’s invasion of southern Indochina in
July 1941.5
During the Cold War, there were some tensions related to diverging eco-
nomic interests within the US led western bloc. However, the necessity to
maintain the cohesion of the Western alliance vis-à-vis the Soviet bloc resulted
in a situation in which these tensions were not supposed to challenge the unity
of the West. Economic means were considered as an effective instrument to
weaken the Communist bloc; this was illustrated by the US strategy in the
1980s that included the following among others: a) The implementation of the
Strategic Defence Initiative (SDI) to use ground and space-based systems to
protect the United States from attack by strategic nuclear ballistic missiles. The
USSR could not cope with this initiative in the context of the logic of the Cold
War arms race. b) In 1983, the US administration approved the National
Security Decision Directive 75, which resulted in the implementation of a
strict regime of sanctions to limit the foreign policy and military options of
the Soviets. c) The US exercised its influence on Saudi Arabia in 1985 to
drastically increase oil production to cause a sharp drop in oil prices that, in
turn, impacted considerably Soviet revenues from oil exports that accounted
for about 80 per cent of Soviet hard-currency earnings.
After the end of the Cold War, the disintegration of the communist bloc
resulted in the erosion of the cohesion of the US led western bloc and
geoeconomic rivalries have impacted considerably the Transatlantic relations.
 4 G. CSURGAI

The integration of strategic analysis of economic relations has been addressed

by Edward Luttwak and others authors (without an exhaustive list, the
following experts can be mentioned: Edward Luttwak, Robert D. Blackwill,
Jennifer M. Harris, J. Mark Munoz and Ian Bremmer in the US, Christian
Harbulot Director of the French
Institution ‘Ecole de Guerre Economique’ (School of Economic Warfare),
Pascal Lorot, Director of the French journal ‘Géoéconomie’, the Italian econo-
mist Paolo Savona, Slovenian Professor Laris Gaiser and Gyula Csurgai, Director
of the Geneva Institute of Geopolitical Studies, among several others). Since the
beginning of the 1990s, these authors have emphasised the increasing power
struggle in the economic sphere. These economic power rivalries have been
taking place as well between political and military allies as the evolving nature of
relations between the US and continental Europe illustrates.
Contemporary economic power rivalries are increasingly characterised by
Downloaded by [Tufts University] at 11:50 28 October 2017

applying methods of non-military warfare: Such as gaining control over

strategic sectors of the economy by a foreign power, use of Sovereign Wealth
Funds for technology transfer and various information operations and cur-
rency wars, etc.6 Moreover, as the US led interventions in Iraq and
Afghanistan illustrated, military confrontations and direct control of a given
geographic area by armed forces are often perceived as less advantageous than
the use of indirect strategies and soft power (two important constituents of
geoeconomics) to achieve different strategic objectives of states. The indirect
approach to projecting power is demonstrated, for instance, by 1) the growing
Chinese influence in different geographic zones ranging from East and Central
Asia to Africa and Latin America and 2) the increasing German influence in
Central Europe – a traditional sphere of interest for Germany – thanks to its
efficient use of financial, economic and cultural power.
Geoeconomics illustrates the strategic interactions between state agencies
and various economic sectors to enhance the power position of states in the
contemporary international system. French scholar, Pascal Lorot, director of
the French Review Géoéconomie, defines geoeconomics

as the analysis of economic strategies–notably commercial–,decided upon by states

in a political setting aiming to protect their own economies or certain well-
identified sectors of it, to help their national enterprises acquire technology or to
capture certain segments of the world market relative to production or commer-
cialization of a product. The possession or control of such a share confers to the
entity–state or national enterprise–an element of power and international influ-
ence and helps to reinforce its economic and social potential.7

