MPI / GETTY IMAGES Mergers and acquisitions: negotiating the Louisiana Purchase, 1803.

The Lost Art of Economic Statecraft

Restoring an American Tradition

Despite boasting the most powerful economy on earth, the United States too often reaches for the gun instead of the purse in its foreign policy. The country has hardly outgrown its need for military force, but over the past several decades, it has increasingly forgotten a tradition that stretches back to the nation’s founding: the use of economic instruments to accomplish geopolitical objectives, a practice we term “geoeconomics.”

It wasn’t always this way. For the country’s first 200 years, U.S. policymakers regularly employed economic means to achieve strategic interests. But somewhere along the way, the United States began to tell itself a different story about geoeconomics. Around the time of the Vietnam War, and on through the later stages of the Cold War, policymakers began to see economics as a realm with an authority and logic all its own, no longer subjugated to state power—and best kept protected from unseemly geopolitical incursions. International economic policymaking emerged as the near-exclusive province of economists and like-minded policymakers. No longer was it readily available to foreign policy practitioners as a means of working the United States’ geopolitical will in the world.

The main reason the United States abandoned geoeconomics may have less to do with evolving foreign policy habits than with evolving economic beliefs.

The consequences have been profound. At the very time that economic statecraft has become a lost art in the United States, U.S. adversaries are embracing it. China, Russia, and other countries now routinely look to geoeconomics as a means of first resort, often to undermine U.S. power and influence. The United States’ reluctance to play that game weakens the confidence of U.S. allies in Asia and Europe. It encourages China to coerce neighbors and lessens their ability to resist and gives Beijing free rein in vulnerable states in Africa and Latin America. It allows Russia to bend much of the former Soviet space to its will. It reduces U.S. influence in friendly

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