Back to Front Page

On Geoeconomics

On Geoeconomics

Aesop

09/22/2020

 

The currency change in Ethiopia raised a lot of hype. These hypes may be categorized into four (albeit misguided) huts. Some ridicule the spelling error in the 200-ETB note: “hunoreo”. Others focus on the abuse of the currency change as a pretext to confiscate private savings by law enforcement agencies as approved by the PM. Some focus on the economic rationale for the currency change as a mechanism for bankrupting illicit commercial and financial activities. And others see this as a strategic move by Derg 2.0 (2018-Present) to freeze TPLF’s financial wherewithal. These interpretations fail to see the big picture, i.e. Derg 2.0 economic warfare against Tigrai.

Derg 2.0 has been waging economic warfare against Tigrai for over two years. The Addis-Dessie-Mekelle road blockage, the destruction of Tigrean-owned businesses, the appropriation of commodities traveling to Tigrai, the pressure on Tigreanbusinessmen, harassment of foreign investors going to Tigrai, the targeted internet blockade on Tigrai’s industrial parks, the multifaceted obstacles levied on EFFORT (Tigrai government’s conglomerate), and the constant threats to cut out the federal budget, institutions, and utilities of Tigrai amount to economic warfare against the regional state. These precedents oblige one to assess the recent currency change as a continuation of Derg 2.0’s economic warfare against Tigrai.Blackwill and Harris (2016) call this practice: geoeconomics.

Videos From Around The World

Geoeconomics was first coined by Edward Luttwak. He described it as the application of commercial grammar to the logic of war. Geoeconomics changed history over the millennium. But scholars ignored this instrument until Susan Strange wrote about it in 1970. Strange noticed that changes in international economic and political systems are becoming overwhelming the global order. These changes, beginning in the 1950s, manifested in three areas. First, the post-World War II disturbances following decolonization and the communist expansion begun affecting the state of price, interest rate, and employment in advanced countries. Second, some countries within the Western block started limiting credit and adopting miserly monetary policies. Third, businessmen from advanced countries began devastating the economies of developing countries in pursuit of egotistic economic interests via investments, mergers, and acquisitions, fabricating risk and conflict along the way. Despite these developments, Strange (1970) lamented that scholars failed to study the problem partly because:

many academicians engaged in international relations, politics, and history in these years have been absorbed and preoccupied with arguments about theory and methodology which have focused, far too exclusively, in my view, on the political and strategic relations between national governments, to the neglect of all else” (Strange, 1970, p. 304).

The blatant neglect of the obvious causality between international relations and international economics could not go unchecked owing to two tectonic shifts which manifested in the new millennium. The 2008 global financial crisis and the rise of China “have helped bring economic phenomena and their geopolitical impacts into the foreign policy reporting and commentary” (Blackwill and Harris, 2016, p. 21). Leonard (2016) backed this assertion by noting great power conflicts begun after the 2008 financial crisis. But these conflicts are not military confrontations as they appear. They are economic skirmishes. Leonard (2016) writes:

Although wars rage from Damascus to Donbas, the main battlefield is economic rather than military; sanctions are taking the place of military strikes, competing trade regimes are replacing military alliances, currency wars are more common than the occupation of territory, and the manipulation of the price of resources such as oil is more consequential than conventional arms races. The world is witnessing what Edward Luttwak called the rise of geo-economics, a contest defined by the ‘“grammar of commerce but the logic of war”’ (2016, p.4).

The increased application of economic tools for geopolitical purposes by the great powers induced scholars to describe geoeconomics. Blackwill and Harris (2016) defined geoeconomics as:

The use of economic instruments to promote and defend national interests, and to produce beneficial geopolitical results; and the effects of other nation’s economic actions on a country’s geopolitical goals (2016, p. 20)

The above definition is tragic in the sense that Derg 2.0 is not applying economic instruments to “promote and defend national interests” as Blackwill and Harris put it. This regime is applying geoeconomics against its people. It is following the example of Derg 1.0 (1974-1991) which opted for a scorched earth technique to defeat the rebellion in Northern Ethiopia. Eminent scholars like Amartya Sen (1999) already exposed the fact that famines were induced by governments, not nature. Everybody knows the humiliation and defeat the Derg 2.0 suffered after the 1984 famine in the hands of the actor Derg 2.0 is trying to decapitate today.