As Lorot states, the state has a role to play in geoeconomics; this is

contrary to the neo-liberal ideology that assigns a rather reduced role to
the state in the economic sphere and emphasizes the dominating aspects of
free markets and free trade regimes. According to Antto Vihma,8
 GEOPOLITICS 5

geoeconomics challenges the liberal interdependency paradigm by integrat-

ing the strategic aspects of international economic relations with inter-state
diplomacy. Hence, understanding the rivalries of national interests mani-
fested in the increasingly conflictive nature of economic power rivalries
becomes an essential part of geoeconomic analysis.
The so-called ‘Democratic Peace’ theory is one of the important constitu-
ents of the liberal paradigm to study international relations.9 This theory
states that the form of domestic politics within democracies makes state
mobilization for war difficult, and leads to the empirical observation that
democracies have not fought a war with each other.10 Although pre-World
War I Germany, Great Britain, France and the United States could not be
considered as full-fledged democracies by contemporary standards, these
states were more or less based on a parliamentary system and were not
dictatorships. These countries had intensive commercial ties with each
Downloaded by [Tufts University] at 11:50 28 October 2017

other. Nonetheless, France, Great Britain, and the United States considered
the rapid rise of German economic and military power as a major challenge.
It is not the type of political regime but the perceptions of the changing
balance of power by Great Britain, France and the US, due to the increasing
international influence of Germany that influenced the transition from peace
to war. Thenceforth, World War I broke out, in which Great Britain, France,
and the United States had the objective of considerably reducing the power
potential of Germany. This objective of the main victorious powers mani-
fested itself as well by the imposition of the humiliating conditions of the
Versailles Treaty on Germany after the end of that war. There is a limitation
of the democratic peace theory to explain wars between contemporary
democracies that are fought by non-military means for geoeconomic supre-
macy. In fact, geoeconomics can be considered as war by other means than
the military ones, as Robert D. Blackwill and Jennfer M. Harris argue11
At present, democracies occasionally wage economic wars on each other.
Similarly, political and military allies can engage in fierce geoeconomic battles to
conquer markets, control technologies, and maintain financial and monetary
domination, as well as other matters. The nature of ‘Ally–Adversary’ relations is
manifested in trans-Atlantic relations. Although European NATO member
states are in a military alliance with the United States, commercial rivalries are
part of the EU–US relations, such as the mutual accusations in the World Trade
Organization related to subsidies given to Boeing and Airbus. A stronger
example is the use of the ECHELON electronic surveillance system, managed
by the United States in collaboration with other English-speaking Western
countries, and PRISM, a clandestine surveillance program under which the
United States National Security Agency (NSA) collects data of internet and
phone communications. The information collected through ECHELON and
PRISM and given to economic actors can be used to promote the economic
 6 G. CSURGAI

interests of the United States,12 illustrating the role of the state apparatus in,
ostensibly, intra-firm competition.
Co-operation between state agencies and companies runs counter to the
tenets of neo-liberalism. The neo-liberal ideology advocates a high degree of
deregulation, opening up rapidly the domestic economy to international
exchanges and investments, privatization of most sectors of the economy,
and limitation of the public sector. The neo-liberal model failed in several
countries. One can mention the Argentinian economic depression taking
place between1998 and 2002, or the devastating consequences of the
Russian ‘shock therapy’ in the 1990s. Contrary to the rapid liberalization
and deregulation of the economy, the East Asian states opted for a gradual
opening of their economies combined with a long-term economic develop-
ment approach in which the state played a strategic role.13 One of the most
obvious examples of this approach – also called State Capitalism – is the
Downloaded by [Tufts University] at 11:50 28 October 2017

successful economic development of South Korea which was a rather poor

country in the 1960s. However, it became gradually a developed and prosper-
ous state with competitive export oriented economic sectors by the 1990s.14
The existence of state-industry co-operation challenges the neo-liberal perspec-
tive. There has been no diminution of the importance of the state, but a transfor-
mation of its strategic role in order to adapt to a new power reality of the twenty-
first century in which commercial, financial, technological and cultural factors play
an increasing role.15 The objective of this ‘Strategic State’ is to create the conditions
for establishing a successful geoeconomic disposition that can create synergy
between the private sector and government agencies. The tools used to create a
national geoeconomic framework of cooperation between the public and private
sectors include education and training, research and development, commercial
strategy, economic diplomacy, and economic intelligence among others. Grouping
together, each of these elements into a national geoeconomic disposition may
determine the influence of the state in the international system in the twenty-first
century.
This process is influenced by cultural, historical, and geopolitical factors, and by
a shared perception by various actors of public and private sectors, on the role of
geoeconomics to enhance the economic security of the state. In this context, it is
important to note the existence of different national approaches to develop and
implement geoeconomic strategies. The work of Christian Harbulot, a leading
French expert in the study of economic wars and economic intelligence, is
especially informative.16 In the case of Japan, cultural, historical, and geopolitical
factors have influenced this nation to develop its geoeconomic power. The
relatively small size of Japanese territory, combined with high population density,
the lack of natural resources, a consensus-based society, in which authority,
discipline, and collectivism are important values, and the country’s defeat in
World War II, all influenced Japanese strategic thinking after the conflict. The
objective was to create a strong national geoeconomic disposition including an
 GEOPOLITICS 7

