Lawfare Archive: A Weaponized World Economy with Henry Farrell and Abe Newman
Feb 23, 2025
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Henry Farrell, a political scientist and co-author of "Underground Empire," joins forces with fellow scholar Abe Newman to unpack economic warfare. They discuss how technological advancements have transformed economic statecraft and its merging with U.S. national security objectives. The duo reveals how the U.S. has weaponized global markets, influenced by corporations and historical precedents. With insights into the complexities of legal frameworks and economic coercion, they delve into the unintended consequences on global stability, especially in the context of relations with China.
The evolution of economic statecraft emphasizes the U.S.'s use of economic tools to fulfill foreign policy objectives amid technological advancements.
The historical role of figures like Walter Riston showcases how financial innovation inadvertently empowered U.S. control over global transactions during market deregulation.
The complexities of U.S.-China economic relations highlight the need to balance national security with the risks of retaliation and global market disruption.
Deep dives
The Evolution of Economic Statecraft
Economic statecraft has evolved significantly from traditional concepts, with the U.S. increasingly using economic tools to achieve foreign policy objectives. This shift has roots in historical practices such as protectionist policies and trade agreements, but is now marked by new technological advancements that allow for economic coercion on a global scale. The conversation emphasizes that the intertwining of national security with economic warfare is a contemporary reality, driven by advancements in financial technologies and the organizational structures of global markets. Policymakers must navigate this complex landscape while ensuring that the existing economic web does not become a vulnerability for the U.S.
Walter Riston's Influence on Global Finance
Walter Riston, the former CEO of Citibank, played a crucial role in shaping the global financial landscape through his push for a deregulated, interconnected marketplace. He spearheaded the creation of instruments like certificates of deposit that enabled the eurodollar market, promoting the dollar's dominance in international trade. Although Riston aimed to eliminate state power from finance, his actions inadvertently positioned U.S. authorities to exert control over global transactions through centralized banking networks. This consolidation revealed how powerful financial institutions can become targets for state coercion, fundamentally altering the dynamic of international economic relations.
The Role of SWIFT and Information Control
The launch of the SWIFT network showcased the critical importance of controlling financial information in global markets. By establishing a secure messaging system for international transactions, SWIFT became integral to the global economy, enabling financial institutions to streamline operations and communicate effectively. However, the U.S. government's ability to access SWIFT data post-9/11 revealed vulnerabilities in international banking systems, as it allowed for unprecedented levels of oversight and intervention in cross-border financial transactions. This dynamic raises questions about the balance between security and privacy in an interconnected world.
Long-term Implications of Economic Tools
The deployment of economic tools for national security objectives presents significant long-term implications that policymakers must carefully consider. While targeted sanctions and economic measures are designed to minimize collateral damage, their ripple effects can unintentionally harm ordinary citizens and destabilize economies abroad. Historical examples, such as the sanctions against oligarchs that led to unexpected fallout in global supply chains, illustrate the dangers of hasty economic coercion. Policymakers need to anticipate these consequences and develop a more nuanced understanding of the complex interdependencies within the global market.
Navigating the Complexities of U.S.-China Relations
The U.S.-China relationship exemplifies the challenges faced in employing economic statecraft amidst rising geopolitical tensions. As the U.S. confronts perceived threats from China's technological advancements, the pressure to leverage economic tools for competitive advantage intensifies. However, this strategy risks creating a cycle of retaliation that could disrupt global markets and undermine existing cooperative frameworks. Striking a balance between legitimate national security concerns and the potential for escalating conflicts requires careful deliberation and a reevaluation of the principles guiding U.S. economic strategy.
From September 20, 2023: Economic warfare isn’t a new concept. Protectionist policies, asymmetrical trade agreements, currency wars—those are just a few examples of the economic levers states have long used to control outcomes. But in their new book, two political scientists, Henry Farrell and Abe Newman, argue that a technological innovation spurred on by free market embracers and coopted by the U.S. was an accidental entry point into a new era of economic statecraft—an era whose precise contours and rules are still being ironed out today, as we are fighting in a so-called economic war.
Lawfare Associate Editor Hyemin Han talked to them about how this weaponization came to be, how U.S. national security objectives are bleeding into economic warfare, and what policymakers might focus on in trying to ensure that the economic web that the U.S. currently sits at the center of is not ravaged by its own power.
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