The Age of Economic Warfare

Chokepoints: American Power in the Age of Economic Warfare, by Edward Fishman (Portfolio, 560 pp., $40)

Asked which candidate he supported in the 2008 presidential election, former Federal Reserve chairman Alan Greenspan responded, “National security aside, it hardly makes any difference who will be the next president. The world is governed by market forces.” With globalization replacing U.S. policy action, he explained, there wasn’t much for statesmen to do anymore. Now we could just watch the neutral pipework of the world economy do its thing, without interference from politics.

Greenspan didn’t know what was coming. As international relations scholar Edward Fishman shows in Chokepoints: American Power in the Age of Economic Warfare, economic and political matters are now fundamentally intertwined. In our “age of economic warfare,” international trade is important not just for consumer welfare and growth, but also for geopolitical competition and national security. Policymakers have even developed a new vocabulary to make sense of this convergence of statecraft and market craft, inventing phrases like “de-risking,” “decoupling,” and “friendshoring.”

Fishman, a professor at Columbia and veteran of the State Department, Pentagon, and Treasury, has produced an important study of how we entered this new world—and what might come next.

At the center of Fishman’s story are features of the global economic system that nations can wield against political adversaries. Policymakers and the public have become more aware of supply chains’ political importance, for example, since the pandemic. But as Fishman shows, the change was well underway even when Greenspan made his quip; trade was already essential to statecraft in 2008.

In the early 2000s, for example, the Bush administration worked to turn the financial system against the nation’s enemies. After 9/11, the federal government needed to track terrorist financing networks. It hit on a solution in SWIFT, a Brussels-based messaging service that all the world’s major financial institutions used. By making a deal with SWIFT and securing the ability to subpoena data and follow terrorists’ payments, the Treasury Department turned a previously apolitical entity into a War on Terror partner.

From there, the line between neutral economic institution and political friend or foe only grew blurrier. To strike at Iran’s nuclear program, the Bush administration pursued sanctions against Iranian banks—politicizing America’s financial system in a way that hardly anyone had realized was possible. “When Iranian banks made payments to counterparts in Europe or Asia,” Fishman explains, “their transactions often went through the U.S. financial system, making a brief pit stop at a correspondent account in New York before taking a ‘U-turn’ to their final destination. Few bankers ever thought about this U-turn, a quirk of the invisible infrastructure of cross-border finance, but Treasury could turn it into a chokepoint.”

The beauty of this strategy, the administration realized, was that you could strike at your adversaries without firing a bullet. The next administration appreciated it, too, and expanded its range. In 2010, Barack Obama signed legislation introducing a new trick, “secondary sanctions.” These targeted any foreign bank that worked with Iran’s already-blacklisted financial institutions. With this move, the U.S. learned how to pull other countries into its political-economic maneuvering.

What started with Iran and finance continued with China and tech. As the United States woke up to China’s competitive threat, Obama’s Commerce Department restricted American companies from selling to Chinese telecom giant ZTE, which relied on U.S. tech parts, causing the company to implode. And though President Trump was surprisingly favorable toward ZTE, given his usual hawkishness toward Chinese industry, the lesson endured: “Washington could exploit technology as a chokepoint, much like it did with the U.S. dollar. . . . American technology was so essential that cutting off access to it . . . could send a major Chinese tech company into a death spiral.”

The Trump administration would apply such tools elsewhere—for example, strengthening the powers of the Committee on Foreign Investment in the United States, which can block foreign firms’ attempted acquisitions of U.S. companies. To take on another Chinese telecom company, Huawei, the administration presented international chip companies with an ultimatum: either stop buying U.S. tech or stop selling to Huawei. Numerous countries responded by banning the firm from their 5G networks.

The next act of America’s economic warfare targeted the energy industry. The Biden administration achieved the full trifecta against Russia following the invasion of Ukraine: penalties against Russia’s biggest banks, export controls for advanced tech, and a price cap threatening any buyer of Russian oil sold above a certain price. For Fishman, taking on Russian oil represented perhaps the greatest politicization of all, given the oil market’s status as an “emblem of globalization.” Exploiting that market’s chokepoints thus signaled a decisive end to the era of one pure, global market.

In tracing this history, Chokepoints spends relatively little time on technical economic details, focusing instead on the decisionmakers and their political environment. That approach limits the reader’s insight into precisely how America’s economic weapons work, but it allows Fishman to reveal their wholly accidental nature. At every step, policymakers only stumblingly realized just how much political leverage the economic infrastructure granted them. Indeed, such leverage was possible only because the infrastructure had been intended for entirely different purposes.

Fishman also shows politicians eager to wield this new, less bloody implement for coercing other nations. The embrace of economic warfare has been remarkably bipartisan. The 2010 sanctions legislation against Iran passed Congress by overwhelming margins; a year later, 92 senators signed a letter to Obama calling for even tougher action. Today, the blending of economics and geopolitics has become so accepted that Biden advisor Jake Sullivan could declare a “new Washington consensus” in international economic policy, one that firmly repudiates Greenspan’s dreams.

Ironically, this mode of economic warfare may soon be on its way out. What Henry Farrell and Abraham L. Newman have termed “weaponized interdependence” works only as long as nations are interdependent. Once nations realize they are reliant on tools that America can and will turn to its advantage, they naturally start looking for a way out. Hence China’s creation of its own digital currency; Russia’s work on an oil and gas supply chain that circumvents Western involvement; Russia’s creation of an alternative to SWIFT; and the BRICS nations’ aim of weaning themselves off the U.S. dollar. Economic warfare proves inherently self-limiting.

Still, Fishman warns, the alternative is hardly better. If the global order continues down the path toward multipolarity, and American economic weapons weaken, we may find ourselves resorting to the old-fashioned form of nation-state conflict. Carl von Clausewitz called war “the continuation of politics by other means,” but it seems just as true that economics can be the continuation of war by other means. What will happen when those means falter? Fishman ends his history with a sober warning: “Someday, the Age of Economic Warfare will end, but we might miss it when it’s gone.”

Top Photo: Photo by Lars Klemmer/picture alliance via Getty Images