New Economic Statecraft: China, the United States and the European Union

Xiao ong, Zhang
Book
New Economic S a ec a : China, he Uni ed S a es and he
Eu opean Union
Rou ledge F on ie s o Poli ical Economy
P o ided in Coope a ion wi h:
Taylo & F ancis G oup
Sugges ed Ci a ion: Xiao ong, Zhang (2024) : New Economic S a ec a : China, he Uni ed S a es and
he Eu opean Union, Rou ledge F on ie s o Poli ical Economy, ISBN 978-1-003-35138-2, Rou ledge,
London,
h ps://doi.o g/10.4324/9781003351382
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New Economic S a ec a
This book p o ides insigh s on he a o go e ning a s a e and managing i s
ex e nal ela ions om a weal h-powe logic. I looks a “economic s a ec a ”,
which consis s o weal h p oduc ion, weal h mobiliza ion, and weal h-powe
con e sion by a s a e.
This book econcep ualizes wha economic s a ec a is and p oposes a new
heo y ocused on weal h-powe con e sion. Wi h a long his o ic pe spec i e,
his book goes h ough he mode n his o y o Wes e n powe s p ac icing
economic s a ec a since 1500, and p esen s h ee case s udies, he Uni ed
S a es, he Eu opean Union, and China, he h ee bigges use s o economic
s a ec a in he con empo a y wo ld.
The book se es as an ideal e e ence o policy make s, business people, and
esea che s whose wo k ouch upon ei he weal h c ea ion, powe p ojec ion,
o he combina ion o bo h.
Zhang Xiao ong is P o esso o Ins i u e o Bel and Road Ini ia i e & Global
Go e nance, Fudan Uni e si y, Shanghai, China. He is a Resea che a Wuhan
Uni e si y Cen e o Economic Diplomacy. He ob ained a PhD in poli ical
science om Uni e si é Lib e de B uxelles (ULB) in Belgium.
Rou ledge F on ie s o Poli ical Economy
Socialis Economic Sys ems
21s Cen u y Pa hways
S e en Rose eld
COVID-19 and Economic De elopmen in La in Ame ica
Theo e ical Deba es, Financing Dilemmas and Pos -Pandemic Scena ios
Monika Mei eles, B uno De Con i and Diego Gue a a
Ma xis Poli ical Economy and Bou dieu
Economic and Cul u al Capi al, Classes and S a e
Geo ge Economakis and Theo anis Papageo giou
New Ins i u ional Economics as Si ua ional Logic
A Phenomenological Pe spec i e
Pie De V ies
Human Economics
Pa adigms, Sys ems, and Dynamics
Sa a Casag ande
The Knowledge P oblems o Eu opean Financial Ma ke In eg a ion
Pa adoxes o he Ma ke
T oels K a up
Beyond Ecological Economics and De elopmen
C i ical e ec ions on he hough o Man ed Max-Nee
Edi ed by Luis Valenzuela and Ma ía del Valle Ba e a
New Economic S a ec a
China, he Uni ed S a es and he Eu opean Union
Zhang Xiao ong
Fo mo e in o ma ion abou his se ies, please isi : www. ou ledge.com/Rou ledge-F on ie s-
o -Poli ical-Economy/book-se ies/SE0345
New Economic S a ec a
China, he Uni ed S a es
and he Eu opean Union
Zhang Xiao ong

Fi s edi ion published 2024
by Rou ledge
4 Pa k Squa e, Mil on Pa k, Abingdon, Oxon, OX14 4RN
and by Rou ledge
605 Thi d A enue, New Yo k, NY 10158
Rou ledge is an imp in o he Taylo & F ancis G oup, an in o ma
business
© 2024 Zhang Xiao ong
The igh o Zhang Xiao ong o be iden i ed as au ho o his wo k has
been asse ed in acco dance wi h sec ions 77 and 78 o he Copy igh ,
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com, has been made a ailable unde a C ea i e Commons A ibu ion-
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o egis e ed adema ks, and a e used only o iden i ca ion and
explana ion wi hou in en o in inge.
B i ish Lib a y Ca aloguing-in-Publica ion Da a
A ca alogue eco d o his book is a ailable om he B i ish Lib a y
Lib a y o Cong ess Ca aloging-in-Publica ion Da a
Names: Zhang, Xiao ong (College eache ), au ho .
Ti le: New economic s a ec a : China, he Uni ed S a es and he
Eu opean Union / Zhang Xiao ong.
Desc ip ion: Fi s edi ion. | Abingdon, Oxon ; New Yo k,
NY : Rou ledge, 2023. | Se ies: Rou ledge on ie s o poli ical
economy | Includes bibliog aphical e e ences and index.
Iden i e s: LCCN 2023013674 (p in ) | LCCN 2023013675 (ebook) |
ISBN 9781032397917 (ha dback) | ISBN 9781032397931 (pape back) |
ISBN 9781003351382 (ebook)
Subjec s: LCSH: Uni ed S a es—Economic condi ions. |
China—Economic condi ions. | Eu opean Union—Economic
condi ions.
Classi ca ion: LCC HC103 .Z45 2023 (p in ) | LCC HC103 (ebook) |
DDC 330.973—dc23/eng/20230512
LC eco d a ailable a h ps://lccn.loc.go /2023013674
LC ebook eco d a ailable a h ps://lccn.loc.go /2023013675
ISBN: 978-1-032-39791-7 (hbk)
ISBN: 978-1-032-39793-1 (pbk)
ISBN: 978-1-003-35138-2 (ebk)
DOI: 10.4324/9781003351382
Typese in Gallia d
by Apex CoVan age, LLC
Con en s
Acknowledgemen iii
Lis o Tables ix
Lis o Figu es x
In oduc ion 1
1 Economic Sl a ec a – Concep s and Theo ies 9
1.1 Economic S a ec a as a Concep 9
1.1.1 The O igin o Economic S a ec a as a Concep 9
1.1.2 “Economic S a ec a ” Ve sus “Economic
Diplomacy” 11
1.1.3 Analysis and C i ique o he Concep o Economic
S a ec a 13
1.1.4 Recons uc ion o he Concep o Economic
S a ec a 14
1.2 The Theo e ical Cons uc o Economic S a ec a 17
1.2.1 Theo e ical Assump ions 17
1.2.2 The Main Ac o o Economic S a eca 19
1.2.3 S eps and Me hods o Implemen ing Economic
S a ec a 19
1.2.4 Academic and Theo e ical S anding o Economic
S a ec a 24
2 Pa adigm Shi s in Economic S a ec a O e Time 28
2.1 The Age o Classical Me can ilism (15 h–18 h
Cen u ies) 29
2.2 The Age o Classical Libe alism (1846–1870) 36
2.3 The Age o Impe ialism (1870–1914) 38
2.4 Ma xism 41
i Con en s
3 Ame ica’s Economic S a ec a 44
3.1 Ame ican Economic S a ec a in he Con ex o B i ish
Hegemony (1775–1898) 47
3.1.1 Founding o he Uni ed S a es o Ame ica 47
3.1.2 Con inen al Empi e (1815–1850s) 51
3.1.3 Ci il Wa and O e seas Empi e
(1860/65–1898) 52
3.2 Ame ican Economic S a ec a in he Con ex o
U.S. Hegemony 53
3.2.1 Rise o U.S. Hegemony (1898–1913) 54
3.2.2 T iumph o U.S. Hegemony (1914–1945) 57
3.2.3 Ma u ing o U.S. Hegemony (1945–1967/73) 63
3.2.4 Decline o U.S. Hegemony (1967/73–2001/08) 65
3.3 U.S. Economic S a ec a in he Con ex o he Rise o
O he G ea Powe s (2008–2020) 67
3.3.1 U.S. Economic S a ec a Unde P esiden Obama
(2008–2016) 69
3.3.2 U.S. Economic S a ec a Unde P esiden T ump
(2016–2020) 69
3.4 Pa adigm Shi in U.S. Economic S a ec a : Pendulum
Be ween Libe alism and Me can ilism 71
3.4.1 The Dilemma o De-globaliza ion 73
3.4.2 The Dilemma o he U.S. Hegemony 74
3.4.3 The Dilemma o U.S. Domes ic Poli ics 74
4 The EU’s Economic S a ec a 79
4.1 Inhe en De ciencies in he EU’s Implemen a ion
o Economic S a ec a and he EU’s Inno a i e
Solu ions 81
4.2 Upda ing he EU’s Economic S a ec a “Toolbox” Since
2020 85
4.2.1 P omo e he Fu he Ins umen aliza ion o
Mili a y and Economic Powe o C ea e a “Eu opa
Geopoli ica” 85
4.2.2 P omo e a “So e eign Eu ope” and P o ec he
“Economic So e eign y” o Eu ope 86
4.2.3 P omo e he “Geoeconomic Eu ope” Agenda by
Vigo ously Implemen ing Economic Diplomacy 87
4.2.4 Economic Coe cion Is an Inc easingly Impo an
Tool in he EU’s Economic S a ec a 87
Con en s ii
4.3 The His o y o EU Fo eign Policy F om he Pe spec i e o
Economic S a ec a 89
4.3.1 The Founda ion o Eu opean Powe
(1950–1967) 90
4.3.2 The “Upwa d Spi al” o Eu opean Powe
(1967–2008) 90
4.3.3 Decline o Eu opean Powe (Since 2008) 92
5 China’s Economic S a ec a Unde Xi Jinping 99
5.1 Wha Was P esiden Xi’s Economic S a ec a in His Fi s
Te m (2012–2017)? 100
5.2 Wha Was P esiden Xi’s Economic S a ec a in His
Second Te m (2017–2022)? 104
5.3 Conclusion and Fu u e Scena ios 108
6 Compe ing Economic S a ec a s 114
6.1 The Change o “The Spi i o he Times” 114
6.2 The Mani es a ions o Compe ing Economic S a ec a s
and Consequences 116
6.3 Compe ing Though s Behind Compe ing Economic
S a ec a s 119
Index 128
4 In oduc ion
Second, wha is he p ocess o economic s a ec a ? The implemen a ion
o economic s a ec a has h ee s eps: weal h gene a ion, weal h ex ac ion,
and weal h-powe ans o ma ion. Weal h gene a ion pe ains o a na ion’s
economic g ow h and sus ainable de elopmen . Weal h ex ac ion e e s o
he collec ion and expendi u e o go e nmen e enue, as well as he go e n-
men ’s ole and beha io in economic in e en ion. Weal h-powe ans o -
ma ion e e s o he ans o ma ion o weal h in o global in uence, mili a y
powe , o coe cion. The ans o ma ion o weal h in o powe can ake a a ie y
o o ms, wi h coun ies adop ing di e en ools and me hodologies a di e -
en imes in his o y. Fo example, du ing Wo ld Wa I, he UK emba goed
Ge many, decla ed he No h Sea a wa zone, supe ised he comme ce o
neu al coun ies, and imposed a “comme cial s a a ion blockade”, among
o he means o ans o ming weal h in o powe .9 To a la ge ex en , he powe
w es ling among g ea powe s is ac ually a con es o economic s a ec a , in
which he key is inno a ion in s a egies, ac ics, ools, and me hodologies o
con e ing weal h in o powe .
Thi d, who is he main ac o in economic s a ec a ? The main ac o o eco-
nomic s a ec a is he s a e. Howe e , au ho i y wi hin a coun y’s go e nmen
is o en agmen ed and siloed, wi h di e en depa men s some imes wo king a
c oss pu poses – wi hou iew o he bigge pic u e o coo dina ed ac ions due
o unc ional cons ain s. Only na ional leade s, supe seding coo dina ing bodies
and senio policy ad iso s, can ha e a holis ic ision and connec he do s. The
ideal ac o o implemen economic s a ec a is a leade who can coo dina e wi h
he big pic u e in mind, s , he head o s a e and go e nmen , and second, he
nance minis e , economic minis e , ade minis e , in e io minis e , e c.
Fou h, wha a e he main pa adigms o economic s a ec a ? Since
mode n imes, ou pa adigms o economic s a ec a ha e eme ged in he
Wes e n wo ld, namely, me can ilism, libe alism, impe ialism, and Ma xism.
Each pa adigm has i s own a ian s. Fo example, unde he libe alism pa a-
digm, libe al ins i u ionalism de eloped in he Uni ed S a es a e Wo ld Wa I,
and neolibe alism was p oposed in he 1980s. A e Wo ld Wa II, he new
libe al app oach o economic s a ec a de eloped in Eu ope, which achie ed
Eu opean econcilia ion h ough he es ablishmen o he Eu opean Coal and
S eel Communi y. This app oach c ea i ely and success ully ound an ins i-
u ional amewo k o sol ing he p oblem wi h Ge many unde a bipola
sys em.10 The p ac ice o Eu opean in eg a ion is a c ea i e libe al app oach o
economic s a ec a wi hin he amewo k o he libe alism pa adigm. China’s
economic s a ec a , ollowing he launch o i s e o m and opening-up p o-
cess, is la gely o iginal and di e s g ea ly om he So ie Union’s S alinis -
pe iod di ec i e command economy. To da e, i is di cul o a ibu e Chinese
economic s a ec a de ni i ely o an es ablished pa adigm. I is likely ha
China is c ea ing an en i ely new pa adigm o economic s a ec a , bu o he
o eseeable u u e, i appea s ha China is me ging he classical pa adigms o
me can ilism, libe alism, and Ma xism in o a new de elopmen alis model o
economic s a ec a .

In oduc ion 5
Fi h, wha is he key o he ise o a g ea powe ? Th oughou his o y,
he ise o a g ea powe has depended on ou componen s. Fi s , he ein-
en ion o a weal h s a egy in economic s a ec a . The undamen al d i -
ing o ce o he pa adigm shi o economic s a ec a is p oduc i i y gains, he
p og ess o science and echnology, and indus ial e olu ion. A g ea powe
ha e en ually ises o p ominence mus ha e ein en ed i s weal h s a egy,
ha is, he acquisi ion o new sou ces o p oduc i i y, a signi can gain in
p oduc ion e ciency, and he abili y o ex ac and mobilize economic powe
mo e e ec i ely. Me can ilism, as opposed o he medie al eudal sys em, was
a new way o gene a ing and ex ac ing weal h. Libe alism, in u n, e en ually
eplaced me can ilism because o he ad ances in science and he indus ial
e olu ion ha began o build momen um in he la e 17 h cen u y. The eudal
dynas ies, in gene al, paid li le a en ion o he s a egy o weal h enewal and
o keeping wi h he imes, hus being unable o suppo he poli ical ambi-
ions o he empi e. The cu en s a egic compe i ion be ween China and he
Uni ed S a es, o example, is essen ially a compe i ion o weal h s a egies,
and he cen al ene is o achie e p oduc i i y gains and mo e esilien supply
chains, alue chains, and inno a ion chains.
Le ’s look a he economic s a ec a o h ee hegemons in mode n imes:
Du ch hegemony in he mid-se en een h cen u y, B i ish hegemony in he
mid-nine een h cen u y, and US hegemony in he mid- wen ie h cen u y.
Acco ding o he wo ld-sys em analysis, such hegemonies encompass domi-
nance in economic, poli ical, and ideological sphe es o ac i i y, bu hey a e
mly based upon he de elopmen o economic sup emacy. This has in ol ed
h ee s ages. Fi s , he hegemonic s a e gained p imacy in p oduc ion e -
ciency o e i s i als. Second, his enabled i s me chan s o build a comme cial
ad an age. Thi d, he banke s o he s a e we e able o achie e nancial domi-
nance o he wo ld economy.11
The second componen is he ein en ion o a powe s a egy in eco-
nomic s a ec a . A success ul ising powe mus ha e adop ed a new ype o
powe s a egy, ha is, inno a ions in he ways, s a egies, and p ocesses o
con e ing weal h o powe , hus subs an ially imp o ing he e ciency and
ou comes o he con e sion. Fo example, he B i ish cons an ly sough he
leas e o ul way o pu suing hei in e es s in e e y pa o he wo ld.12 In he
pos -Wo ld Wa II e a, he Uni ed S a es s es ablished a mul ila e al poli ical
and economic o de a he global le el h ough libe al ins i u ionalism, and
hen won he Cold Wa h ough neolibe alism, p omo ing he Washing on
Consensus on a global scale. A e Wo ld Wa II, Eu ope apidly engaged
in in eg a ion, c ea ed he Eu opean Economic Communi y, and mobilized
nonmili a y “ci ilian powe ” and “no ma i e powe ”. In so doing, he EU
apidly eme ged as one pole o he wo ld and achie ed peace wi hin i s e i-
o y. Howe e , he EU is no as e cien in ans o ming weal h in o powe as
indi idual na ions due o in e nal a i ion and cons ain s.