efficient system of economic intelligence. The Ministry of Economy, Trade and

Industry (METI) played an important role in the strategic coordination between
the public and the private sectors. Training, and other activities in fields related to
the elaboration of geoeconomic strategies, was organized. Different networks
between industrial groups and government agencies were created to develop a
culture and practice of economic intelligence based on a systematic collection,
analysis, and dissemination of information to actors in the economy.17 These
coordinated geoeconomic activities played an important role in the successful
market penetration of Japanese firms in the United States, in Europe, and in Latin
America from the 1960s.

Economic Intelligence
The mastering of information has been always a key element of power. The
Downloaded by [Tufts University] at 11:50 28 October 2017

growing impact of information and communication technologies (ICT), and

related issues such as big data, artificial intelligence, and cyber security
among others, has had an influence on this aspect of power. The result is
the new context of complexity, as ICTs increase the speed of the impacts of
changes that affect political, economic, security and military matters.
Concurrently, it is becoming increasingly challenging to analyse the massive
quantity of information available. It is important to recall that in the last
thirty years more information was produced than throughout all human
history before it. Easy access to a vast quantity of information does not
necessarily facilitate decision-making processes as analysts and decision-
makers have to face the problem of selecting and examining the value of
the data, and further, they have to face the problem of various types of
information manipulation, such as the practice of disinformation.
One of the most important components of a successful geoeconomic
strategy is economic intelligence. Economic intelligence can be defined as
the research, analysis, and dissemination of information, useful to different
actors of a given business entity or of a given state to support geoeconomic
strategies of these entities.18 Economic intelligence can be understood as the
transformation of information into knowledge and the knowledge in opera-
tional choices.19 To have an efficient geoeconomic disposition, strategic net-
works of economic intelligence should be established between the state level
and business. Different state entities collect, analyse and disseminate useful
information and intelligence analysis to different actors in a private–public
partnership structure to support businesses in geoeconomic competition. The
other level of economic intelligence is the business level. Considerable num-
ber of businesses has established their own economic intelligence units.
These entities can receive support from state structures. For instance, state
security agencies can provide advice, training and technical support to
protect business from hostile information gathering by competitors.
 8 G. CSURGAI

Economic intelligence is not limited to the research, analysis and dissemination

of information. This intelligence is often applied in offensive and indirect strate-
gies such as disinformation, perception management, lobbying and destabilisation
of an adversary company. Business and state entities therefore have developed
both defensive and offensive capacities of economic intelligence. Defensive stra-
tegies related to information protection are very important as an enterprise can
become a potential target of information gathering by competitors to obtain
information on financial situation, market penetration strategies, clients, potential
clients and innovation among others.20 One of the key aspects of economic
intelligence is anticipation and permanent crisis management capacities in order
to deal efficiently with the complexity of the external environment in which states
act and businesses operate in different economic spaces. When striving to make
good decisions, geoeconomic strategies have become increasingly complicated
due to the influence of rapidly evolving geopolitical, technological, cultural,
Downloaded by [Tufts University] at 11:50 28 October 2017

financial, and commercial factors. Consequently, the use of strategic foresight by

providing analysis on the possible future evolutions in different periods of geo-
political, economic, technological, cultural, demographic factors that may poten-
tially impact the environments that businesses operate, plays an important role in
economic intelligence.

