Week 8: Geo-politics and Geo-
economics Introduction
This topic discusses the inter-relationship between geo-politics and geo-economics.
Learning Objectives
By the end of this topic, the learner should be in a position to:
Distinguish between geo-politics and geo-economics.
Explain the concept geo-economics and how it is manifested in the
contemporary world.
What is Geo-Economics?
Geo-economics may be defined in two different ways:
1. As the relationship between economic policy and change on national
power and geo- politics - in other words, the geopolitical consequences of
economic phenomenon, or, as the economic consequences of geopolitical trends
and national power. Both the notion of ‘trade follows the flag,’ that there are
economic consequences of the projection of national power, and the idea that
‘the flag follows trade,’ that there are geopolitical consequences of
, essentially economic phenomena, would constitute the subject matter of geo-
economics. Either way, the intellectual roots of geo-economics are embedded in
17th century European, largely French, ‘mercantilism’. (Mercantilism is an
economic policy designed to maximize on exports and minimize the imports
within a particular economy. It capitalizes on use of tariffs and subsidies on
traded goods to achieve this target).
The military pursuit of markets, resources and gold bars for a country to be able
to ‘export more and import less’, ‘buy cheap and sell dear’ preceded the advent
of modern economics based on ideas of free trade and laissez-faire.
While the 19th century was dominated by these ideas of ‘classical political
economy’, mercantilism was never buried and has repeatedly raised its head, in
inter-war Europe of the 1920s and 1930s and, most recently, in China. In the
1980s, the rise of Japan elicited mercantilist responses from Europe and the
United States based on fears that Japan had in fact risen on the back of
mercantilism.
More recently, the crises in Europe and North America have revived latent
mercantilism, with many accusing Germany and the United States of
pursuing a mercantilist agenda. In the post-war era, from 1950 to 1990,
international economics and politics were marked by a conflict between the
ideas of free trade and liberal democracy, on the one hand, and those of
communism and authoritarianism on the other.
A few countries experimented with a mix of the two, some mixing liberal
democracy with state capitalism (like India) and others mixing free enterprise
with military or one-party rule (like the ‘Asian Tigers’ and many Latin American
countries).
However, the dominant paradigm in this period, the Cold War era, was one in
which politics remained in command and geopolitics was driven by
ideological rather than purely economic factors. It is, therefore, not a
coincidence that the three most important ideas defining contemporary geo-
economics were all articulated at the time when the Cold War was on the verge
of ending or had just ended and a new era of economic rivalry between nations
was inaugurated.
economics Introduction
This topic discusses the inter-relationship between geo-politics and geo-economics.
Learning Objectives
By the end of this topic, the learner should be in a position to:
Distinguish between geo-politics and geo-economics.
Explain the concept geo-economics and how it is manifested in the
contemporary world.
What is Geo-Economics?
Geo-economics may be defined in two different ways:
1. As the relationship between economic policy and change on national
power and geo- politics - in other words, the geopolitical consequences of
economic phenomenon, or, as the economic consequences of geopolitical trends
and national power. Both the notion of ‘trade follows the flag,’ that there are
economic consequences of the projection of national power, and the idea that
‘the flag follows trade,’ that there are geopolitical consequences of
, essentially economic phenomena, would constitute the subject matter of geo-
economics. Either way, the intellectual roots of geo-economics are embedded in
17th century European, largely French, ‘mercantilism’. (Mercantilism is an
economic policy designed to maximize on exports and minimize the imports
within a particular economy. It capitalizes on use of tariffs and subsidies on
traded goods to achieve this target).
The military pursuit of markets, resources and gold bars for a country to be able
to ‘export more and import less’, ‘buy cheap and sell dear’ preceded the advent
of modern economics based on ideas of free trade and laissez-faire.
While the 19th century was dominated by these ideas of ‘classical political
economy’, mercantilism was never buried and has repeatedly raised its head, in
inter-war Europe of the 1920s and 1930s and, most recently, in China. In the
1980s, the rise of Japan elicited mercantilist responses from Europe and the
United States based on fears that Japan had in fact risen on the back of
mercantilism.
More recently, the crises in Europe and North America have revived latent
mercantilism, with many accusing Germany and the United States of
pursuing a mercantilist agenda. In the post-war era, from 1950 to 1990,
international economics and politics were marked by a conflict between the
ideas of free trade and liberal democracy, on the one hand, and those of
communism and authoritarianism on the other.
A few countries experimented with a mix of the two, some mixing liberal
democracy with state capitalism (like India) and others mixing free enterprise
with military or one-party rule (like the ‘Asian Tigers’ and many Latin American
countries).
However, the dominant paradigm in this period, the Cold War era, was one in
which politics remained in command and geopolitics was driven by
ideological rather than purely economic factors. It is, therefore, not a
coincidence that the three most important ideas defining contemporary geo-
economics were all articulated at the time when the Cold War was on the verge
of ending or had just ended and a new era of economic rivalry between nations
was inaugurated.