The hi d componen is he smoo h and e cien ans o ma ion
be ween weal h and powe . Fa eed Zaka ia once posed a ques ion – why
6 In oduc ion
did he Uni ed S a es, he wo ld’s mos powe ul indus ialized na ion
since he beginning o he 1870s, hew o a ela i ely isola ionis line, wi h
ew excep ions, un il he 1890s – a highly unusual gap be ween powe
and in e es s, o i las ed some 30 yea s.13 Zaka ia’s puzzle is essen ial o
economic s a ec a s udies. He e, he key ques ions a e: Wha is he ela-
ionship be ween weal h and powe ? Wha a e he ac o s ha es ain he
ansla ion om economic s eng h o powe ? Unde wha ci cums ances
can weal h be ansla ed in o powe in an e cien way? Zaka ia de eloped
an analy ical amewo k which he called “s a e-cen e ed ealism”, a a ia ion
on classical ealism.14 He ecognizes ha s a e s uc u e limi s he a ail-
abili y o na ional powe . In he s 80 yea s h oughou he 19 h cen u y,
he US p esiden s and hei sec e a ies o s a e ied epea edly o con e
he na ion’s ising powe in o in uence ab oad, bu hey p esided o e a
ede al s a e s uc u e and a iny bu eauc acy ha could no ge men o
money om he s a e go e nmen s o om socie y a la ge. Ame ica was
an unusual g ea powe – a s ong na ion bu a weak s a e. This si ua ion
did no change un il he 1880s and 1890s, which ma ked he beginnings
o he mode n Ame ican s a e, eme ging p ima ily o cope wi h he domes-
ic p essu es gene a ed by indus ializa ion. The exigencies o he g owing
na ional economy and he collapse o he cong essional bid o sup emacy
ga e he ede al go e nmen a mo e cen alized, less poli ical, and a ional
s uc u e.15 The Uni ed S a es’ unusual ise o i s ole as a wo ld powe
demons a es ha a s ong s a e is he p econdi ion o ans o ma ion om
weal h o powe .
Compa ed o Wes e n democ acies, China has an ins i u ional ad an age in
making decisions on economic s a ec a , as he op-down decision sys em can
p o e mo e e cien .
In e ms o decision e ciency, he EU migh be a wo s case as i is no
one so e eign s a e. Howe e , in p ac ice, he EU has de eloped a se ies o
economic s a ec a ools ha can s ill ans o m weal h in o powe . Wha ma -
e s he e is ha he EU has de eloped a sophis ica ed in e nal coo dina ion
mechanism h ough decades o in eg a ion, making i igh ully a g ea powe
in e ms o economic s a ec a .
The ou h componen is a sus ainable weal h-powe s a egy, ha is,
whe he he ans o ma ion be ween weal h and powe can each dynamic
equilib ium. When he equilib ium is los , he demand o weal h will ou s ip
supply, leading o “s a egic o e d a ” o “s a egic ad en u ism”, simila o
he Japanese a ack on Pea l Ha bo . This in u n will lead o a ailed a emp
a a na ion’s ise, and he decline o he g ea powe . Such phenomena ha e
occu ed h oughou his o y among Spain, Ge many, Japan, and he So ie
Union, while he UK and he Uni ed S a es ha e handled hese si ua ions com-
pa a i ely well. Despi e sho - e m o e d a s, he UK and he Uni ed S a es
ha e been able o each a s a e o equilib ium in he medium and long e m,
hus main aining hei sup emacy. The sup emacy o he B i ish Empi e las ed
160 yea s, s a ing in he la e 18 h cen u y and ending a e Wo ld Wa II.
In oduc ion 7
US sup emacy has al eady been mo e han 100 yea s in du a ion, since i s
ascension in he la e 19 h cen u y. Du ing Wo ld Wa II, he Uni ed S a es
spen mo e han 40% o i s GDP on de ense. Ins ead o a s a egic o e d a ,
he Uni ed S a es o e came he G ea Dep ession o he 1930s h ough he
“A senal o Democ acy”, ising o become he new wo ld supe powe . Since
1946, US de ense spending (as a sha e o GDP) has apidly allen back o
10%, and a g ea deal o mili a y echnology and capaci y has been epu -
posed o ci ilian use. In doing so, he Uni ed S a es laid a solid economic
ounda ion and es ablished i s capaci y o inno a ion, in con as wi h he
So ie Union.
F om he pe spec i e o economic s a ec a , he main challenge wi h he
Uni ed S a es is no he decline o i s sup emacy, which is only a supe cial
phenomenon. The unde lying p oblem lies wi h he weal h-powe s uc u e.
Fo many yea s, he Uni ed S a es has elied on powe o supply weal h, bu
his cons i u es a weal h-powe pa adox, ha is, as powe uels weal h, weal h
expands u he , demanding mo e powe , esul ing in mo e mili a y expan-
sion and agg ession, which equi es mo e weal h. The cycle epea s i sel ,
esul ing in a agile equilib ium o US sup emacy, which, once b oken, will
cause he sup emacy o wane. This sugges s ha he key o economic s a e-
c a is mode a ion and he sus ainable s a egic managemen o weal h and
powe .
Whe he a ising powe can become a wo ld-class powe depends on
whe he i can de elop a no el, ad anced, and spi i -o - he- imes o m o eco-
nomic s a ec a (including bo h weal h and powe s a egies) and whe he o
no his new o m o economic s a ec a can achie e sus ainable and dynamic
equilib ium be ween weal h and powe o decades, o e en cen u ies.
This book consis s o six chap e s.
Chap e 1 in oduces he concep s and a new heo y o economic s a ec a .
Chap e 2 compa es he his o ical p ac ices o economic s a ec a by g ea
powe s, om mode n imes o Wo ld Wa II. The explo a ion expands om
he ci y-s a es o I aly o he Ne he lands, B i ain, Ge many, Russia (la e he
So ie Union), Japan, and he Uni ed S a es. I also summa izes he ou majo
pa adigms o economic s a ec a since mode n imes, namely, me can ilism,
libe alism, impe ialism, and Ma xism.
Chap e s 3, 4, and 5 deal wi h case s udies on economic s a ec a in he
Uni ed S a es, he EU, and China, espec i ely. Chap e 3 e iews US eco-
nomic s a ec a since i s ounding. Chap e 4 p o ides a his o ical o e iew
on he esea ch and p ac ice o he EU’s economic s a ec a . Chap e 5 exam-
ines he economic s a ec a o he People’s Republic o China unde P esiden
Xi Jinping.
Chap e 6 e iews he compe i ion in economic s a ec a among he
Uni ed S a es, he EU, and China in ecen yea s, a emp ing o show ha
hei s a egic compe i i e ela ionships s em om he de e io a ion o he
spi i o he imes, and he compe ing weal h-powe sys ems and weal h-powe
s a egies o he Uni ed S a es, he EU, and China.
8 In oduc ion
No es
1 Economic S a ec a Ini ia i e, A lan ic Council, see www.a lan iccouncil.o g/
p og ams/geoeconomics-cen e /economic-s a ec a -ini ia i e/
2 Economic S a ec a P og am, see h ps://bush. amu.edu/economic-s a ec a /
wha -is-economic-s a ec a /
3 Cen e o Na al Analyses. The China and Indo-paci c Economic S a ec a
Ini ia i e. See www.cna.o g/cen e s-and-di isions/cna/cip/china-s udies/cip-
economic-s a ec a -ini ia i e
4 Cen e o a New Ame ican Secu i y. Economic S a ec a . See www.cnas.o g/
esea ch/ene gy-economics-and-secu i y/economic-s a ec a
5 Eu opean Council on Fo eign Rela ions. Economic Coe cion. See h ps://ec .eu/
eu opeanpowe /economic-coe cion/
6 Zhang, X., e al. (2013). On he Use o China’s Economic S eng h. No heas Asia
Fo um, 22(1), pp.91–98.; Zhang, X. (2013). Theo e ical Cons uc ion o Chi-
na’s Economic Diplomacy: A P elimina y A emp . Fo eign A ai s Re iew, 30(6),
p.49; Zhao, K. (2014). Wha is he S a egic Goal o he G ea Powe Economic
Diplomacy? – US Economic Diplomacy and he Collapse o he B i ish Empi e.
Chinese Jou nal o Eu opean S udies, 32(4), pp.63–75.; Zhang, X. (2014). China’s
G ea Powe Economic Diplomacy wi h I s Own Cha ac e is ics. Chinese Jou nal
o Eu opean S udies, 32(4), pp.76–87.
7 Shi, Y. (2015). T adi ional Chinese Expe ience and Con empo a y Chinese P ac-
ice: S a egic Adjus men , S a egic O e d a and G ea Reju ena ion. Fo eign
A ai s Re iew, 32(6), pp.57–68.; Liu, F. (2017). S a egic O e d a : A Concep-
ual Analysis. Jou nal o S a egy and Decision Making, 8(3), pp.25–30.
8 Yan, X. (2017). China Should Clea ly P io i ize I s Na ional In e es s and Gua d
Agains S a egic Indisc e ions. Wo ld Peace Fo um, 2017.
9 Hel e ich, K. (2019). Economic Wa and Wa Economy (G. Wang, T ans.) (in
Chinese). Beijing: Taihai Publishing House.
10 Monne , J. (1989). Memoi s (H. Sun, T ans.) (in Chinese). Hongkong: Wo ld
Cul u e Books, pp.294–295.
11 Flin , C., & Taylo , P. (2018). Poli ical Geog aphy: Wo ld-Economy, Na ion-S a e
and Locali y (7 h edi ion). New Yo k: Rou ledge, p.53.
12 Da win, J. (2012). Un nished Empi e: The Global Expansion o B i ain. New Yo k:
Bloomsbu y P ess, pp.10–11.
13 Zaka ia, F. (1998). F om Weal h o Powe : The Unusual O igins o Ame ica’s Wo ld
Role. P ince on, NJ: P ince on Uni e si y P ess, p.4.
14 Zaka ia, F. (1998). F om Weal h o Powe : The Unusual O igins o Ame ica’s Wo ld Role.
P ince on, NJ: P ince on Uni e si y P ess, p.8.
15 Zaka ia, F. (1998). F om Weal h o Powe : The Unusual O igins o Ame ica’s Wo ld
Role. P ince on, NJ: P ince on Uni e si y P ess, p.10.
1 Economic S a ec a – Concep s
and Theo ies
1.1 Economic S a ec a as a Concep
1.1.1 The O igin o Economic S a ec a as a Concep
Economic s a ec a has a long in ellec ual his o y. Based on a sea ch on
Google Schola , he s appea ance o economic s a ec a was in Al ed
Ma shall’s P inciples o Economics. In he book, Ma shall commen ed,
“Adam Smi h’s c i icisms on he Me can ilis s o his own age may seem
ha sh. Bu i is o be emembe ed ha he knew he weaknesses and he
co up ion o hose who we e posing as mas e s o economic s a ec a ”.1
He e, economic s a ec a e e s o me can ilism, and he so-called mas-
e s o economic s a ec a we e me can ilis s. I is Adam Smi h who s
in en ed he concep o “Me can ilism” in his amous book, The Weal h
o Na ions.2 He posi s ha , o me can ilis s, “ he wo g ea engines o
en iching he coun y we e es ain s upon impo a ion, and encou age-
men s o expo a ion.3
In 1918, William S ephen Sande s, a B i ish poli ician and schola , elabo-
a ed upon Ge man economic s a ec a . Sande s s a ed,
An economic s a ec a was in en ed, ha ing o i s objec he building
up o Ge man ade, comme ce, and indus y in he way bes sui ed o
p omo e he powe and p es ige o he Ge man na ion as a p edomi-
nan ly mili a is Powe wi h wo ld-wide ambi ions.4
He u he explained,
To do his success ully i was necessa y no only o encou age, con ol,
and di ec he ene gies o he capi alis and gi e him a na ional aim,
bu also o g an some measu e o p o ec ion o he wo kman. This
was also impe a i e o mili a y easons. As he a my emained he s
ca e o he S a e, i was essen ial ha i s po en ial cannon- odde should
no be allowed o su e om he e ec s o un es ic ed indi idualis ic
capi alism.5
DOI: 10.4324/9781003351382-2
This chap e has been made a ailable unde a CC-BY-NC-ND license.

10 Economic S a ec a – Concep s and Theo ies
Sande s emphasized, “in Ge many he S a e declined o play he seconda y
ole o ‘nigh -wa chman.’ I assumed a leading pa and became he o ganise
and con olle in he economic as well as in he poli ical sphe e”.6
John A. Hobson applied he concep o economic s a ec a in his 1922 a i-
cle, c i icizing he B i ish go e nmen by saying “Economic s a ec a would
ha e a oided a leas h ee a al blunde s. The s is he economic-poli ical
dismembe men o Aus o-Hunga y which le he a o ing ca cass in he
Eu opean sys em. Second comes he boyco o Russia, accompanied o wo
yea s by a squande ing o as sums o money and men by he Wes e n Pow-
e s in he wo k o u he inju ing he economic esou ces o ha ill-go e ned
and impo e ished coun y. Thi d comes he as ening upon Ge many o an
immeasu able load o epa a ions, ins ead o a xed, p ac icable sum.7
James T. Sho well, p esiden eme i us o he Ca negie Endowmen o
In e na ional Peace, analyzed Wilson’s leade ship, by saying
In he p eceding ske ch o Wilson’s a i policy we ha e seen he con i-
nui y o hough be ween he domes ic issues and wo ld a ai s. Ye was
his ue o he es o Wilson’s economic s a ec a ? Few gu es in wo ld
his o y ha e been mo e me cilessly a acked han he chie a chi ec o
he T ea y o Ve sailles, and al hough he con o e sies o he 1920’s
ha e cooled wi h he passing yea s, he e is s ill wide di e gence o opin-
ion on he me hods as well as he esul s o he Pa is Peace Con e ence
o 1919.8
So, o Sho well, Wilson’s economic s a ec a included a i policy and he US
demand o Ge man epa a ion in he T ea y o Ve sailles.
In 1961, Kenne h K. Ku iha i and Kenne h K. Ku iha a, he la e a
pos -Keynesian economis o Japanese o igin, discussed “mixed economic
s a ec a ”, which was mos closely associa ed wi h he name o Keynes. Fo
Ku iha a, he concep o a mixed economy (which he e e ed o as “mixed
economic s a ec a ”) ep esen s an ingenious combina ion o he ad an ages
o capi alism (laissez- ai e) and socialism wi hou hei disad an ages.9 Mixed
economic s a ec a is some hing be ween a laissez- ai e economy and an
au ho i a i e planned economy.
In 1960, Si Douglas Copland concluded his pape p esen ed o he Indus-
ial De elopmen Con e ence in Welling on wi h he wa ning “ he assump-
ion upon which economic s a ec a in he mode n wo ld mus be based is
g ow h. Those who ea i , o en e ain doub s abou he isks in ol ed will be
bypassed while he es o he wo ld goes o wa d”.10
By going h ough he li e a u e o economic s a ec a o e he pas
100 yea s, we can conclude ha economic s a ec a as a concep has been
employed since he end o he 19 h cen u y. Economic s a ec a could e e
o a leas ou hings: s , me can ilism, as indica ed in Al ed Ma shall’s
book P inciples o Economics; second, a mixed economy in he Keynesian s yle;
hi d, a s a e’s s a egy o inc ease powe and p es ige (as indica ed in William
Economic S a ec a – Concep s and Theo ies 11
S ephen Sande s’s Ge man economic s a ec a ); and ou h, a s a ec a using
economic means o achie e diploma ic and s a egic pu poses (as desc ibed by
John Hobson).