Concluding Remarks
The main arguments developed by Edward Luttwak about geoeconomics at
the end of the Cold War have remained not only valid but also gained even
more importance in the examination of power rivalries in contemporary
international relations. Therefore, the article of the Finnish expert Antto
Vihma21 contributes positively to current debates not only about the neces-
sary and more nuanced interpretations of Edward Luttwak’s strategic
approach to the study of international economic relations but also about
the re-consideration of the role of the state in economic policy and in the
enhancement of economic security. Indeed, defending states’ economic inter-
ests in the twenty-first century requires a modified perception of their
security needs in order to develop an efficient geoeconomic coordination
between state agencies and private businesses. Antto Vihma’s study can be
considered as an important contribution to the debates about the limits of
critical geopolitical approach and the problems related to its practical usabil-
ity in applied research and or in practical work in private corporations and
government agencies including diplomacy, intelligence and the military.
Various study programs were established in geoeconomics and economic
intelligence in different European countries to train current and future
decision makers and analysts of both private and public sectors. A consider-
able number of articles and books have been published as well in Europe on
 GEOPOLITICS 9

geoeonomics since the end of the Cold War. Somehow, Antto Vihma did not
integrate these developments in his study.
Overall, there are rather few exchanges between the scholars of different
contemporary schools of thought in geopolitics and geoeconomics between con-
tinental Europe and the United States. The journal Geopolitics can contribute to
the increase of exchanges of ideas between these different schools. The discussion
on geoeconomics can be considered as a positive step in this direction.

Notes
1. E. Luttwak, ‘From Geopolitics to Geo-Economics: Logics of Conflict, Grammar of
Commerce’, The National Interest 20 (1990) pp. 17–23.
2. A. Vihma, ‘Geoeconomic Analysis and the Limits of Critical Geopoltics: A New
Engagement with Edward Luttwak’ Geopolitics (2017) pp. 1–21.
Downloaded by [Tufts University] at 11:50 28 October 2017

3. Ibid.
4. A. Laidi, Histoire Mondiale de la Guerre Economique (Paris: Perrin 2016).
5. E. S. Miller, Bankrupting the Enemy: The U.S. Financial Siege of Japan before Pearl
Harbor (Annapolis: United States Naval Institute Press 2007).
6. C. Harbulot, La Machine de Guerre Economique (Paris: Economica 1992) and La main
Invisible des Puissances (Paris: Ellipses 2007); R. D. Blackwill and J. M. Harris, War by
Other Means, Geoeconomics and Statecraft (Cambridge/London: Harvard University
Press 2016).
7. P. Lorot (ed.), Introduction à la géoéconomie (Paris: Economica 1999) p. 15.
8. Vihma (note 3).
9. P. A. Mello, ‘Democratic Peace Theory’, in P. Joseph (ed.), The SAGE Encyclopedia of
War: Social Science Perspectives (Thousand Oaks: Sage Publications 2017).
10. C. Elman, ‘Introduction: History, Theory, and the Democratic Peace’, The International
History Review 23/4 (Abingdon: Routledge 2001).
11. Blackwill and Harris (note 6).
12. L. Gaiser, Economic Intelligence and World Governance, Reinventing States for a New
World Order (Citta di Castello: Il Cerchio 2016) pp. 177–86.
13. E. F. Vogel, The Four Little Dragons: The Spread of Industrialization in East Asia
(Cambridge: Harvard University Press 1993).
14. Y.-I. Chung, South Korea in the Fast Lane: Economic Development and Capital
Formation (Oxford: Oxford University Press 2007).
15. H. Kirsch (ed.), La France en guerre économique, Plaidoyer pour un Etat stratège (Paris:
Vuibert 2008).
16. C. Harbulot, La Machine de Guerre Economique (Paris: Economica 1992); C. Harbulot,
La Main invisible des puissances (Paris: Ellipses 2007); C. Harbulot, Manuel d’intelli-
gence économique (Paris: PUF 2015).
17. C. Harbulot, La Machine de Guerre Economique (Paris: Economica 1992) pp. 29–34.
18. G. Csurgai, ‘Geoeconomic Strategies and Economic Intelligence’, in J. M. Munoz (ed.),
Advances in Geoeconomics (London/New York: Routledge 2017).
19. C. Jean and P. Savona, Intelligence Economica (Soveria Mannelli: Rubettino 2011) p. 21.
20. C. Harbulot (ed.), Manuel d’intelligence économique (Paris: PUF 2015).
21. Vihma (note 3).