Derg 2.0’s leader did mention his detractors in Tigrai will wither away once their financial wherewithal dries up. He made this remark a few weeks before advertising the currency change. One can only wonder how much money these so-called “detractors” had when they decided to wage armed struggle against Derg 1.0. Derg 1.0 already secured billions from the Soviet empire when university sophomore students from Tigrai decided to overthrow it in 1975. At the outset, these fighters realized that neither ammunition nor foreign aid could sustain a regime except popular legitimacy. Today, Derg 2.0, a regime afflicted with popular illegitimacy, is seeking to employ geoeconomics against a party that secured the vote of an overwhelming majority of the Tigrean constituency.

A regime determined to use all instruments at its disposal to stay in power will do anything. This obliges its victims to master the levers of geopolitical instruments beforehand. Geoeconomics cannot be understood without making a paradigm shift. One must discard the neoclassical economic paradigm which makes a clear distinction between power and money. This dogmatic percept preaching markets solve everything is obsolete. Second, one must identify geoeconomics tools and understand how effective they are as forces of good and evil under given circumstances. Hitherto, there are seven geoeconomics tools (policies) that scholars identified (Blackwill and Harris, 2016a). These are trade policy, investment policy, economic and financial sanctions, geoeconomics cyber-attack, aid/budget (military, development or humanitarian) curtailment, financial and monetary policy, and energy and commodities restrictions. These steps enable one to take preventive measures against geoeconomics assault.

The preventive measures may take the form of general and tailored counter measures. The general counter measures encompass strategic and organizational realignments. The seven general recommendations extracted from Moyer and Venable (2019) in this regard are worth stipulating.

·         Evaluate policy outcomes in terms of their geopolitical impact than economic results.

·         Understand the new tools: what they are, how they work, and the conditions under which they will succeed or fail.

·         Form a new discipline- A hybrid discipline incorporating political scientists and economists

·         Set ethical standards (norms) on what an acceptable and unacceptable tool should be for a democratic system

·         Streamline geo-economics into the policy of external relations and allocate sufficient resources commensurate to the use of force

·         Establish an office that monitors the relations between money and power, i.e., geoeconomics.

·         Admit geoeconomics into national grand strategy as a foreign policy subgroup.

The general recommendations outlined above call for a paradigm shift. Tigrai must tear down the iron-curtain erected between political science (including international relations), and economics. Experts from these disciplines should bridge the gap between money and power. This means inaugurating a new discipline: geoeconomics for Tigrai. The specific measures, on the other hand, emanate from the seven geoeconomics tools identified. These include: establishing trade agreements with friendly economies while putting safeguard and response instruments to future coercion through trade policy; predicting the impact of primary and secondary sanctions while rallying public support against it; soliciting leading official development donors per GNI than overall wealth; and developingan energy security policy that diversifies sources and reduces dependence.

In sum, the relentless economic warfare against Tigrai bestows the latter with a gift of foresight. It presents Tigrai an opportunity to embark on the new discipline of geoeconomics. Once Tigrai masters the hitherto seven tools of geoeconomics, it will be able to formulate and implement effective policies to exploit new opportunities and stave off future threats. The most important thing, at this point, is to understand that geoeconomics could serve as a panacea and as a weapon.Tigrean economists and political scientists should make a paradigm shift, eliminate the jargon dividing their respective fields, and unveil the long-term relationship between money and power in Tigrai via cross-disciplinary pollination.

References

Blackwill, R., & Harris, J. (2016a). What Is Geoeconomics? In War by Other Means: Geoeconomics and Statecraft (pp. 19-32). Cambridge, Massachusetts; London, England: Harvard University Press. Retrieved September 22, 2020.

Blackwill, R., & Harris, J. (2016). The Lost Art of Economic Statecraft: Restoring an American Tradition. Foreign Affairs, 95(2), 99-110. Retrieved September 22, 2020.

Leonard, Mark. 2015. "Geopolitics vs Globalization: How Companies and States Can Become Winners in the Age of Geo-economics." In Geo-economics: Seven Challenges to Globalization, by Global Agenda Councils, 4-5. Davos: World Economic Forum. Accessed September 13, 2020. http://www3.weforum.org/docs/WEF_Geo-economics_7_Challenges_Globalization_2015_report.pdf.

Sen, Amartya. 1999. Development as Freedom. Oxford: Oxford University Press.

Strange, Susan. (1970). International Economics and International Relations: A Case of Mutual Neglect. International Affairs (Royal Institute of International Affairs 1944-), 46(2), 304-315.

 

 

 

 

 


Back to Front Page