In 1985, a landma k yea o he s udy o economic s a ec a , Ame ican
poli ical scien is Da id Baldwin published his seminal book, Economic S a e-
c a . P io o his, he meaning and conno a ion o economic s a ec a we e
ambiguous and uid. Baldwin was he s schola in he Wes e n wo ld o
clea ly de ne and heo ize economic s a ec a . Almos single-handedly, he
cons uc ed a heo e ical amewo k a ound he concep . In Encyclopedia
B i annica’s en y on he opic, Da id Baldwin de ned he e m as “ he use
o economic means o pu sue o eign policy goals”.11 In his book Economic
S a ec a , he assigned a mo e academic de ni ion o he concep , e e ing o,
“in uence a emp s elying on esou ces which ha e a easonable semblance o
ma ke p ice in e ms o money”.12
By he ime Economic S a ec a was published in 1985, Baldwin had s -
hand expe ience and ample ime o conside a se ies o in e mingled poli ical
and economic e en s, such as he oil emba go imposed by he A ab wo ld on
he Wes in he 1970s and he ood emba go imposed on he So ie Union
by he Uni ed S a es (in p o es o he So ie in asion o A ghanis an). In
hese e en s, economic esou ces we e used as ools and weapons in in e -
na ional poli ical s uggles. In Baldwin’s de ni ion o “economic s a ec a ”,
he economy was ega ded as a means and ins umen o o eign policy, and
he p ac ice o economic s a ec a was a one-way ans o ma ion o economic
esou ces in o diploma ic in uence. Since hen, US policy make s and he
academic communi y ha e g adually emb aced economic s a ec a , a he
han economic diplomacy, as an o e all concep and an o cial policy e m.
The de ning momen o his was when Hilla y Clin on, hen sec e a y o
s a e, ga e a keyno e speech on economic s a ec a in 2011 and placed eco-
nomic s a ec a a he hea o Ame ica’s o eign policy agenda. In he speech,
Clin on expanded he policy ools and objec i es o “economic s a ec a ”.
She explained ha economic s a ec a in ol ed wo componen s: (1) how
one ha nesses he o ces and uses he ools o global economics o s eng hen
diplomacy and in e na ional p esence, and (2) how such diplomacy and p es-
ence can wo k o s eng hen a domes ic economy.13 Unlike Baldwin, Clin on
unde s ood economic s a ec a as a wo-way ans o ma ion be ween eco-
nomic and diploma ic in uence, a “ wo-way s ee ” o weal h and powe .
1.1.2 “Economic S a ec a ” Ve sus “Economic Diplomacy”
In con as o he US p e e ence o economic s a ec a , China, he EU, and
Japan a e accus omed o using he e m “economic diplomacy” o cha ac-
e ize he in e ela ionship be ween economics and diplomacy. Wha a e he
easons o his di e ence? Some Ame ican diploma s a gue ha “economic
s a ec a ” and “economic diplomacy” can be used in e changeably.14 In ac ,
long be o e Baldwin’s book was published, he Uni ed S a es used he e m
12 Economic S a ec a – Concep s and Theo ies
“economic diplomacy” a he han “economic s a ec a ”.15 E en a e he
publica ion o Baldwin’s book, he Uni ed S a es con inued o use he e m
“economic diplomacy” in an o cial capaci y.16 Howe e , a e o me Sec e-
a y o S a e Hilla y Clin on’s 2011 policy announcemen on “economic s a e-
c a ”, US o cials and hink anks began using he e m “economic s a ec a ”
wi h g ea e equency, and made less equen use o he e m “economic
diplomacy”.17 Acco ding o Maaike Okano-Heijmans, a senio esea ch ellow
a he Ne he lands Ins i u e o In e na ional Rela ions (Clingendael), he e
a e wo main easons why “economic s a ec a ” was a o ed by Sec e a y
Clin on and a signi can numbe o US schola s and o cials: (1) The Uni ed
S a es was paying mo e a en ion o he economic ac o s in diplomacy. Sec-
e a y Clin on ele a ed economic s a ec a o one o he pilla s o US o eign
policy, p oposing ha , “Inc easingly, economic p og ess depends on s ong
diploma ic ies, and diploma ic p og ess depends on s ong economic ies”.18
(2) Those who use he e m economic s a ec a end o accen ua e he ele-
men o powe play, which is consciously o unconsciously deemphasized in
scholas ic and p ac ical e e ences o economic diplomacy.19
China and Eu ope’s p e e ence o he e m “economic diplomacy” is-à-
is he Uni ed S a es e ec s di e en pe cep ions, unde s andings, and appli-
ca ions o he concep o powe among he h ee. In con as , he Uni ed
S a es places he g ea es emphasis on powe , and he US s a egic communi y
is chie y conce ned wi h he ans o ma ion be ween economic esou ces and
powe in “economic s a ec a ”, which is inc easingly becoming an essen ial
building block o US g and s a egy. China and Eu opean coun ies (and ins i-
u ions), howe e , emphasize he p ocess o diploma ic nego ia ion and dis-
a o he use o powe . Among he bes -known Eu opean (including B i ish)
gu es in he s udy o economic diplomacy a e Si Nicholas Bayne, o me
economic di ec o a he B i ish Fo eign and Commonweal h O ce, and D .
S ephen Woolcock, o he London School o Economics and Poli ical Science
(LSE). Wi h he LSE as hei main a ena, Si Nicholas Bayne and D . S ephen
Woolcock ha e been o e ing cou ses in economic diplomacy since 1999. They
de ne economic diplomacy as “ he me hods and p ocess o decision-making
and nego ia ion”, emphasizing ha economic diplomacy is abou , “how hey
make decisions domes ically, how hey nego ia e wi h each o he in e na ion-
ally, and how hese wo p ocesses in e ac ”.20 I is hus clea ha Si Nicholas
Bayne and D . S ephen Woolcock, in hei s udy o economic diplomacy, ocus
p ima ily on he p ocess and ins i u ion o economic diplomacy and less so on
he deploymen and ans o ma ion o powe embedded in he nego ia ion
p ocess o economic diplomacy. Clea ly, his de ni ion o economic diplomacy
is hea ily in uenced by Robe Pu nam’s wo-le el game heo y. In ac , Si
Nicholas Bayne and Robe Pu nam a e good iends, and hei iendship
has inspi ed hem bo h and has g ea ly bene ed Pu nam’s ad ancemen and
e nemen o his wo-le el game heo y.21 The wo men also wo ked oge he
on a book on he G oup o 7 (G7) Summi , a opic hey examined using wo-
le el game heo y.22
Economic S a ec a – Concep s and Theo ies 13
Howe e , economic diplomacy is a niche eld o s udy in he EU, and
i s de elopmen and policy p ac ice ha e no achie ed subs an ial a en ion.
Fo example, om 2016 o 2017, he EU ied o launch an EU economic
diplomacy s a egy, bu ul ima ely, he s a egy was abo ed o a ious ea-
sons. On Feb ua y 24, 2016, he Eu opean Poli ical S a egy Cen e (EPSC),
he Eu opean Commission’s in-house hink ank, o ganized a con e ence wi h
he heme o “Economic Diplomacy and Fo eign Policy: F iends o Foes?”
The con e ence ea u ed a keyno e speech by Jy ki Ka ainen, he hen-Finnish
ice-p esiden o he Eu opean Commission wi h a ade policy po olio, and
ga he ed eli e gu es om EU poli ics, business, and academia o discuss how
poli ical and economic goals and ools can be combined and how ade-o s
be ween poli ical and economic in e es s should be made.23 The con e ence
can be seen as a p ecu so o he EU’s ad ancemen o economic diplomacy
om 2016 onwa ds. In o de o ad ance he economic diplomacy s a egy
a he EU le el, he Eu opean Ex e nal Ac ion Se ice (EEAS) also c ea ed a
special ambassado ial-le el economic diplomacy ad iso ole o managing he
o mula ion o an economic diplomacy s a egy pape . Howe e , he s a egy
pape (called “Communica ion” in he EU ja gon) was no eleased o wo
easons: (1) The e was disag eemen among EU membe s a es conce ning
he de ni ion o economic diplomacy. Some conside ed economic diplomacy
as ade and in es men p omo ion, which alls unde he ju isdic ion o mem-
be s a es. O he membe s a es and he EEAS (Eu opean Ex e nal Ac ion
Se ice) belie ed ha he EU needed a uni ed and coo dina ed economic
diplomacy app oach o be e employ i s economic s eng hs and means o
achie e he EU’s o eign policy objec i es. The e o e, he EU should ha e
ju isdic ion o e economic diplomacy ma e s. (2) Wi hin he Eu opean Com-
muni y, he e we e di e en iews as o how o align economic and s a egic
in e es s. The Di ec o a e o T ade o he Eu opean Commission was less
inclined o weaponize ade policy ins umen s, whe eas he EEAS (in cha ge
o o eign policy) a o ed using ade, mone a y, and nancial ins umen s o
achie e s a egic o eign aims. As a esul , no EU-le el economic diplomacy
s a egy pape was eleased.
1.1.3 Analysis and C i ique o he Concep o Economic S a ec a
To accu a ely disce n he concep o “economic s a ec a ”, we mus s
unde s and wha “s a ec a ” is. The Camb idge Dic iona y de nes s a e-
c a as “ he skill o go e ning a coun y”.24 O he dic iona ies de ne i
as “ he a o go e nmen and diplomacy”, “ he a o conduc ing pub-
lic a ai s”, o “s a esmanship”.25 The Me iam-Webs e Dic iona y’s en y
eads, “ he a o conduc ing s a e a ai s”.26 In Ma ga e Tha che ’s S a e-
c a : S a egies o a Changing Wo ld, “s a ec a and s a esmanship a e,
acco ding o he dic iona y de ni ion, in e changeable. Bu he o me has
a mo e p ac ical ing o i , emphasising ac i i y a he han he o ic, s a egy
no jus diplomacy”.27
20 Economic S a ec a – Concep s and Theo ies
means o weal h p oduc ion in ancien G eece, bu A hens and Spa a had
e y di e en ways o acqui ing weal h. A hens was a ma i ime empi e ha
elied on o e seas coloniza ion. Spa a, on he o he hand, was p ima ily
an ag a ian ci iliza ion. In ancien Rome, he main mo i a ion o Roman
a mies o go o wa was pu ely economic gain – o plunde spoils and sla es
ha would suppo a sla eholding empi e. Thus, he expansion and ise o
Rome was p ima ily h ough mili a y migh . As i expanded, i cons an ly
expo ed oops and plunde ed weal h.45 Mon esquieu said, “Rome g ew
g ea because she had successi e wa s” (F ench: Rome s’é ai ag andie, pa ce
qu’elle n’a ai eu que des gue es successi es).46 The e a e many explana ions
o he decline o he Roman Empi e. The ancien Roman his o ian Appi-
anus (c. 95–c. 165) s a ed ha a e y impo an eason o he all o he
ancien Roman Empi e was sla e y and he unsus ainable economy o la ge
plan a ions. This economic app oach o ced he ancien Roman Empi e
o expand cons an ly o acqui e new e i o ies and sla es o suppo i s
sla eholding empi e, e en ually leading o mili a ism and ex a agance. As
hedonism b ed in e nally, he la e Roman Empi e was o ced o ely on la ge
oops o Ge manic me cena ies, which e en ually led o he empi e’s demise
(a he hands o he Ge manic me cena y chie s). In eudal socie ies, one
o he Pope’s weal h-making me hods was he sale o he indulgence le e ,
which e en ually led o he Re o ma ion, wi h Ma in Lu he ’s Nine y-Fi e
Theses as he p ecu so .
Fo he ea ly me can ilis s, weal h was gold and sil e . All economic ac i i-
ies o he s a e se ed he sole pu pose o acqui ing mo e gold and sil e .
Me can ilism held ha he e we e wo sou ces o weal h: (1) he mining o
gold and sil e , and (2) he de elopmen o ex e nal ade. In con as , Adam
Smi h, a leading gu e in classical libe alism, a gued ha he so-called na ional
weal h is he sum o commodi ies p oduced by a na ion, and ha he sou ce o
weal h is labo in a ious sec o s such as ag icul u e, indus y, and comme ce.
The e a e wo p ima y condi ions o means o g ow weal h: o inc ease labo
p oduc i i y, which equi es imp o ing he di ision o labo , and o inc ease
he numbe o wo ke s, which equi es u he capi al accumula ion. Adam
Smi h opposed me can ilism, belie ing i o be he mos de imen al o he
o ganic g ow h o weal h.
Nine een h-cen u y Ge man economis F ied ich Lis c i icized Adam
Smi h and p oposed he “ heo y o p oduc i e powe ” based on he idea ha
weal h is gene a ed o causes qui e di e en om weal h i sel . Lis belie ed
ha a pe son may possess weal h, i.e. exchangeable alue; i , howe e , he does
no possess he powe o p oducing objec s o mo e alue han he consumes,
he will become poo e . This applies o indi iduals, bu is s ill mo e he case
wi h en i e na ions (who canno li e ou o me e en als) han wi h p i a e
indi iduals. Ge many has been de as a ed in e e y cen u y by pes ilence, by
amine, o by ci il o o eign wa s; she has, ne e heless, always e ained a
g ea po ion o he powe s o p oduc ion, and has hus quickly ea ained
some deg ee o p ospe i y; while ich and migh y bu despo - and p ies - idden

Economic S a ec a – Concep s and Theo ies 21
Spain, no wi hs anding he compa a i e enjoymen o in e nal peace, has sunk
deepe in o po e y and mise y. The same sun s ill shines on he Spania ds,
hey s ill possess he same a ea o e i o y, hei mines a e s ill as ich, hey
a e s ill he same people as be o e he disco e y o Ame ica, and be o e he
in oduc ion o he Inquisi ion; bu ha na ion has g adually los he powe s
o p oduc ion, and has he e o e become poo and mise able.47 Lis concluded
ha “ he powe o p oducing weal h is he e o e in ni ely mo e impo an
han weal h i sel ”.
Lis was also a suppo e o p o ec i e du ies. He a gues,
i is ue ha p o ec i e du ies a s inc ease he p ice o manu ac u ed
goods; bu i is jus as ue, and mo eo e acknowledged by he p e ail-
ing economical school, ha in he cou se o ime, by he na ion being
enabled o build up a comple ely de eloped manu ac u ing powe o i s
own, hose goods a e p oduced mo e cheaply a home han he p ice a
which hey can be impo ed om o eign pa s.48
Lis ’s doc ine had a g ea in uence on Ge many and he Uni ed S a es du ing
hei ises and ca ch-up phases.
