The United States possesses the most powerful military on the planet. Yet, there is a widely held perception that it is losing ground on all fronts and in all domains. China has emerged as a threat to our economy, our security, and even our historically hard-earned rules-based, global order. The onset of the COVID-19 pandemic demonstrated disturbingly how the United States had become hostage to un-secured vital supply chains, subject to disruptions by our most dangerous adversaries. How did this come about? The answer is geoeconomics.
Geoeconomics is the use of industry and commerce to accumulate power rather than wealth and reveals how economic factors have become increasingly important—possibly even predominant—in determining global power dynamics. Geoeconomics has been defined in many ways since Edward Luttwak prophetically introduced the concept in 1990. Most conventional definitions emphasize territorial or spatial aspects of economic strength. More contemporarily relevant definitions highlight global economic inter-connectivity and asymmetric interdependence. A useful definition is geoeconomics studies and compares the national economic endowments that determine global power dynamics, including manufacturing capacity, workforce demographics, terms of trade, currency strength, national creditworthiness, technical innovation, and growth.
From time immemorial power relations among polities—whether tribes, fiefdoms, kingdoms and even empires—were determined by the ability to prevail on the battlefield.
However, the declining likelihood of major war coupled with the political unacceptability and economic inutility of territorial conquest and occupation have significantly diminished the importance of battlefield prowess as a determinant of global power dynamics. Today power and influence are projected through economic factors as much if not more than military capability. In these vital areas, the United States has been a leader for the last century, but today is indeed losing ground.
The COVID-19 global pandemic was a stark demonstration of how the United States has lost manufacturing capacity. It revealed that the United States no longer possesses the capacity to manufacture the most basic personal protective equipment, such as testing swabs or protective masks, which had to be purchased abroad. While the United States continues to lead in technical innovation, that lead is eroding as China leverages its robust manufacturing juggernaut, its super-large market, its investments in research, and its technically educated workforce to catalyze home-grown innovation. With its manufacturing prowess and low costs, China has become the world’s dominant trading partner while it experiments with ways to displace the U.S. dollar as the global currency. As the world’s biggest trader and manufacturer, and with its epic Belt and Road Initiative extending its reach globally, China wields increasing global power and influence. Meanwhile, each time the U.S. Congress threatens to shut down the government or fail to raise the debt ceiling, thus pushing the country toward default, its economic power fades.
China is even catching up with the United States in the strictly military dimension; in certain technologies that may have dramatic military utility in the future, China may be ahead of the United States. But its true advantage is in the ability of authoritarian states to mobilize all the elements of national power, including economic and information capabilities, for strategic purposes. China's military-civil fusion program, its national security law, and domination by the Communist Party of every aspect of life in China clearly prioritize national security over all other interests. This does not show up in the traditional order of battle tables by which military might is typically measured.
Through Xi Jinping’s ambitious Belt and Road Initiative and its digital companion the Digital Silk Road Initiative, as well as Made in China 2025, China Standards 2035, and the String of Pearls network, China is coming to dominate global inter-connectivity—the ways and means by which goods, services, data, and information flow throughout the world. Such domination empowers China to disrupt or obstruct vital supply chains and lines of communication while taking advantage of data dominance.
Despite the many benefits of globalization, the accompanying vulnerabilities are exacerbated by asymmetrical interdependence. To put it bluntly, some countries are more interdependent than others, while some use their dominance in trade, finance, and to their strategic advantage. China's debt diplomacy and trade bullying with Australia, Japan, and many other countries are symptomatic. So also, in a way, is Chinese purchasing and ownership of farmland around the world—including in the United States. China is literally eating our lunch.
The United States has not by any means lost the contemporary great power competition, and it enjoys certain significant advantages, such as its tradition of rewarding innovation and initiative, its possession of the still-dominant U.S. dollar, and perhaps most important, its incomparable global alliance and partnership network. These will be to no avail, however, if its national security policymakers fail to understand that the currency of global power has changed; military prowess is no longer the only or the best measure.
To compete successfully in great power competition today, the United States must find the political will to create the bureaucratic architecture that can harness America’s economic might to its military capabilities and align with the capabilities of its allies and partners. To make geoeconomics work requires a degree of command authority over the many and diverse sources of economic power. Some such as Dr. Robert Atkinson have advocated for an “Advanced Industry and Technology Agency,” but an additional agency will not solve the problem. This authority must be nested within the governmental architecture under the Office of the President (as opposed to "grafted onto" as are the various "czars" and "special presidential representatives," which all invariably crash on the rocks of inter-agency rivalry and bureaucratic resistance). One approach might be a restructuring of the national security council staff.
Reconstituted as a semi-permanent cadre of senior career national security professionals rather than the revolving door of political appointees and agency detailees that it currently is, the national security council staff could achieve a knowledge of the federal government that is currently not possible. However, it should also be a thinking and planning unit working in liaison with U.S. companies, authorized to represent U.S. national security needs and concerns to American businesses. Thus, it should have a deep understanding of the American manufacturing, innovation, and financial sectors.
Such a re-purposed national security staff would need the authority—with presidential approval—to invoke the Defense Production Act, limited intra-agency budgetary allocations, and other vital national security authorities. It would have to be insulated from the petty inter-agency bickering and partisan politics that currently disable foreign policy.
There are a thousand reasons why such a bureaucratic innovation would be difficult, as there were a thousand reasons why the creation of the National Security Council or the Department of Defense after World War II was difficult. Perhaps there is a better way to harness America's economic might to its national security. The lamentable fact is that the current arrangements are failing to protect American security interests and fail dismally in the global geoeconomics competition, leading to the widely held perception that America is losing ground on all fronts and in all domains. Above all, America’s national security leaders must learn to think geoeconomically or witness the continuing erosion of American power and influence in the world.
Michael Miklaucic is a Senior Fellow at National Defense University and the Editor-in-Chief of PRISM, NDU’s journal of national and international security affairs.