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President of Afghanistan Mohammad Ashraf Ghani, NATO Secretary-General Jens Stoltenberg, U.S Defense Secretary Ashton Carter and Deputy Prime Minister of Singapore Tharman Shanmugaratnam, Davos, Switzerland, Jan. 22, 2016 (AP photo by Michel Euler).

Geo-Economics Moves Front and Center as Connectivity Reshuffles Global Politics

Friday, July 1, 2016

At the foundations of the major crises that have rocked Europe over the past three years can be found questions of geo-economics. Whether in the Russian intervention in Ukraine in 2014, the migration crisis that began in earnest in 2015, or last week’s decision of British voters to approve an exit from the European Union, governments and peoples are making choices as to what sources of human capital, raw material and manufacturing potential, as well as which larger economic groupings, they wish to be associated with.

The neat division of the world into largely self-sufficient Westphalian states defined by clear geographic borders—in which interstate conflict was driven by the desire to seize land, resources and populations by one state from another—has been upended by the processes of globalization, which have created new connections between states while simultaneously opening up divides within them. Forging—or forcing—economic connectivity seems to be the driving force for international politics in the 21st century, and geo-economics is the framework through which it can be best understood.

Geo-economics argues that states seek control over the nodes of the global economy as a source of power and influence. In this new context, the principal drivers of conflict—or conciliation—will be battles over the management of connections: whose hand will turn the various spigots that control and channel the flows of economic activity, whether pipelines, canals, trade routes or internet connections.

But not everyone sees states as central to this landscape. In his newly released book, “Connectography: Mapping the Future of Global Civilization,” Parag Khanna argues that, in the 21st century, large, unitary nation-states will give way to a world of interconnected regions across former frontiers. In his book, he charts the progression of global politics toward a future that “will feature more connections and fewer divisions,” where the “escalation of tensions is being carefully managed, tempered by rising trade and investment volumes worldwide.”

Brexit and the continuing crisis of Euroskepticism, and hiccups in the integration process in Southeast Asia and South America, raise doubts as to how smoothly the new order will emerge.

Khanna predicts that by mid-century, most small nation-states will cease to be viable political and economic entities under these new conditions. Meanwhile, large states will have to cope with centrifugal forces that pull their different geo-economic regions apart from each other in favor of more productive connections with other areas more amenable to their needs, thus loosening the bonds of political unity. If he is correct, then how this process emerges will be of critical importance to the survival and evolution of current governments and political elites.

In particular, this vision is not particularly appealing to any of the major neo-Westphalian powers—among them Russia, India and China—nor to the world’s sole superpower, the United States. At the same time, Brexit and the continuing crisis of Euroskepticism in other nations of the European Union, and hiccups in the integration process in Southeast Asia and South America, raise doubts as to how smoothly the new order will emerge. By a narrow majority, British voters are apparently willing to pay the price of a reduced gross domestic product and a higher degree of economic pain in return for re-establishing borders and reducing connectivity in favor of local sovereignty. Both ASEAN in Southeast Asia and UNASUR in South America have demonstrated that regional integration enjoys strong popular support when it comes at no apparent cost. But at the first signs of trouble, the barriers go back up.
Further challenges will come when existing governments weigh the national security pros and cons of relying on connectivity. Here we see evidence of the schizophrenia that defines the international security environment of the 21st century, which continues to define defense in national terms while accepting and depending on regional and global supply chains that exist beyond the control of any one state for economic prosperity.

Many governments around the world may also look askance at turning over sovereignty or accepting dependence on transnational trade and transportation corridors or cross-border infrastructure projects. The fear that a friendly partner today might become a hostile competitor tomorrow—one that could threaten to turn off the lights, the power or the water—may prove to be as powerful a motivating factor as the vision of a borderless community defined by shared prosperity.

At the same time, the United States, in particular, is worried about what will happen to its ability to pressure and isolate the so-called “states of concern” if and when these countries become enmeshed in regional infrastructure, making it much more difficult to cut them back out of the herd. India’s ambitious project to develop Iran’s Chabahar port, for instance, as well as its plans for a new north-south corridor that will connect India to Russia, Europe and Central Asia via Iran, will turn Iran into an indispensable node in a regional network. That in turn will make it much more difficult for the United States to wield the same degree of economic pressure against Iran as it did in the past over Tehran’s nuclear program. China’s One Belt, One Road and Maritime Silk Road projects present similar challenges.

In 2015, the World Economic Forum noted, “After two decades of coming together, many countries are focusing on the challenges of interdependence as well as on its benefits.” Yet, over the coming years, whether it comes to how to divide up and apportion the riches of the Arctic Ocean, or the waters of the Mekong the Nile rivers; or how to assign, develop and transport to market the energy resources of the Eastern Mediterranean; an increasing number of the issues in world politics will revolve around whether countries put their trust in international cooperation for profit versus taking unilateral national action for security. Geo-economics is at the center of these calculations, and will remain there.

Nikolas K. Gvosdev is the Jerome E. Levy Chair for Economic Geography and National Security at the U.S. Naval War College. The opinions contained herein are entirely his own.