In he his o y o economic doc ine, economic s a ec a has ecei ed
a en ion om a ious economic schools o hough , wi h a ying deg ees
o impo ance gi en o he ole o go e nmen . The s was he ee ma ke
school, s a ing wi h Adam Smi h and con inuing h ough Mil on F iedman
in he 1960s. The second was he Keynesian school, wi h i s emphasis on go -
e nmen egula ion. The hi d was he school o supply-side economics, which
was also de i ed om Adam Smi h; i ad oca ed small go e nmen and ma -
ke -based alloca ion. Unlike he Keynesian belie o go e nmen egula ing
he ma ke , he school o supply-side economics belie ed ha supply bege s
he ma ke and demand. The main and mos success ul applica ion o supply-
side economics in he con ex o economic s a ec a was in he ea ly 1980s,
when Eu ope, ep esen ed by Tha che , and he Uni ed S a es, ep esen ed
by Reagan, sol ed he p oblem o “s ag a ion” h ough supply-side economic
e o m. Eu ope’s economic boom in he 1990s and he Uni ed S a es’ in he
la e 1980s ( om Bush S . h ough he Clin on yea s), can be a ibu ed o he
ounda ion laid by Tha che and Reagan in he 1980s. Thanks o he g owing
economic s eng h o he Uni ed S a es and B i ain, he Uni ed S a es ou -
las ed he So ie Union and won he Cold Wa , while B i ain won he Falkland
Islands Wa o e A gen ina.49
1.2.3.2 Weal h Ex ac ion
Weal h ex ac ion e e s o he collec ion and expendi u e o go e nmen
e enues, as well as he unc ion and ac o go e nmen in e en ion in
he economy, which alls wi hin he scope o he s udy o public econom-
ics o go e nmen economics.50 Weal h ex ac ion has been a co e subjec
22 Economic S a ec a – Concep s and Theo ies
in Wes e n nance, and la e , public economics esea ch. In 1662, William
Pe y published A T ea ise o Taxes and Con ibu ions, which analyzed he
easons o inc eases in s a e expendi u e, people’s objec ion o axa ion and
he me hods o ax collec ion, and he ways and means by which he s a e
aised unds. I pionee ed he s udy o Wes e n nance. In The Weal h o
Na ions, Adam Smi h also spoke a leng h abou s a e nance.51 His o ically,
weal h was ex ac ed s by ule s o consolida e hei eign and la e o
expansion. Fo example, in he la e Middle Ages, o main ain he b oadening
unc ions o he oyal h one, i was necessa y o nd ways o inc ease axes.
In his age, Eu opean mona chs began o collec sales axes and du ies on
impo s and expo s. On he back o h i ing comme ce and expanding ma -
ke s, business e enues con inued expanding, and he mona chs did no was e
his oppo uni y o collec money.52 Weal h ex ac ion was a game be ween
he ule s and he uled, as well as one played among he uling eli e. In he
la e Middle Ages, wi h he apid ise o oyal powe in England, he nobles
had o p o ec hei own in e es s, so hey began o demand ha he c own’s
powe be sha ed. The Magna Ca a was in oduced o limi he king’s pe -
sonal powe s, which se he p eceden o he mode n bou geois-democ a ic
e olu ion. F ance expe ienced simila de elopmen s. Du ing he Hund ed
Yea s’ Wa wi h England, he F ench c own was also on he e ge o nan-
cial and economic exhaus ion. The F ench c own was o ced o summon he
Es a es Gene al and su ende some o i s powe in exchange o he nobil-
i y’s suppo o axa ion. In addi ion o axa ion, ano he impo an a enue
o weal h ex ac ion was bo owing, and bo owing had o be done on good
c edi .53 When a coun y’s weal h ex ac ion is insu cien , i mus conside
in e na ional supplemen a ion. A guably, he T ump adminis a ion aised
a i s o make up o he gap in i s domes ic ax cu s by launching a wo ld-
wide ade wa . T ump’s domes ic policies we e buil on d awing esou ces
om o he coun ies.
The abili y o ex ac weal h ma e s in he ise and all o na ions. The
amous “Re o ms o Wang Anshi” in Chinese his o y la gely deal wi h he
means o weal h ex ac ion. I signi can ly en iched he s a e’s e enue and
empowe ed i s a my h ough he G een Sp ou s Law, he Land Su ey and
Equi able Tax Law, and he Ma ke Exchange Law. Howe e , he ailu e o
Wang Anshi’s e o ms e en ually led o he demise o he Song Dynas y. The
Ming Dynas y used up all he sil e in i s easu y o help he Joseon Empi e o
Ko ea esis he Japanese wa lo d Toyo omi Hideyoshi, so much so ha i had
no hing le o pay soldie s o de end agains Li Zicheng, e en ually leading
o he end o he dynas y. Ray (Renyu) Huang men ioned ha he e ciency
o Chinese axa ion was highly co ela ed wi h he expansion and con e gence
o he empi e.54 Chen Yun, a key Chinese Ma xis economis and leade , once
said ha he poli ical au ho i y o he Chinese cen al go e nmen should
be unde pinned by i s economic au ho i y. In 1994, China ini ia ed e o m
owa ds a ax-sha ing sys em, which signi can ly inc eased he coun y’s abil-
i y o ex ac scal e enue.55
Economic S a ec a – Concep s and Theo ies 23
1.2.3.3 Weal h-Powe T ans o ma ion
Da id Baldwin’s de ni ion o economic s a ec a al eady implied he ans o -
ma ion o weal h in o in e na ional in uence, bu he did no explici ly say so.
“T ans o ma ion” is a key s a egy o he ealiza ion o economic s a ec a ,
and an in eg al componen o he s udy o economic s a ec a . “T ans o ma-
ion” in he con ex o economic s a ec a e e s o he ac , a , and p ocess
o consciously ans o ming weal h and powe h ough he s a egy, ac ics,
and ins i u ional design o a coun y’s (cen al) go e nmen in i s ex e nal
ela ions.56 The “s a egy” he e is a plan o ac ion o he ac o s o mobilize,
cul i a e, o ganize, and deploy a ious exis ing and po en ial o ces o achie e
p ede e mined goals.57 The ealiza ion o ans o ma ion s a egy depends on
a ious policy ools. In his ega d, Baldwin g ouped he ools o economic
s a ec a in o wo ca ego ies: posi i e sanc ions (e.g., g an ing mos - a o ed-
na ion s a us, p o iding aid) and nega i e sanc ions (e.g., emba go, boyco ).58
In addi ion o he economic s a ec a men ioned by Baldwin, coun ies a e
“in en ing” and “ ein en ing” a ious ypes o economic s a ec a ools o
ans o m weal h in o powe – o example, he EU’s la es in en ions o he
In e na ional P ocu emen Ins umen (IPI) and he An i-Coe cion Ins u-
men (ACI). The IPI allows he EU o ecip ocally close i s own go e nmen
p ocu emen ma ke i a o eign go e nmen ails o open i s go e nmen p o-
cu emen ma ke o w he EU, so a i s co e, i is a sys em o “nega i e eci-
p oci y”. Unde he ACI, he EU can ake economic coun e measu es when a
hi d coun y ies o coe ce he EU o a membe s a e o ac o no o ac in
ce ain ways h ough measu es a ec ing ade o in es men . To some ex en ,
he con es o economic s a ec a is a con es o abili y o de elop economic
s a ec a ools. The de elopmen o economic s a ec a ools equi es bal-
anced conside a ion o a coun y’s economic s eng h, domes ic a o dabili y,
and in e na ional epu a ion, among o he conside a ions.
A he same ime, a “ ans o ma ion” s a egy also equi es conside a ion
o he e ciency and e ec i eness o ans o ma ion. In The T agedy o G ea
Powe Poli ics, John Mea sheime aised he ques ion, which ype o poli i-
cal and economic sys em (some hing we can call “weal h-powe -sys em”) is
mos conduci e o ans o ma ion? A e compa ing he economic sys ems o
he So ie Union, he Uni ed S a es, and Ge many, Mea sheime concluded
ha he So ie and US economies we e a be e o ganized han he Ge -
man economy o mass-p oducing weapon y.59 Huang Qixuan a gues ha big
powe s’ choice o economic g ow h model o en leads o di e en in e na-
ional poli ical ou comes. In he la e 19 h and ea ly 20 h cen u ies, why did
he economic g ow h o he Uni ed S a es no in i e a s ong con on a ion
om B i ain, while he ise o Ge many economically pushed B i ain and Ge -
many o wa ?60 In ac , an impo an aspec o he s udy o economic s a ec a
is “compa a i e economic s a ec a ”, ha is, he s udy o whe he he poli i-
cal and economic sys em o a coun y (weal h-powe sys em) is conduci e o
mo e e cien and sus ainable ans o ma ion o weal h in o powe .
24 Economic S a ec a – Concep s and Theo ies
1.2.4 Academic and Theo e ical S anding o Economic S a ec a
Acco ding o Gilpin, in he la e 19 h cen u y, he b oad de ni ion o wha econ-
omis s s udy na owed conside ably. Al ed Ma shall, he a he o mic oeco-
nomics, u ned his back on he ea lie emphasis on he na ion as a whole and on
he poli ical as impo an . In his highly in uen ial P inciples o Economics (1890),
Ma shall subs i u ed he p esen -day e m “economics” o “poli ical economy”
and g ea ly es ic ed he domain o economic sciences.61 The s udy o economic
s a ec a has a pu pose o he con a y; i is o e u n o he esea ch e hos and
o igins o classical poli ical economy and o make new b idges be ween econom-
ics and poli ical science and be ween in e na ional poli ical economy, economic
diplomacy, g and s a egy, and managemen s udies.
The heo e ical oo s o economic s a ec a a e s and o emos he poli ical
economy; i is inex icably linked, and in some cases, synonymous wi h poli ical
economy. As John S ua Mill, he las majo classical economis , commen ed,
poli ical economy is he science ha eaches a na ion how o become ich. Clas-
sical economis s emphasized he weal h o na ions, and he e m “poli ical” was
as signi can as he e m “economy”.62 In The Weal h o Na ions, Adam Smi h
a gued ha poli ical economy is, “a b anch o he science o a s a esman o leg-
isla o ”. I was also a guide o he p uden managemen o he s a e economy.
Adam Smi h ega ded economics as a science o he p oduc ion, dis ibu ion,
and consump ion o weal h.63 Wi h he publica ion o Smi h’s majo wo ks
and hei Ge man ansla ions, a Ge man poli ical economy called “S aa swis-
senscha ” o “s a e economics” began o eme ge in Ge many. The Ge mans
conside ed “S aa swissenscha ” as a science ha sys ema ically s udied he
measu es and ins umen s ha he s a e should adop o manage, in uence,
es ic , and o ganize indus y, comme ce, and c a s o maximize he wel a e o
he people.64 Economic s a ec a looks a he ich and complex dialec ical ela-
ionships be ween poli ics and economics and be ween weal h and powe . This
s udy is mean o se e he s a e’s s a egy and policy making. In ancien imes,
economic s a ec a was, o he king, he a o uling, he way o go e ning.
In con empo a y imes, economic s a ec a is la gely abou he go e nance o a
coun y’s a ai s. Ma xis pa ies pay pa icula a en ion o economic s a ec a
because he Ma xis way o hinking is ha he economic base de e mines he
supe s uc u e, and economic s a egies in e ac closely wi h poli ical and dip-
loma ic s a egies. Howe e , he cu en disciplina y di ide lea es a gap o an
in eg a ed analy ical amewo k o examine and add ess his issue.
In Chap e Two, we a e going o s udy he ou majo pa adigms o eco-
nomic s a ec a in mode n imes, namely, me can ilism, libe alism, impe ial-
ism, and Ma xism.
No es
1 Ma shall, A. (1890). P inciples o Economics. London: Macmillan, p.41.
2 Smi h, A. (2012). An Inqui y in o he Na u e and Causes o he Weal h o Na ions.
Chicago: Uni e si y o Chicago P ess, p.556.
Economic S a ec a – Concep s and Theo ies 25
3 Smi h, A. (2012). An Inqui y in o he Na u e and Causes o he Weal h o Na ions.
Chicago: Uni e si y o Chicago P ess, p.587.
4 Sande s, W. M. S. (1918). Pan-Ge man Socialism. London: W.H. Smi h & Son, p.12.
5 Sande s, W. M. S. (1918). Pan-Ge man Socialism. London: W.H. Smi h & Son,
pp.12–13.
6 Sande s, W. M. S. (1918). Pan-Ge man Socialism. London: W.H. Smi h & Son, p.12.
7 Hobson, J. A. (1922). B i ain’s Economic Ou look on Eu ope. Jou nal o Poli ical
Economy, Augus , 30(4), p.483.
8 Sho well, J. T. (1951). The Leade ship o Wilson. Cu en His o y, No embe ,
21(123), pp.263–264.
9 Ku iha i, K. K., & Ku iha a, K. K. (1961). Mixed Economic S a ec a and Democ a ic
Sa egua ds. Social and Economic S udies, June, 10(2), pp.223–228.
10 Copland, S. D. (1960). Economic P oblems o New Zealand in an Expanding
Economy. Indus ial De elopmen Con e ence, Welling on, June.
11 Baldwin, D. A. Economic S a ec a . B i annica, see www.b i annica.com/ opic/
economic-s a ec a
12 Baldwin, D. A. (1985). Economic S a ec a . P ince on, NJ: P ince on Uni e si y
P ess, pp.13–14.
13 Clin on, H. (2011). Economic S a ec a Speech. Economic Club o New Yo k, New
Yo k Ci y, Oc obe 14.
14 (2012). I in e iewed a diploma a he U.S. Embassy, Beijing, Ap il.
15 Economic diplomacy s appea ed in Ame ican academic jou nals in 1959, when
Robe B. W igh , Chie o he Economic De ense Di ision o he US Depa men
o S a e, published a pape i led “Ame ican Economic Diplomacy and he So ie
Bloc” in Social Science, see W igh , R. B. (1959). Ame ican Economic Diplomacy
and he So ie Bloc. Social Science, Oc obe , 34(4), p.200. In he 1960s, he e was
a slowly g owing numbe o publica ions on economic diplomacy. Examples in-
clude “The Challenge o Coexis ence: A S udy o So ie Economic Diplomacy” by
Mil on Ko ne in 1961 (Ame ican Poli ical Science Re iew, Vol. 55, No. 4); Hei o
Empi e: Uni ed S a es Economic Diplomacy (1916–1923) by Ca l P. Pa ini in 1969
(Uni e si y o Pi sbu gh P ess); and He be Hoo e and Economic Diplomacy:
Depa men o Comme ce Policy, 1921–1928 by Joseph B andes in 1970 (Uni e -
si y o Pi sbu gh P ess). The 1970s wi nessed a mild inc ease o publica ions on
economic diplomacy. I seems ha economic diplomacy was mainly he in e es
o Ame ican diploma ic his o ians. Rep esen a i e wo ks include “Anglo-Ame ican
Co po a ism and he Economic Diplomacy o S abiliza ion in he 1920s” by Ca l
Pa ini and Michael Joseph Hogan in 1978 (Re iews in Ame ican His o y, Vol
6, p. 379); Economic Diplomacy: The Expo -Impo Bank and Ame ican Fo eign
Policy, 1934–1939 by F ede ick C. Adams in 1976 (Uni e si y o Missou i P ess,
Columbia); and In o mal En en e: The P i a e S uc u e o Coope a ion in Anglo-
Ame ican Economic Diplomacy, 1918–1926 by Michael J. Hogan in 1977 (Uni e -
si y o Missou i P ess, Columbia). The only excep ion is poli ical scien is s Samuel
P. Hun ing on e al.’s o eign policy piece “T ade, Technology, and Le e age: Eco-
nomic Diplomacy” in 1978 (Fo eign Policy, Vol. 32, pp. 63–106).
16 Wayne, E. A. (2006). U.S. Economic Diplomacy: P io i ies and Conce ns. Hous on
Wo ld A ai s Council Co po a e B ie ng, Hous on, Texas, Janua y 13.
17 Goodman, M. P. (2017). T ump’s Economic S a ec a : The Fi s 1,000 Days.
CSIS Newsle e , Ap il 27; Ki shenbaum, J. (2021). Economic S a ec a Towa d
China om T ump o Biden: Mo e Con inui y han Mee s he Eye. Ge man Ma -
shal Fund, June 23.
18 Clin on, H. (2011). Ame ica’s Paci c Cen u y. Fo eign Policy, Oc obe 11.
19 Okano-Heijmans, M. (2013). Economic Diplomacy: Japan and he Balance o
Na ional In e es s. Leiden and Bos on: Ma inus Nijho Publishe s, oo no e 4,
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No on & Company, p.40.
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DOI: 10.4324/9781003351382-3
This chap e has been made a ailable unde a CC-BY-NC-ND license.
