Economic Strategy in a Multipolar World

“In a world where laissez-faire is increasingly unsustainable, a fusion of economic and geopolitical analysis is the logical progression.”

Authored by GoldFix, ZH Edit

Contents: (1500 words)

1. Bottom Line
2. Overview
3. Geo-Economics: The Shift to Statecraft
4. Tools of The Trade: Carrots and Sticks
5. Statecraft in Practice
6. U.S. and European Statecraft Compared
7. Realism vs Idealism in Economic Statecraft
8. Synthesizing Geopolitics With Economics
9. Slide Decks
10. PDF: Macrostrategy vs. 'Grand Macro Strategy'

1- Bottom Line

Economic statecraft, grounded in realism, is necessary to navigate today’s multipolar world.

• The World is becoming multipolar along Ideological, Monetary, and Military lines. Pax Americana is dying. Economic statecraft, grounded in realism, is therefore necessary.
• Policy enacted by other nations will reverberate with bigger consequences on domestic economies necessitating Economic tools be redeployed as extensions of national security.
• The rise of Nationalism will also accelerate the need to hone statecraft’s survival tools. 1

Geo-Economics: As domestic Macroeconomic policy decisions become more dominated by intruding extra-national forces, the need to incorporate a unified “Grand Macro Strategy” into domestic policy decisions becomes paramount.

2- Overview

In "Macrostrategy vs.Grand Macro Strategy” Rabobank Global Strategist Michael Every examines the re-emergence of economic statecraft as a vital tool in geopolitical strategy, diverging from traditional economic policy in both purpose and application.

The report defines economic statecraft not merely as a method for achieving domestic economic stability but as a strategic instrument for advancing national security objectives in an increasingly polarized global environment. Every advocates for what he terms a “Grand Macro Strategy,” a synthesis of economic policy and geopolitics, emphasizing that in today’s multipolar world, economic decisions cannot be viewed in isolation from geopolitical ambitions.

3- Geo-Economics: The Shift to Statecraft

"For markets, the recent, rude interjection of national security is ‘new’. However, the link between the economy and foreign policy was seen as important as back as Thucydides, Plato, Aristotle, Sun Tzu, Machiavelli, Locke, Smith, Ricardo, List, Hamilton, J.S. Mill, Marx, and Keynes."

Every distinguishes conventional economic policy from economic statecraft by elucidating their divergent goals. Traditional economic policy is inward-focused, utilizing tools like monetary and fiscal policy to manage inflation, unemployment, and growth.

Traditional economic policy is very macro-economically focused. It operates under the assumption of a stable world outside national borders. The end of Pax-Americana (discussed in this space many times) as indicative of and concurrent with Mercantilism’s rise and fragmenting supply-chains, necessitates domestic tools be more focused on how a nation will (once again) manage exogenous international factors intruding on domestic economies. Isolationism brings protectionism as walls get built.

Editorial Footnote2

Economic statecraft, by contrast, uses these same tools to serve foreign policy objectives, such as coercing rival nations, exerting influence, or defending national interests abroad.

This shift from economic policy to economic statecraft mirrors historical precedents, as seen in British and American policy shifts during wartime. Every underscores this distinction by referencing key historical moments, such as Lord Palmerston’s realist view that nations possess “permanent interests” rather than “permanent friends or enemies.”

This foundational premise is critical to Every’s argument: while conventional economics asks, “What is GDP growth?” economic statecraft asks, “What is GDP growth for?” To what ends are we doing this?

Macroeconomics is once again a subdivision of Geo-economics. Successors to Benjamin Disraeli and Henry Kissinger will also once again have higher standing in setting national domestic policy.

This shift compels policymakers and markets alike to question underlying motivations and to adopt a more strategic, nationally-centered lens—a development he links to the re-election of political leaders with nationalist agendas. Above, Table 1 1illustrates this conceptual shift between economic policy and economic statecraft effectively underscoring this pivotal point.3

4- Tools of The Trade: Carrots and Sticks

"The economic statecraft toolkit has both carrots and sticks that individually or collectively persuade, or force, other states to adopt certain actions."

In the report, Every presents a detailed economic statecraft toolkit, divided into three categories—trade, capital, and auxiliary tools—that collectively encompass both incentives (carrots) and deterrents (sticks).

Carrots or Sticks: Both Have Strings Attached…

This toolkit includes established methods such as tariffs, sanctions, and foreign aid, as well as more complex mechanisms like export controls, capital restrictions, and currency policies. For example, Every describes the U.S. tariffs on Chinese goods as part of a broader strategy that goes beyond trade deficit reduction; it is, in essence, an attempt to limit China’s geopolitical influence.

 

Essentially, an incumbent nation can further benefit from sanctions by forcing uncomfortable decisions upon recipients of said sanctions; Specifically, they sometimes must choose between their friends and economic survival.

6- U.S. and European Statecraft Compared

US grand strategy is defined in the 2022 National Security Strategy as…”to leverage all elements of our national power to outcompete our strategic competitors; tackle shared challenges; and shape the rules of the road.”

Every contrasts U.S. and European approaches to economic statecraft, focusing on the distinct strategic orientations each bloc exhibits. While the U.S. adopts an aggressive, unilateral approach to tariffs and subsidies, Europe’s response has been mixed, shaped by internal divisions. U.S. policies, ranging from primary sanctions to export controls and subsidies for key industries, exhibit a pronounced realist perspective rooted in national security.

Europe, by contrast, has historically embraced an idealist approach, favoring free trade and multilateralism, but recent actions—such as imposing tariffs on Chinese electric vehicles—signal a tentative shift toward a more realist stance.

The pattern of European (including UK) economic statecraft is clear. It was home to Machiavelli, Von Clausewitz, Palmerstone, and Bismarck; realpolitik is German; Europe was realist until WW1. Post-war Europe attempted to build an idealist order, but this failed and led to WW2

Every contends that Europe’s slower adaptation reflects not only its commitment to free-market ideals but also its political fragmentation. This divergence, he suggests, may undermine Europe’s ability to leverage economic statecraft effectively in the face of rising geopolitical threats.

China’s RMB Takes EURO Marketshare. The Lack of Grand Macro Policy?…

 

7-  Realism vs Idealism in Economic Statecraft

Everybody has a plan until they get punched in the mouth- M.Tyson

Every situates the concept of economic statecraft within a historical context, tracing its evolution from British mercantilist policies to modern-day trade wars. Referencing the British Empire’s Navigation Acts and the U.S.’s World War II policies, he demonstrates that economic tools have long served national security interests. The report suggests that the recent resurgence of realist statecraft is not an anomaly but a return to a historical norm, wherein states prioritized national security over economic liberalism.

This will not go over well with Continental idealists. To be fair, the author of this work—if he is indeed suggesting that protectionism/mercantilist-nationalism is a the mean and the post WW2 neo-keynesian liberalism was the outlier— has grown far afield of his own geographic economic roots in the past seven years. The WEF may need some time to catch up to what many already know here.

Adding to Lord Palmerston’s assertion mentioned by Micheal up top that “there are no permanent allies, only permanent interests,” we can also say: Everyone acts in their own self-interest.

This raises a concern: We would surely fear for Michael’s economic life on the Continent if he continued on this line of thinking. Pretty soon he’ll be quoting Ayn Rand

"By what conceivable right can anyone demand that a human being exist for anything but for his own joy?" -Howard Roark

Humor aside…

Here, the analysis critically examines laissez-faire assumptions in market economics, arguing that in a geopolitical crisis, the natural policy progression may involve even stricter economic controls rather than a reversion to free-market principles as exemplified in Free Trade Agreements (FTAs)

Continues here