2 Pa adigm Shi s in Economic
S a ec a O e Time
Since mode n imes, ou pa adigms o economic s a ec a ha e eme ged
among he wo ld’s majo powe s: me can ilism, libe alism, impe ialism, and
Ma xism, wi h a numbe o a ian s. The so-called “pa adigm” o economic
s a ec a e e s o he weal h-powe s a egy (WPS) o he dominan s a e
(especially he hegemonic s a e) o e a long his o ical pe iod.
The WPS in Wes e n his o y could be a long-du a ion s a egy o sho -
e m ac ics. I he e o e di ide he WPS in o h ee ypes: long, medium, and
sho -du a ion. The s ype o WPS was he long du a ion, co e ing s he
ancien G eco-Roman impe ial e a, hen he Ch is ian eudal e a, and las , he
na ion-s a e e a. Fo he ancien Roman Empi e, economy and empi e we e
closely linked. The su i al o ancien Rome depended on he expansion o
he empi e and he main enance o i s as e i o y. Expansion b ough in
mo e sla es o se e he sla eholding la ge plan a ion economy. The Roman
Republic buil a Roman Empi e ac oss Eu asia h ough cons an expansion
and conques . Du ing T ajan’s eigning pe iod (53 AD–117 AD), he Medi-
e anean Sea became Ma e Nos um (La in: Ou Sea) o he Roman Empi e.
The ancien Roman Empi e esis ed in e nal di ision and ex e nal ba ba ian
in asions wi h i s adminis a i e s uc u e and he linked mili a y appa a us.
The empi e e en ually disin eg a ed when i became oo di cul o main ain
local loyal y o he cen e and gh o o eign in ade s. The sla eholding la ge
plan a ion economy led o u ban pola iza ion, economic and social inequal-
i y, and in ensi ed con ic s wi hin he ancien Roman Empi e. This ga e ise
o Ch is iani y, which became a ai h o he lowe classes and he poo – and
e en ually, he s a e eligion.1
By he la e Middle Ages, mona chs, eage o expand hei e i o ies, achie e
in e nal uni y, and o i y absolu e mona chy, had aken owne ship o axa ion,
a o m o poli ical so e eign y. The no ion o he sup emacy o mona chy and
kingship began o eme ge, and he no ion o mu ual es ain s and con ac s,
cha ac e is ic o eudalism, was eplaced by ha o supe io powe . The pope,
he Ge man p inces, and he F ench, Spanish, English, and Scandina ian mon-
a chs an swi ly owa d au ho i a ianism.2 In he ecen pas , he Wes has
expe ienced me can ilism, libe alism, and impe ialism. These we e sys emic-
le el, global, and long-las ing pa adigms.
Pa adigm Shi s in Economic S a ec a O e Time 29
The second ype o WPS was he medium-du a ion WPS. I included powe
s a egies ( ans o ma ion o weal h in o powe ) such as he Ma shall Plan p o-
posed by US P esiden Ha y S. T uman, he Build Back Be e Wo ld (B3W)
ini ia i e p oposed by P esiden Joe Biden, he Global Ga eway ini ia i e p o-
posed by he Eu opean Commission unde he p esidency o U sula on de
Leyen, and a se ies o weal h s a egies such as mone a ism, Keynesianism,
and O do-libe alism. These weal h s a egies, hough exp essed in he o m o
economic policies, ha e p o ound poli ical implica ions.
The hi d was he sho -du a ion WPS, e e ing o he wo-way ans o -
ma ion o weal h and powe in speci c nego ia ions. I is essen ially a nego ia-
ion s a egy and a p ojec ion o ba gaining powe . The e a e many examples
o sho - e m economic s a ec a , such as ade wa s, nancial wa s, and eco-
nomic sanc ions. The global ade wa s a ed by P esiden T ump in 2018
was essen ially abou using he Uni ed S a es’ posi ion o s eng h and eco-
nomic powe o impose economic coe cion on o he majo economies. China,
he EU, India, Tu key, and o he economies esponded o T ump’s economic
coe cion wi h e alia ions, esul ing in a global phenomenon o wha we can
call “compe ing economic s a ec a s”. In ecen yea s, in e dependence has
been inc easingly ins umen alized, poli icized, and weaponized.
All he WPS o di e en du a ions conce n he cen al issue in he s udy
o economic s a ec a – he wo-way ans o ma ion o weal h and powe .
This chap e ocuses on he WPS in he long du a ion. In he ma a hon o
g ea powe compe i ion, an eme ging g ea powe mus adop a no el weal h
s a egy, ha is, i acqui es new p oduc i i y and enjoys highe labo e ciency.
A he same ime, his new powe mus ha e adop ed a mo e e cien and
sus ainable WPS. A he end o he day, he s a egic compe i ion among g ea
powe s is a compe i ion o WPSs. Following is he analysis o he pa adigms
o economic s a ec a o Wes e n hegemonic powe s and hei ca ching-up
coun e pa s since mode n imes, as summa ized in Table 2.1.
2.1 The Age o Classical Me can ilism (15 h–18 h Cen u ies)
Me can ilism was by a he longes -las ing o m o economic s a ec a . Jacob
Vine summa ized e elemen s o me can ilism:
(1) policy should be amed and execu ed in s ic ly na ionalis ic e ms,
ha is, na ional ad an age alone is o be gi en weigh ; (2) in app ais-
ing any ele an elemen o na ional policy o o o eign ade, g ea
weigh is always o be pu on i s e ec , di ec o indi ec , on he na ional
s ock o he p ecious me als; (3) in he absence o domes ic gold o sil-
e mines, a p ima y na ional goal should be he a ainmen o as la ge
an excess o expo s o e impo s as is p ac icable, as he sole means
whe eby he na ional s ock o he p ecious me als can be augmen ed; (4)
a balance o ade “in a o ” o one’s coun y is o be sough h ough
di ec p omo ion by he au ho i ies o expo s and es ic ion o impo s
36 Pa adigm Shi s in Economic S a ec a O e Time
2.2 The Age o Classical Libe alism (1846–1870)
Economic libe alism was he second majo pa adigm o economic s a ec a
o eme ge a e me can ilism. Adam Smi h s in oduced he idea o me -
can ilism in The Weal h o Na ions and p oposed he heo e ical amewo k o
classical libe alism based on a c i ique o me can ilism. Adam Smi h p oposed:
(1) i is no necessa y o pu sue he s ock o p ecious me als, (2) he e is no
need o seek ade su plus, and (3) he e is no need o ewa d expo s while
es ic ing impo s.
The key componen s o economic libe alism include (1) ee ma ke s; (2)
minimal s a e in e en ion; (3) indi idual consume s, ms, o households
( a he han he s a e) o m he basis o socie y; and (4) he p ima y objec i e
o economic ac i i y o weal h c ea ion is o se e consume s. In Adam Smi h’s
wo ds, he ole o go e nmen was o ac as a “nigh wa chman” o p e en
o eign agg ession and main ain public secu i y.
Be o e B i ain, he s coun y o adop libe al policies was he Ne he -
lands. The Du ch libe al policies, bo h poli ical and economic, we e so ho -
oughly implemen ed ha hey we e libe alism on s e oids. The Du ch Empi e
made i s name o he skill o one-s oke he ing gu ing and h i ed on he
he ing ade. A ha ime, o esis he ule o he Spanish Habsbu gs, he
P o es an p o inces in he no he n Ne he lands o med he Union o U e-
ch o gh o independence, bu he sou he n p o inces we e long unde
he Ca holic ule o he Spanish Habsbu gs. As a esul , weal hy and skilled
Jews om he sou h and om Spain and Po ugal ed o he no h o escape
eligious pe secu ion, whe e he e was a capi alis epublic and eedom o eli-
gion, poli ics, and comme ce. This eedom was e ec ed in scien i c esea ch,
w i ing, and many o he aspec s. The no he n Ne he lands became a sanc u-
a y o businessmen, scien is s, publishe s, and eedom seeke s. This eedom
in eligion, poli ics, comme ce, and publishing led o a boom in a , cul u e,
and o eign ade in he Ne he lands. In e ms o o eign ade, he Ne he -
lands aded wi h he Middle Eas , Cen al Asia, and he Fa Eas . The mos
impo an was he spice ade, which led o he es ablishmen o he Du ch
Eas India Company. Thanks o he p i a e capi al aised om he Ams e dam
S ock Exchange, in less han a cen u y, he Du ch Eas India Company g ew
o become he mos powe ul and weal hy ading company in he wo ld.
Ams e dam also became a hub o scien i c esea ch, highe educa ion, and
comme ce in Eu ope. As o he decline o he Ne he lands, i was mainly due
o he ise o o he g ea powe s such as B i ain and F ance, as he Ne he lands
lacked an asse i e powe o gan. The decline o he Ne he lands was ela i e.
As a small, opp essed coun y, he Ne he lands ose o become a ma i ime
empi e o global each wi h unique weal h and powe s a egies, o which, he
libe al weal h-powe s a egy was he mos c ucial and emblema ic.
A e he Ne he lands, B i ain ose o become he new hegemon. B i -
ain was ini ially me can ilis and la e libe al. P io o Adam Smi h, B i ain
en o ced he Na iga ion Ac s, he so-called “en epô colonialism”. Unde he

Pa adigm Shi s in Economic S a ec a O e Time 37
Na iga ion Ac s, aw ma e ials om he Ca ibbean and Ame ican colonies had
o be shipped o B i ain s and be ca ied by B i ish-owned ships, ega dless
o he nal ma ke . En epô colonialism imposed a comme cial s ai jacke on
colonial economies ha was deeply esen ed as an in ingemen o eedom –
by he P o es an Anglo-I ish as well as by plan e s in Ba bados: “F ee T ade is
he li e o all colonies”, decla ed he Ba bados go e no ebelliously.10
In he ee ade phase, he B i ish go e nmen abandoned ade p o ec ion
and adop ed a policy o ee ade, es ablishing “ ee ade impe ialism”. Wha
mo i a ed his change was B i ain’s inc eased weal h p oduc ion capaci y. A e
he Indus ial Re olu ion, B i ain became he mos compe i i e coun y in he
wo ld, so in he mid-19 h cen u y, he Co n Laws and he Na iga ion Ac s
we e abolished, and libe alism was in oduced. As B i ain emba ked on he
Indus ial Re olu ion, Adam Smi h’s book The Weal h o Na ions was pub-
lished. The book no longe emphasized he s a e as me can ilism had, bu
a he , p omo ed cosmopoli anism, nding ha he sou ce o weal h gene a-
ion was no longe ci cula ion, bu he di ision o labo in he p oduc ion
s age. Smi h belie ed ha o inc ease na ional weal h, he s a e mus inc ease
he numbe o wo ke s and labo p oduc i i y. An inc ease in he numbe o
wo ke s equi es he accumula ion o capi al, and he inc ease in labo p o-
duc i i y is p edica ed upon he di ision o labo . The di ision o labo , in
u n, leads o exchange, and exchange leads o a se ies o economic ca ego ies
such as alue.11 In Smi h’s ime, England had become a capi alis indus ial
na ion, and ag icul u e had become capi alis ag icul u e. The bou geoisie, as
a p og essi e class, demanded he clea ing o obs acles o capi alis de elop-
men , he elimina ion o s a e in e en ion and me can ilis policies,12 and he
aboli ion o eudalism.
Howe e , om he pe spec i e o economic s a ec a , B i ain, which
adop ed libe al policies, did no ac ually o ego he powe s a egy o he s a e.
Wha uly made he B i ish Empi e s ong was he combina ion o libe alism,
he indus ial e olu ion, and he empi e. I was he bou geoisie ha pushed
B i ain o adop libe al policies. The e o e, in he libe al e a, he bou geoisie
was esponsible o implemen ing bo h he s a egy o weal h and he s a egy
o powe . This anscends he dicho omy be ween he ac o s o weal h and
powe s a egies du ing he me can ilis pe iod (bou geoisie s. eudal des-
po ). In he classical libe al pe iod, he s a e’s pu sui o weal h equi ed he
supply o s a e powe , and when he gene al s a e sys em ailed o deli e , B i -
ain mo ed owa d colonialism and e en ually he es ablishmen o an empi e.
When s a e powe could no sa is y he s a e’s need o weal h, he empi e
was abandoned. Fo na ions ha uphold he libe al doc ine, hei s a es a e
con olled by me chan s and capi alis s, and hei s a es seek weal h maximiza-
ion. To maximize weal h, he s a e needs a cons an supply o powe and he
app op ia e poli ical scale o accommoda e weal h maximiza ion, which is why
B i ain adop ed he poli ical o m o empi e and e en ually occupied India.
B i ish economic s a ec a in he 17 h and 18 h cen u ies, essen ially, was o
exibly deploy i s poli ical and mili a y powe o maximize economic gains.
38 Pa adigm Shi s in Economic S a ec a O e Time
Two his o ians o Eu ope’s impe ialisms, John Gallaghe and Ronald Rob-
inson, ske ched ou B i ain’s ou e o wo ld empi e a e 1815. A he hea
o hei a gumen lay wo c ucial asse ions: ha he B i ish cons an ly sough
he leas e o ul way o pu suing hei in e es s in e e y pa o he wo ld,
pa ly because o hei sys em o go e nmen wi h i s inbuil cons ain on
public expendi u e; and ha his led hem, whe e e hey could, o ely upon
coope a ion (“collabo a ion”) wi h he local eli es in o whose backya ds hey
s ayed. The esul was a complex his o ical pa e n. In some pa s o he
wo ld, he B i ish could secu e an open doo o hei ade by an ene ge ic
diplomacy ha le local so e eign y mo e o less in ac : his was he La in
Ame ican model. In less coope a i e egions, a mo e coe ci e app oach was
adop ed: i he locals would no open he doo , he lock would be o ced and
he doo ba e ed down. Be ween 1839 and 1842, he B i ish applied his
o China, demanding ee en y o i s ma ke s, and blocking he Yang ze –
China’s main a e y – wi h hei s eame s un il Beijing ga e way.13 The B i ish
powe s a egy in di e en places ully illus a es ha he acquisi ion o weal h
mus be accompanied by di e en ypes o powe s a egies, and he impe ial
o m is no hing bu a mani es a ion o he powe s a egy.
Di e en om me can ilis economic s a ec a , which seeks powe maxi-
miza ion, libe al economic s a ec a seeks weal h maximiza ion. The ise and
all o a libe al hegemon depend on he ans o ma ion om powe o weal h.
Again, he e exis s a weal h-powe pa adox. The mo e weal h a libe al s a e
seeks, he mo e powe she needs; he mo e she expands, he mo e weal h is
needed, leading o a agile equilib ium o he sup emacy. Bu compa ed wi h
a me can ilis s a e, a libe al s a e is mo e exible in managing he in e nal
ensions and adjus ing he poli ical scale. A libe al s a e is a me chan s a e in
which he uling ac o s a e he same g oup o people – capi alis s – whe eas
in a me can ilis s a e, he leading ac o s a e a dicho omy o eudal despo (o
au ho i a ians) and capi alis s. Tha is why me can ilis s a es (o empi es)
end o su e in e nal uphea al in a cyclical way, mani es ed in e olu ions
and wa s.
2.3 The Age o Impe ialism (1870–1914)
John A. Hobson was among he s who sys ema ically s udied impe ial-
ism. In his amous book Impe ialism (1902), he linked he phenomenon o
impe ialism wi h he demands o ma u ing capi alism o ma ke s, in es men
oppo uni ies, aw ma e ials, and cheap labo .14 Inspi ed by Hobson, Lenin
de eloped a heo y a guing ha impe ialism was he highes and nal s age
o capi alism. Among Ma xis heo e icians, Rosa Luxembu g did no ag ee
wi h Lenin on his poin . She conside ed impe ialism no as a his o ical s age
in he de elopmen o capi alism, bu a he as a mani es a ion o he policy
o capi alis coun ies compe ing o he emaining “non-capi alis sphe es” in
he wo ld. Luxembu g a gued ha he inabili y o capi al accumula ion o ake
place wi hin he capi alis sys em, which led o and p omp ed he expansion
Pa adigm Shi s in Economic S a ec a O e Time 39
o capi alis agg ession ab oad, was he mos p o ound oo cause o impe ial-
ism.15 She u he sugges ed,
Though impe ialism is he his o ical me hod o p olonging he ca ee
o capi alism, i is also a su e means o b inging i o a swi conclusion.
This is no o say ha capi alis de elopmen mus be ac ually d i en o
his ex eme: he me e endency owa ds impe ialism o i sel akes o ms
which make he nal phase o capi alism a pe iod o ca as ophe.16
Lenin and Luxembu g had di e en pe cep ions o impe ialism because Lenin’s
de ni ion o impe ialism was based on his answe s o he p oblems o wo ld
e olu ions, especially he Russian e olu ion, whe eas Rosa Luxembu g d ew
om he s udy o poli ical economics, which ocused on e ealing he laws o
capi al mo emen . Lenin de eloped Ma x’s heo y o e olu ion and iden i-
ed he mo i a ion o e olu ion in he age o impe ialism, while Luxembu g
de eloped Ma x’s heo y o capi alism and de ned he logic o capi al in he
age o impe ialism.
Combining he iews o Hobson, Lenin, and Luxembu g on impe ialism,
we can e isi impe ialism om he pe spec i e o economic s a ec a . Impe-
ialism eme ged because he s a e’s un es ic ed pu sui o weal h (capi al)
demanded he impe ial o m and mo i a ed in e -impe ialis wa s. In he age
o impe ialism, he ac o o he weal h s a egy was monopoly capi al, and he
ac o o he powe s a egy was he go e nmen con olled by he monopoly
capi alis s. The impe ialis policy was la gely an in eg a ed s a egy o weal h
and powe ; i was bo h weal h and powe s a egies.
Le ’s s look a Japan’s impe ialis economic s a ec a a he ime o i s ise.
A e he Meiji Res o a ion c ea ed he ounda ion and condi ions o Japan’s
ans o ma ion and ise o powe , Japan began o ise. Economically, Japan g adu-
ally comple ed he ansi ion o monopoly capi alism. Poli ically, Japan began o
expand a e he annexa ion o Ryukyu, and in 1905, i o mally annexed Ko ea.
A wa is he mos ypical e en ha changes he balance o powe . Japan ose o
become an in e na ionally ecognized powe a e winning he Sino-Japanese and
Russo-Japanese wa s. Howe e , Japan’s impe ialis economic s a ec a made i di -
cul o balance be ween i s weal h and powe s a egies. In ac , impe ialis Japan
always wo ied abou i s abili y o p oduce weal h. I expanded e i o y by means
o wa (powe s a egy) o gain g ea e abili ies o p oduce weal h and ex ac
powe . The esul was mili a iza ion and s a egic ad en u ism. The a emp o
annex China and he a ack on Pea l Ha bo bo h s emmed om he con adic-
ion inhe en in Japan’s economic s a ec a – weal h maximiza ion depended on
mili a is policy and he need o main ain an e e -expanding empi e. This unde -
lying dilemma o economic s a ec a has been e ec ed in a ying deg ees in all
majo powe s, bu Japan was mos o n by his “weal h-powe dilemma”, likely
due o he small size o he Japanese island and he s a egic anxie y o i s poli ical
eli es. The e o e, he ise and all o Japan in he s hal o he 20 h cen u y was
mo e o less conce ned wi h Japanese impe ialis economic s a ec a .
40 Pa adigm Shi s in Economic S a ec a O e Time
We will hen examine he economic s a ec a o sa is Russia. Why did sa-
is Russia nally choose he powe s a egy o impe ialism and he weal h s a -
egy o indus ializa ion? Fi s was he loss o he C imean Wa o 1853–1856.
In a ba le om 1828 o 1829, Russia de ea ed he Tu kish a my and ied o
es ablish a p o ec o a e o e he inc easingly a e ed O oman Empi e. Bu
his expansion h ea ened he balance o powe in Eu ope and caused a mili-
a y con ic be ween he Russian Empi e and an alliance ha included B i ain,
F ance, he Kingdom o Sa dinia, and he O oman Empi e. The C imean
Wa clea ly e ealed he weakness o he Russian Empi e agains he mili a y
migh o he indus ialized na ions o Wes e n Eu ope. In Sep embe 1854,
he allied o ces launched an a ack on Russia’s Black Sea ee , he po ci y
o Se as opol on he C imean Peninsula. Despi e Eu opean oops’ medioc e
command, he Russian a my su e ed a disg ace ul de ea , wi h hea y losses on
i s own e i o y due o i s inabili y o mobilize, equip, and anspo soldie s.
Russia’s economy could no suppo he sa ’s expansionis ambi ions, and
he C imean Wa clea ly exposed he ulne abili y o an ag icul u al economy
based on an un e e ed labo o ce. The mili a y de ea o ced he sa is go -
e nmen o eassess Russia’s social o de and implemen a sweeping es uc-
u ing p og am. The mos c ucial elemen s o Russian social e o m we e he
emancipa ion o se s; he es ablishmen o local sel -go e nmen (zems os)
in 1864 o manage he local a ai s o heal h, educa ion, and wel a e; and
indus ializa ion. The chie p oponen o indus ializa ion in Russia was Coun
Wi e, minis e o nance om 1892 o 1903 and an o he Ge man econo-
mis F ied ich Lis . In 1893, he objec i es o his s budge a y bill we e
“ emo ing he un a o able condi ions which hampe he economic de elop-
men o he coun y”, and “kindling a heal hy spi i o en e p ise”. A he hea
o his indus ial policy was a massi e ail oad cons uc ion p ojec ha would
link as a eas o he Russian Empi e and s imula e he de elopmen o o he
indus ies. Mo e impo an ly, he new ail oad would c oss Sibe ia, making
la ge-scale se lemen , de elopmen , and indus ializa ion possible in Sibe ia.
To aise unds o indus y domes ically, Coun Wi e eenginee ed he s a e
banks and encou aged he es ablishmen o sa ings banks. He suppo ed bu -
geoning indus ies wi h high p o ec i e a i s, while also a emp ing o und
indus ializa ion wi h la ge o eign loans om Wes e n Eu ope. F ench and
Belgian capi al played a pi o al ole in he de elopmen o he s eel and coal
indus ies, while B i ish money suppo ed he boom o he oil indus y in he
Caucasus egion. In e ms o powe s a egy, sa is Russia emba ked on a pa h
o con inuous impe ial expansion. Howe e , economic c ises, coupled wi h
mili a y se backs in Wo ld Wa I, led o he Oc obe Re olu ion and he col-
lapse o sa is Russia.
S a ing in he la e 19 h cen u y, he hegemony o he B i ish Empi e was
challenged on many on s. B i ain’s compe i i eness declined ela i e o he
ise o Ge many, he Uni ed S a es, Japan, and o he powe s. Compe ing wi h
Eu opean powe s in A ica and Asia had g adually exhaus ed B i ain’s powe . In
ac , up o 1914, B i ish opinion s ill ega ded ee ade as he i al ing edien
Pa adigm Shi s in Economic S a ec a O e Time 41
o B i ish p ospe i y. By ha ime, howe e , i was widely accep ed ha ee
ade was unde gene al a ack and ha i would be ha d o he B i ish o
de end hei huge s ake in a wo ld now all bu di ided be ween e Wes e n
powe s and he cade powe o Japan.17 The B i ish Empi e e en ually al-
e ed. As B i ain’s “ ee ade impe ialism” collapsed, i adop ed he app oach
o closed egionalism by es ablishing he p o ec ionis “sys em o impe ial
p e e ences” and “s e ling a ea” o ex end he li e o he B i ish Empi e.
2.4 Ma xism
The So ie Union was he s coun y o adop Ma xism as i s p e ailing eco-
nomic s a ec a . Following he iumph o he Oc obe Re olu ion, no p io
expe ience wi h socialism was a ailable, and Lenin had o cha a new pa h.
In esponse o he p oblems e ealed by he implemen a ion o wa ime com-
munism om he second hal o 1918 o he sp ing o 1921, Lenin p oposed a
new economic policy and made p o ound changes o he wa ime communis
policy. A e Lenin’s dea h, S alin g adually de eloped he singula sys em o
public owne ship o he means o p oduc ion, a op-down command economy
sys em, h ough he issuance o di ec i es and a highly cen alized poli ical
sys em. A e he ounding o he People’s Republic o China in 1949, Mao
Zedong also implemen ed a Ma xis economic s a ec a in China.
This highly cen alized model o s a e owne ship was well sui ed o wa -
imes, and China’s economic s a ec a unde Mao Zedong helped China p e-
ail in he Ko ean Wa and o ce an a mis ice deal wi h he Uni ed S a es. In
1950, he yea a e he ounding o he Peoples Republic o China, China
managed o mobilize and ex ac esou ces om a e y weak ounda ion o
weal h in a way ha was unp eceden ed in his o y and e cien ly con e ed
such weal h in o Chinese mili a y powe . I su p isingly o ced he Uni ed
S a es, which a he ime had hal o he wo ld’s g oss domes ic p oduc
(GDP) and unma ched mili a y powe , o s op i s ad ances a he 38 h pa al-
lel. Howe e , his p ac ice o a command economy subsequen ly expe ienced
majo miss eps, leading o he “G ea Leap Fo wa d” and he “Cul u al Re o-
lu ion”, which caused signi can economic and social ha m o China. China’s
economic s a ec a only saw meaning ul changes a e he e o m and open-
ing-up in 1978, when i g adually mo ed owa d a socialis ma ke economy.
China’s diploma ic s a egy also saw signi can changes, acco dingly.
In Janua y 2013, Chinese P esiden Xi Jinping e ec ed on he So ie
model o economic s a ec a , a guing ha he So ie model p omo ed he
apid economic and social p og ess o he So ie Union unde speci c his o i-
cal ci cums ances and played an impo an ole in he ic o y o he an i ascis
wa by he So ie a my. Howe e , due o he lack o espec o economic laws,
i s sho comings g ew inc easingly p onounced o e ime and became a se i-
ous ins i u ional hu dle o economic and social de elopmen . In he 1980s,
acing he p edicamen o economic and social de elopmen , he So ie Union
and Eas e n Eu opean coun ies ied o make adjus men s, bu unde he

42 Pa adigm Shi s in Economic S a ec a O e Time
s ong o ensi e o powe s in he Wes , such adjus men s de ia ed om he
igh di ec ion and led o a se ies o d ama ic changes in Eas e n Eu opean
coun ies in 1989, he disin eg a ion o he So ie Union, and he dissolu ion
o he Communis Pa y o he So ie Union in 1991. Socialism su e ed a
majo se back in he wo ld.18
To his day, China emains he la ges es ing eld o he Ma xis economic
s a ec a . Ob iously, China’s economic s a ec a is e y di e en om S a-
lin’s, he mos c ucial di e ence being he implemen a ion o a ma ke econ-
omy sys em. This sys em is called a “socialis ma ke economy sys em” wi h
“Chinese cha ac e is ics”. This sugges s ha China’s Ma xis economic s a e-
c a is a no el, ongoing expe imen o s a ec a ha may come ac oss a ious
challenges as i ad ances. The Communis Pa y o China (CPC) places g ea
emphasis on he “dialec ic”, which was sys ema ically in en ed by Ge man phi-
losophe Hegel and la e inhe i ed and adap ed by Ka l Ma x. The CPC seems
e y com o able wi h his dialec ical p ocess o mo ing om one con adic-
ion o ano he and om one p oblem o ano he , and i ejoices as hese
con adic ions and p oblems a e esol ed. To a la ge ex en , communism, like
me can ilism and libe alism, is a philosophy as much as a me hodology o
economic s a ec a .
No es
1 On Feb ua y 27, 380 A.D., he Roman Empe o Theodosius I (Eas e n Empe o )
and G a ian (Wes e n empe o ) join ly issued he Edic o Thessalonica, decla ing
he ini y o Ch is iani y o hodox and he s a e eligion o he Roman Empi e.
2 Chen, L., & Zhou, H. (2003). The P ocess o Eu opean Ci iliza ion (in Chinese).
Beijing: SDX Join Publishing Company, p.67.
3 Vine , J. (1968). Economic Though : Me can ilis Though . In Da id L. Sills (Ed.),
In e na ional Encyclopedia o he Social Sciences. New Yo k: F ee P ess, p.436.
4 C owley, R. (2011). Ci y o Fo une: How Venice Won and Los a Na al Empi e.
New Yo k: Random House, p.408.
5 Lis , F. (2022). The Na ional Sys em o Poli ical Economy. Pe h: Impe ium P ess,
p.4.
6 Lis , F. (2022). The Na ional Sys em o Poli ical Economy. Pe h: Impe ium P ess,
p.109.
7 No h, D. C., & Thomas, R. P. (1973). The Rise o he Wes e n Wo ld: A New Eco-
nomic His o y. Camb idge: Camb idge Uni e si y P ess, p.2.
8 Lis , F. (2022). The Na ional Sys em o Poli ical Economy. Pe h: Impe ium P ess,
p.92.
9 Lis , F. (2022). The Na ional Sys em o Poli ical Economy. Pe h: Impe ium P ess,
p.118.
10 Da win, J. (2012). Un nished Empi e: The Global Expansion o B i ain. New Yo k:
Bloomsbu y P ess, p.20.
11 Zhao, Y. (2004). S udies in he His o y o Economic Theo y (in Chinese). Beijing:
China Social Science P ess, p.59.
12 Zhao, Y. (2004). S udies in he His o y o Economic Theo y (in Chinese). Beijing:
China Social Science P ess, p.58.
13 Da win, J. (2012). Un nished Empi e: The Global Expansion o B i ain. New Yo k:
Bloombu y P ess, pp.11–12.
14
15
16
17
18
Pa adigm Shi s in Economic S a ec a O e Time 43
E ans, G., & Newnham, J. (1998). The Penguin Dic iona y o In e na ional Rela-
ions. London: Penguin Books, p.244.
Zhang, K. (2018). A Genealogy o Fo eign Ma xis Poli ical Economy Figu es (in
Chinese). Beijing: People’s Publishing House, p.171.
Luxembu g, R. (2003). The Accumula ion o Capi al (A. Schwa zschild, T ans.).
London: Rou ledge Classics, pp.426–427.
Da win, J. (2012). Un nished Empi e: The Global Expansion o B i ain. New Yo k:
Bloombu y P ess, p.26.
Publici y Depa men o he Communis Pa y o China (2016). Readings om
he Se ies o Impo an Speeches by Gene al Sec e a y Xi Jinpin (in Chinese). Beijing:
People’s Publishing House & Xue Xi Chu Ban She, pp.21–22.
DOI: 10.4324/9781003351382-4
This chap e has been made a ailable unde a CC-BY-NC-ND license.
3 Ame ica’s Economic S a ec a
Economic s a ec a has been a he hea o US o eign policy since he ound-
ing o he epublic.1 This chap e b eaks down he his o y o US economic
s a ec a in o h ee main his o ical phases: US economic s a ec a in he con-
ex o B i ish hegemony (1775–1898), US economic s a ec a in he con ex
o US hegemony (1898–2008), and US economic s a ec a in he con ex o
he ise o he es (since 2008).
In b eaking down he his o y o US economic s a ec a , I supe impose
he long wo ld economic cycle and he hegemonic cycle o o m a compos-
i e pe spec i e ha maps ou he con ou s o US economic s a ec a (see
Table 3.1). The so-called “long economic cycle” e e s o 50–60 yea s o
uc ua ions o e wo s ages: phase A (economic g ow h) and phase B (eco-
nomic dep ession), each s age las ing abou 20–30 yea s. The cycle is also
called he Kond a ie long wa e, named a e he So ie economis Nikolai
Kond a ie . How he e m came abou emains up o deba e. Acco ding o
Joseph Schumpe e , inno a ion was he main d i e , including echnological
and ins i u ional inno a ion. The swell and ebb o economic ides has been
accompanied by he ise and all o g ea powe s. In he long wo ld economic
cycle, hegemony ises and alls. Since mode n imes, h ee hegemonic powe s
ha e eme ged, namely, he Ne he lands (which peaked in he mid-17 h cen-
u y), he UK (which peaked in he mid-19 h cen u y), and he Uni ed S a es
(which peaked in he mid-20 h cen u y). Ou discussion o US economic
s a ec a is also placed in he con ex o he long economic wa e and he ise
and all o hegemonic powe s.
In desc ibing each his o ical s age, I ocus on he c i ical junc u es o ha
s age and analyze he economic s a ec a a hese c i ical junc u es, such as
he T uman Doc ine (economic aid o G eece) on he e e o he Cold Wa
and he Ma shall Plan. Gi en he ichness o US economic s a ec a , I canno
un a ull analysis; I can only selec some c i ical junc u es in his o y o exam-
ine, and hese junc u es o en coincided wi h ansi ions o di e en his o ical
s ages ha can help e eal he unde lying easons behind he pa adigm shi
and majo US economic s a ec a decisions.
Ame ica’s Economic S a ec a 45
Table 3.1 E olu ion o US Economic S a ec a om he Pe spec i e o he Long
Wo ld Economic Wa e Coupled wi h he Hegemonic Cycles
Long Economic Cycle Hegemonic Cycle US Economic S a ec a
(Kond a ie Long Wa e)
Kond a ie
long wa e I-A
(1790/98–1815/25)
Kond a ie
long wa e I-B
(1820/25–1848/52)
Kond a ie long
wa e II-A
(1848/52–1870/75)
Kond a ie long
wa e II-B
(1870/75–1893/96)
The beginning o he B i ish
hegemonic cycle:
Rise o B i ish hegemony:
Glo ious Re olu ion
(1688–1689), joining
he an i-F ench G and
Alliance in 1689, loss
o Ame ican colonies
(1783), F ench Re olu ion
(1789), Napoleonic Wa s
(1803–1815).
The iumph o B i ish
hegemony: Powe pa i y
h ough “Eu opean
coo dina ion”.
Ma u i y o B i ish hegemony:
“High hegemony” and ee
ade phase, G ea B i ain
as a hegemonic powe wi h
es ablishmen o global
ee ade egime and na al
dominance, colonial con ol
o he pe iphe y, Ame ican
Ci il Wa , uni ca ion o
Ge many and I aly, Russia
en e s wo ld s age, ini ial
dis up ion o capi alis
wo ld economy, China’s
ibu a y sys em.
Decline o B i ish hegemony:
Decline o B i ain, p ocess
o challenge o B i ish
hegemony om Ge many,
Uni ed S a es, and Japan
ollowing domes ic poli ical
es uc u ing; he classical
age o impe ialism; Wes e n
powe s sc amble o A ica
and s uggle o sup emacy
in Eu ope; B i ain and Russia
compe ing o Cen al Asia
(“G ea Game”) while China
and Japan compe e o Eas
Asia leade ship; Second
Indus ial Re olu ion.
Founding o he na ion
(1783–1814):
Independence, na ional
uni ca ion, and o ming
o na ion. Washing on’s
Fa ewell Add ess:
De elopmen o
comme cial ela ions, bu
nonen anglemen wi h
Eu opean powe s. Second
Wa o Independence
(1812–1815).
Con inen al Empi e
(1815–1850s): Mon oe
Decla a ion (1823),
Mexican-Ame ican Wa ,
pu chase o Flo ida,
Gadsden Pu chase.
Ci il Wa : 1861–1865;
pu chase o Alaska.
O e seas Empi e:
Recip oci y T ea y o
1875, began o expand
in o o e seas ma ke s,
es ablished na al bases
and coaling s a ions,
s a ed ading a a su plus
om 1874 onwa d, wi h
su plus las ing 75 yea s.
(Con inued)
52 Ame ica’s Economic S a ec a
Du ing his pe iod, US a i s ose signi can ly in esponse o bo h he need
o inc ease go e nmen e enues o pay o he deb accumula ed du ing he
Second Wa o Independence and because o domes ic p o ec ionis p essu es.
Ta i ac s o 1824, 1828, 1832, 1833, 1842, and 1857 we e passed du ing
his pe iod, and he a i s peaked in 1832 be o e alling o hei lowes le els
(du ing his pe iod) in 1857.
Meanwhile, he Uni ed S a es expanded o e seas, including o cing he
Qing Empi e o sign he unequal T ea y o Wangxia in 1844 and he Pe y
Expedi ion o 1853, which opened he ga es o Japan.
This s age o his o y desc ibed when he Uni ed S a es s eng hened i s
powe , building a con inen al empi e and expanding i s e i o y wes wa d
o he Paci c coas ( h ough bo h land acquisi ion and wa a e) unde he
man a o “mani es des iny”. The Uni ed S a es would e en ually become a
bicoas al na ion. A he same ime, he coun y began small s eps o expansion
in Asia. Behind all hese ac ions was he shadow o he B i ish Empi e as he
wo ld’s leading powe .
3.1.3 Ci il Wa and O e seas Empi e (1860/65–1898)
This pe iod was in he un-up o he ise o US hegemony, a pe iod o ansi-
ion in Ame ican his o y. Du ing his pe iod, he B i ish Empi e eached i s
apex be o e i s powe began o wane.
The Ci il Wa was a wa e shed momen in Ame ican his o y. In he 1830s
h ough 1850s, Ame icans belie ed ha he wes wa d expansion mo emen
was guided by mani es des iny, an expansion o Ame ican democ acy and
capi alism wi nessed and blessed by God. Bu he aboli ion o sla e y and he
b u ali y o he Ci il Wa caused P esiden Ab aham Lincoln o ques ion why
God had allowed he Ame ican na ion o gh each o he o such an ex en .
The ques ion Ab aham Lincoln kep asking is: I he ema kable US expan-
sionism o bo h e i o y and a democ a ic sys em was mani es des iny, why
did i climax in he Ci il Wa ?12
The answe lay in he model o Ame ican economic de elopmen . The Ame i-
can na ion became inc easingly di ided. The indus ial no h despe a ely needed
cheap co on om ab oad o boos i s bu geoning ex ile indus y, while he ag i-
cul u al sou h despe a ely needed high a i s o p o ec i s co on p oduc ion. As
a esul , keeping o abolishing sla e y became a key issue in Ame ican poli ics.
Only a e he Ci il Wa was he Ame ican indus ial po en ial ully eleased.
The Uni ed S a es became he wo ld’s la ges economy du ing his pe iod,
bu i did no immedia ely emba k on a pa h o expansion un il he Spanish-
Ame ican Wa in he la e 19 h cen u y. Fa eed Zaka ia, an Ame ican schola
o in e na ional s udies and media commen a o , asked he ques ion: Why did
he Uni ed S a es, he wo ld’s mos powe ul indus ialized na ion since he
beginning o 1870s, hew o a ela i ely isola ionis line, wi h ew excep ions,
un il he 1890s – a highly unusual gap be ween powe and in e es s, o i
las ed some 30 yea s.13 This is a cen al ques ion in economic s a ec a .

Ame ica’s Economic S a ec a 53
Zaka ia’s answe is he so-called “s a e-cen e ed ealism”.14 The pa e n o
Ame ican o eign policy om he end o he Ci il Wa o he close o Theodo e
Roose el ’s e m as p esiden la gely con ms he p edic ions o s a e-cen e ed
ealism: cen al decision make s, which in he Ame ican case means he p esi-
den and his closes ad ise s, expanded Ame ican in uence ab oad when hey
pe cei ed inc eases in s a e powe . The decades a e he Ci il Wa saw he
beginning o a long pe iod o g ow h in he Uni ed S a es’ ma e ial esou ces.
Bu his na ional powe lay do man benea h a weak s a e, one ha was decen-
alized, di use, and di ided. Zaka ia a gues ha he p esiden s and hei sec e-
a ies o s a e ied epea edly o con e he na ion’s ising powe in o in uence
ab oad, bu hey p esided o e a ede al s a e s uc u e and a iny bu eauc acy
ha could no ge men o money om he s a e go e nmen s o om socie y a
la ge. Du ing his pe iod, he powe o he p esidency was a a his o ic low and
he unp eceden ed na ional deb a e he Ci il Wa os e ed a pe asi e sense
o na ional bank up cy and weakness ha exace ba ed his ension. Ame ica
was an unusual g ea powe – a s ong na ion bu a weak s a e. The 1880s and
1890s ma k he beginnings o he mode n Ame ican s a e, which eme ged
p ima ily o cope wi h he domes ic p essu es gene a ed by indus ializa ion.
The exigencies o he g owing na ional economy and he collapse o he con-
g essional bid o sup emacy ga e he ede al go e nmen a mo e cen alized,
less poli ical, and a ional s uc u e. And as he only na ionally elec ed o ce o
go e nmen , he p esiden eme ged wi h s eng hened au ho i y.15
Many his o ians ha e ano he heo y o he lack o US expansion du ing his
pe iod: he economic di cul ies o he 1870s p e en ed expansion in ha e a.
Acco ding o his heo y, when he sou he ne s le Washing on in 1861, he
no he ne s who now con olled Cong ess quickly passed a se ies o laws ha c e-
a ed a ounda ion o he Ame ican indus ial and nancial complexes ha soon
domina ed wo ld a ai s.16 The legisla ion included, o example, a much highe
a i . Such a a i had long been opposed by sou he ne s, whose plan a ion owne s
wan ed access o he cheapes ( ha is, B i ish) indus ial p oduc s. Now p o ec ed
by he e e - ising a i , no he n s eel make s such as And ew Ca negie joined he
c ea o s o o he new indus ies, such as John D. Rocke elle ’s S anda d Oil Com-
pany, o build an indus ial complex ha became he wo ld’s mos p oduc i e by
1900. A new o e seas economic empi e was being de eloped by he Ame icans.17
In 1867, he Uni ed S a es pu chased Alaska om sa is Russia. The coun-
y began o de elop i s na al o ces du ing his pe iod, es ablishing na al bases
and coaling s a ions a ound he wo ld. In 1875, he Uni ed S a es signed a
ee ade ag eemen wi h he Hawaiian Kingdom.
3.2 Ame ican Economic S a ec a in he Con ex
o US Hegemony
US hegemony ose o i s peak and ma u ed om he la e 19 h cen u y o he
1960s. I is insepa able om he Uni ed S a es’ imp essi e economic g ow h
du ing his pe iod.
54 Ame ica’s Economic S a ec a
Acco ding o Robe Go don, an Ame ican economic his o ian, he eco-
nomic e olu ion o 1870 o 1970 was unique in human his o y, un epea -
able because so many o i s achie emen s could happen only once.18 Go don
nds, wi h an a e age annual a e o o al ac o p oduc i i y (TFP) g ow h
o 1.89% pe yea be ween 1920 and 1970, in 1970–2014, by con as , he
g ow h a e was only 0.64% pe yea , jus a hi d he pace o 1920–70.19 Go -
don a gues ha he 1920–70 upsu ge in TFP g ow h e ec ed he impo -
ance o he g ea in en ions o he Second Indus ial Re olu ion (IR #2). His
in e p e a ion is ha he digi al Thi d Indus ial Re olu ion (IR #3), hough
u e ly changing he way Ame icans ob ain in o ma ion and communica e, did
no ex end ac oss he ull span o human li e as did IR #2, wi h he epochal
changes i c ea ed in he dimensions o ood, clo hing, housing and i s equip-
men , anspo a ion, in o ma ion, communica ion, en e ainmen , he cu ing
o diseases and conques o in an mo ali y, and he imp o emen o wo king
condi ions on he job and a home.20 Fo Go don, chie among he headwinds
ha slowed TFP g ow h since 1970 is he ise o inequali y ha has s eadily
di ec ed an e e la ge sha e o he ui s o he Ame ican g ow h machine o
he op o he income dis ibu ion.21
Robe Go don’s ndings help us unde s and why US hegemony ose and
ma u ed om he la e 19 h cen u y o he 1960s, especially a e he G ea
Dep ession when he Uni ed S a es leap o wo ld hegemony h ough Wo ld
Wa II and comple ely shaped he pos -Wo ld Wa II in e na ional o de . How-
e e , om 1971 onwa d, US hegemony en e ed a pe iod o ela i e decline,
and his decline has con inued o his day wi h a p o ound unde lying weal h
a ionale, ha is, he decline o US g ow h. The decline o US g ow h led o
he decline o US hegemony.
Nex , I will elabo a e on Ame ican economic s a ec a in he o de o he
ise, ic o y, ma u i y, and decline o US hegemony om he Spanish-Ame i-
can Wa o 1898 h ough he 2008 global nancial c isis.
3.2.1 Rise o US Hegemony (1898–1913)
In he 19 h cen u y, hanks o he Indus ial Re olu ion, he Uni ed S a es
saw subs an ial gains in economic p oduc i i y and, by 1894, had become
he wo ld’s op indus ial p oduce . As indus ial p oduc ion a ou s ipped
domes ic demand, he Uni ed S a es expanded i s e i o y and ma ke
owa ds he wes – guided by “mani es des iny” – om he A lan ic o he
Paci c coas . In 1898, he Spanish-Ame ican Wa b oke ou , and he sys em
o US o e seas colonies came in o being. Following he Spanish-Ame ican
Wa , he occupa ion o Cuba was he u ning poin o US policy in La in
Ame ica. The Ame icas became he con inen s o Ame icans. Wi h he in o-
duc ion and implemen a ion o he Open Doo policy and he Big S ick pol-
icy, he Uni ed S a es used he Philippines and Cuba as bases o i s expansion
plans owa ds China and La in Ame ica. China and La in Ame ica quickly
became he wo majo cen e s o US o e seas expansion. Such dynamics ook
Ame ica’s Economic S a ec a 55
on he na u e o global expansion and allowed he Uni ed S a es o g ow in o
a wo ld powe .
In e ms o he de elopmen o he capi alis wo ld economy since 1780,
he hegemony o he B i ish Empi e has gone h ough wo Kond a ie long
wa es (see Figu e 3.1), ha is, long wa es I and II. S a ing wi h long wa e
III, ha is, he 1890s, he Uni ed S a es emba ked on he pa h o hegemonic
ise. Since he Ame ican Wa o Independence in 1783, i ook he Uni ed
S a es 100 yea s o go om being an independen na ion o a s ong na ion.
In he nex 100 yea s, i would hen comple e i s ascendence o sup emacy.
Wal e LaFebe , a dis inguished Ame ican diploma ic his o ian, concluded,
“ he economic ounda ion o his new empi e was laid in he 1860 o 1890s
e a. Ye he new empi e’s poli ical s uc u e s ikingly appea ed on his ounda-
ion be ween he 1890s and 1913”.22 This is an in iguing quo e om P o es-
so LaFebe . Indeed Zaka ia, in his book F om Weal h o Powe : The Unusual
O igins o Ame ica’s Wo ld Role, add essed a simila ques ion. Al hough he
Uni ed S a es had become he wo ld’s la ges economy in he 1870s, i wai ed
30 yea s be o e emba king on he pa h o expansion. Wha was he eason o
his 30-yea lag be ween he Uni ed S a es becoming a majo economic powe
and a s ong poli ical powe ? Fa eed Zaka ia sugges ed an answe , ha i was
because he Ame ican s a e was oo weak be o e 1880s. Only when a new
s ong s a e appea ed in he 1880s and 1890s, could he Uni ed S a es emba k
on he pa h o expansion. I would label he yea s o he 1890s as he ges a-
i e s age o a mode n economic s a ec a , when he Uni ed S a es was nally
able o ans o m weal h o powe in a con den manne . And only when he
Uni ed S a es was able o p ac ice s ong economic s a ec a was she able o
ise o hegemony, a combina ion o sup eme economic and mili a y s eng hs.
In Ap il 1898, hen-US P esiden William McKinley decla ed wa on Spain.
In wha hen-Sec e a y o S a e John Hay desc ibed as a “splendid li le wa ”,
Ame ican oops de ea ed he Eu opean powe o Spain in less han h ee
mon hs, cap u ing Cuba, Pue o Rico, and he Philippines. In 1899–1900
John Hay issued wo his o ic Open Doo no es ha de ned he main p inci-
ples o he new empi e. His Open Doo no es opposed colonialism and igo -
ously suppo ed open o eign ma ke s (in which he new Ame ican economic
dominance could compe e success ully agains anyone). These wo p inciples
domina ed US o eign policy in o he 21s cen u y.23
In 1903, hen-US P esiden Theodo e Roose el aided he Panamanian
ebellion, which led o Panama’s independence om Colombia and he
acquisi ion o a 10-mile-wide s ip o land on bo h sides o he Panama Canal.
Wi h his passion o in as uc u e p ojec s, P esiden Roose el ook o e
he Panama Canal p ojec , which he B i ish and F ench had ailed o com-
ple e, and a e 10 yea s o ha d wo k and mobiliza ion o e e y economic,
mili a y, and diploma ic means a ailable o he Uni ed S a es, he Panama
Canal was nally comple ed and opened in 1914. Du ing 1904–1905, P esi-
den Roose el p oposed he amous Roose el Co olla y, a supplemen o
he Mon oe Doc ine, ha s a ed ha he Uni ed S a es has he igh o
56 Ame ica’s Economic S a ec a
in e ene in he a ai s o he coun ies in he Wes e n Hemisphe e o a oid
“ex e nal in asion” ha would ha m he o e all in e es s o he coun ies in
he Ame icas. The Uni ed S a es has a esponsibili y o exe cise i s ole as
in e na ional police in he Ame icas.
Theodo e Roose el ’s successo , P esiden Ta (1909–1913), inhe i ed
Roose el ’s man le o economic in e en ionism and igo ously pu sued “dol-
la diplomacy”. Bo h Ta and his sec e a y o s a e, Philande Chase Knox,
belie ed ha he goal o US o eign economic policy was o c ea e a s able
ex e nal en i onmen ha would acili a e business ab oad o Ame ican busi-
nessmen. They also belie ed ha p i a e capi al was conduci e o his goal.
Guided by his o eign economic policy, hey used he US mili a y o p o ec
US in es men s in Sou h Ame ica, Cen al Ame ica, and China, among o he
places. Ta ’s app oach o economic s a ec a can be seen as a wo-way ans-
o ma ion o weal h and powe , pa icula ly he di ec ion o powe o weal h
wi h diplomacy and he mili a y se ing economic in e es s. The Uni ed S a es
encou aged Ame ican banke s o lend o Hai i, esul ing in massi e indeb ed-
ness o Hai i. A he same ime, Ta ’s “dolla diplomacy” was designed o
squeeze Eu opean and Japanese capi al ou o he Wes e n Hemisphe e and o
make he Ame icas uly Ame ica’s Ame icas. This policy caused a g ea deal o
con o e sy a ound he wo ld.
The Uni ed S a es also exe ed con ol o e La in Ame ican coun ies
h ough egional in e na ional o ganiza ions. The Fi s In e na ional Con-
e ence o Ame ican S a es, held in Washing on, DC, om Oc obe 1889 o
Ap il 1890, app o ed he c ea ion o he O ganiza ion o Ame ican S a es
(OAS). Addi ionally, a s uc u e o ins i u ions was g adually es ablished o
p omo e coope a ion in speci c a eas: he Pan Ame ican Heal h O ganiza-
ion (1902), which la e became he egional o ce o he Wo ld Heal h
O ganiza ion; he In e -Ame ican Ju idical Commi ee (1906), he In e -
Ame ican Child en’s Ins i u e (1927), he In e -Ame ican Commission o
Women (1928), he Pan Ame ican Ins i u e o Geog aphy and His o y
(1928), he Ame ican Indian Ins i u e (1940), he In e -Ame ican Ins i-
u e o Coope a ion on Ag icul u e (1942), he In e -Ame ican De ense
Boa d (1942), he In e -Ame ican Commission on Human Righ s, he
In e -Ame ican Cou o Human Righ s, he In e -Ame ican D ug Abuse
Con ol Commission, he In e -Ame ican Telecommunica ion Commission,
he In e -Ame ican Commi ee on Po s, and he Jus ice S udies Cen e o
he Ame icas, e c. By his ime, he en i e ne wo k o egional in e na ional
ins i u ions – c ea ed o s eng hen coope a ion among Ame ican s a es on a
wide ange o egional issues – became an ins umen o economic s a ec a
by he Uni ed S a es o exe in uence and con ol o e he coun ies o
La in Ame ica.
In 1905, Theodo e Roose el was awa ded he Nobel Peace P ize o medi-
a ing he Russo-Japanese Wa . By his poin , he Uni ed S a es had become a
majo o ce on he in e na ional s age.
Ame ica’s Economic S a ec a 57
3.2.2 T iumph o US Hegemony (1914–1945)
This his o ical phase began and ended wi h he Fi s and Second Wo ld Wa s,
when US hegemony g adually eached i s pinnacle. Howe e , du ing his
30-yea pe iod, US o eign policy and US ex e nal ela ions unde wen a d a-
ma ic swing: he Uni ed S a es decla ed neu ali y a he beginning o Wo ld
Wa I, bu hen in e ened unexpec edly and sough o lead he wo ld a e
he wa . Howe e , he Ame ican public was no in e es ed in he ole o wo ld
leade , and he Sena e e used o a i y he T ea y o Ve sailles o join he
League o Na ions. Wha ollowed was he Republican go e nmen ’s limi ed
en anglemen in in e na ional a ai s and he abandonmen o he collec i e
secu i y p inciple in he 1920s. By he 1930s, isola ionism, which s enu-
ously a oided any in e na ional obliga ions, domina ed US o eign policy.
A e Pea l Ha bo , he Uni ed S a es became ully in ol ed in wo ld wa s
and assumed esponsibili y o eshaping he in e na ional o de and leading
he wo ld in he pos wa e a.24 P o esso Wang Lixin o he Depa men o
His o y a Peking Uni e si y calls his pe iod o US hegemony ( om 1913 o
1945) “hesi an hegemony”.25
3.2.2.1 Hegemonic Hesi ance (1913–1933)
The Uni ed S a es ose o powe in he la e 19 h cen u y. Compa ed wi h he
old powe s, i s accumula ed economic s eng h was ans o med in o powe
h ough a pa h ea u ing unp eceden ed ins i u ional shi s and inno a ion.
This was bes e ec ed in he diploma ic philosophy and p ac ice o P esiden
Wood ow Wilson.
Wo ld Wa I enabled he Uni ed S a es o b eak ee om he shackles o
isola ionism. To a oid ano he wa , Wilson’s “idealism” came o he o e on
and won in e na ional discou se o he ise o US hegemony. In his “Fou een
Poin s”, Wilson p oposed he es ablishmen o an in e na ional o ganiza ion
o he pu pose o main aining wo ld peace and secu i y. Wilson s ad o-
ca ed his plan o a wo ld union in May 1916 and publicly p oposed ha he
Uni ed S a es become a membe o he League o Na ions in Janua y 1917.
A ha ime, many coun ies had doub s abou es ablishing he League o
Na ions hemsel es, and Wilson was eady o apply p essu e on his ma e .
Soon a e he Uni ed S a es en e ed he wa in Ap il 1917, Wilson w o e o
his good iend Colonel Edwa d House, saying: “When he wa is o e we
can o ce hem o ou way o hinking, because by ha ime hey will, among
o he hings, be nancially in ou hands”.26 A e he Pa is Peace Con e ence
on Janua y 18, 1919, Wilson insis ed on discussing he es ablishmen o he
League o Na ions s and ha ing he Co enan o he League o Na ions as
a necessa y componen o he peace ea y wi h Ge many. A e 26 e isions,
he Co enan o he League o Na ions was adop ed a he Pa is Peace Con-
e ence on Ap il 28, 1919. Unde he e ms o he peace ea y, he League
o Na ions, he wo ld’s s in e na ional poli ical o ganiza ion wi h so e eign

58 Ame ica’s Economic S a ec a
s a es as membe s, was es ablished in Janua y 1920. The Uni ed S a es ac i ely
sp ead he idea o ee ma ke s o economic de elopmen and social p og ess
on a global scale h ough in e na ional o ganiza ions and o he means. Addi-
ionally, i s own de elopmen s o y con med he en o ceabili y and supe io -
i y o he idea and enabled bo h he u he pene a ion o libe al ideas and a
consolida ion o US dominance in in e na ional discou se.
Howe e , in Ma ch 1920, he Republican-con olled US Sena e ejec ed
he a i ca ion o he T ea y o Ve sailles, mainly on he g ounds ha he Co -
enan o he League o Na ions o med pa o he T ea y o Ve sailles, and
ha he Uni ed S a es could no accep he con ol by a sup ana ional powe
(i.e., he League o Na ions would be con olled by B i ain and F ance, which
would hinde he expansion o US hegemony). The e o e, Republican leade s
wi hin he Sena e emained opposed o he c ea ion o he League o Na ions.
Fo mos o he 120 yea s since he ounding o he Uni ed S a es, he coun-
y’s o eign policy had ollowed he nonalignmen ideas o Washing on and
Je e son, and Wilson’s policy o in e na ional ins i u ionalism was me wi h
g ea esis ance a home. Faced wi h such esis ance, Wilson began speaking
h oughou he coun y o pe suade he Ame ican public o accep his in e -
na ionalis philosophy. Un o una ely, he su e ed a s oke while in Colo ado
and los his abili y o speak. A e he s oke, Wilson became mo e de e mined
and unwilling o concede o Republicans. This a i ude e en ually led o he
comple e ejec ion o he T ea y o Ve sailles by Cong ess. The Uni ed S a es
did no join he League o Na ions. This was a majo se back o US economic
s a ec a . As he wo ld’s la ges economy and he ic o o Wo ld Wa I in
Eu ope, he Uni ed S a es had su cien na ional powe o shape – and had
clea ly p oposed a bluep in – o he pos wa o de h ough i s own diplo-
ma ic p ac ice, bu because o domes ic cons ain s and opposi ion, i ul i-
ma ely became a los cause. This majo his o ical e en ully illus a es ha he
ans o ma ion om weal h o g ea powe s a us will ne e happen o e nigh
o au oma ically. Whe he he domes ic public will ollow and whe he he
a ious domes ic o ces can uni e unde a common philosophy a e key es s
con on ing ising powe s.
A e missing he window o oppo uni y in 1919, US o eign policy ell
in o indecision. Rega dless, he decade om 1919 o 1929 was a b igh spo
in he p ac ice o US economic s a ec a , and he Uni ed S a es ully wielded
i s economic powe o become a decisi e o ce on he in e na ional scene in
Eu ope a e Wo ld Wa I. The ep esen a i e gu e was hen-US Vice P esi-
den Cha les Dawes, who p oposed he Dawes Plan as an economic solu ion
o he geopoli ical dispu es in Eu ope. The Pa is Peace Con e ence o 1919
o ced Ge many o pay huge wa epa a ions, which led o hype in a ion and
economic collapse, while F ance needed o eco e los e i o ies om Ge -
many as he ic o o Wo ld Wa I. A a ime when he in e na ional o de
in Eu ope was disin eg a ing and Ge many was in economic c isis, Ame ican
banke s and expo e s knew ha Ge many was he mos impo an indus ial
powe on he Eu opean con inen , and hey knew ha i he Ge man economy
Ame ica’s Economic S a ec a 59
collapsed, hen Eu ope would all in o an economic dep ession. In 1924, Chi-
cago banke and hen-Vice P esiden Dawes quickly con ened an in e na ional
con e ence and p oposed a US loan acili y o se le Ge man wa epa a ions,
injec ing a la ge amoun o US p i a e capi al o ebuild he Ge man economy,
and F ance backed down om i s e i o ial claims. O de was b ie y es o ed
in Eu ope.
Bu such s abili y was sho -li ed, as he Uni ed S a es began o su e an
economic c isis in 1928–1929. This c isis las ed un il 1933, when he US
economy was s ill unde wa e and unemploymen le els had eached a eco d
25 million. Eu opean and Japanese economies we e also in down all. In 1933,
Hi le ’s Nazi egime came o powe , and he Japanese mili a is go e nmen
ook o e . He be Hoo e (1929–1933), hen p esiden o he Uni ed
S a es, ound himsel in a helpless posi ion. To make ma e s wo se, du ing his
e m o o ce, Cong ess passed he Smoo -Hawley Ta i Ac , which sha ply
inc eased a i s. This led o e alia o y a i s om coun ies a ound he wo ld,
caused US impo s and expo s o plumme , and deeply sca ed he wo ld
economy. No could Hoo e undamen ally econside he o eign policies
o he 1920s, which had es ed on US economic powe and coope a ion wi h
Japan and Ge many. And so, along wi h he B i ish and F ench, he did li le as
Japan in aded China and as Ge many slid downwa ds in o Nazism.27 Hoo e ’s
p esidency could be likened o he Wa e loo momen o US economic s a e-
c a , as he US go e nmen adop ed a policy o economic na ionalism and
implemen ed “begga - hy-neighbo ” a i s. I s economic ela ions wi h o he
coun ies de e io a ed se iously. Ex e nally, he Uni ed S a es adop ed a policy
o disengagemen and appeasemen owa d Ge many and Japan. The e was a
se ious di ide be ween he economic powe o he Uni ed S a es and i s o -
eign policy. Agains he backg ound o he G ea Dep ession a home, US eco-
nomic powe su e ed s eep losses, and he use o such powe los i s goal and
bea ing. Weal h could no be ans o med in o powe o he Uni ed S a es.
In his 1973 book Wo ld in Dep ession (1929–1933), Cha les Kindlebe ge
e ec ed on he his o y o he G ea Dep ession and pu o wa d he hegem-
onic s abili y heo y. Kindlebe ge a gued ha a hegemonic s a e needs o p o-
ide leade ship and in e na ional ins i u ions so as o keep he s abili y o he
exis ing in e na ional sys em. Al hough he Uni ed S a es su passed B i ain
and became he wo ld’s la ges economy, she ailed o inhe i he B i ish ole
as he wo ld leade . As a esul , he wo ld ell in o he so-called “Kindlebe ge
T ap”, ea u ing economic ecession, genocide, and wo ld wa .28
3.2.2.2 Hegemonic T iumph (1933–1945)
The pinnacle o US economic s a ec a occu ed du ing he F anklin Delano
Roose el (FDR) p esidency. His enu e (1933–1945) was conside ed a i-
umph o US hegemony. In his s e m (1933–1937), FDR p oposed he
New Deal, whose co e objec i es we e he h ee Rs, namely, (1) elie o help
he unemployed and he poo , (2) eco e y o es o e he economy o no mal
60 Ame ica’s Economic S a ec a
le els, and (3) e o m o he nancial sys em o p e en a epea dep ession.
The New Deal eased he G ea Dep ession and helped he eco e y o he
US economy, pa ially es o ing he coun y’s economic s eng h. Du ing
his pe iod, he Uni ed S a es es ablished Pax Ame icana h ough a massi e
ans o ma ion o weal h o powe . The Ame ican economis Robe Go don
sugges ed ha he G ea Dep ession and Wo ld Wa II aken oge he cons i-
u e he majo explana ion o he sha p jump in o al ac o p oduc i i y ha
occu ed be ween he 1920s and 1950s.29
Howe e , FDR’s s e m was la gely cha ac e ized by an isola ionis pol-
icy ha p io i ized US domes ic a ai s. The London Economic Con e ence
o 1933 also ailed because he Uni ed S a es e used o assume leade ship
o he wo ld economy, and he dolla con inued o dep ecia e agains gold,
om $20.67 o $35 pe ounce. Howe e , a majo posi i e change in US ade
policy occu ed in 1934. The Recip ocal T ade Ag eemen s Ac (RTAA),
spea headed by Co dell Hull, he hen-US sec e a y o s a e, no only opened
he US ma ke and ueled Ame ica’s pos wa p ospe i y, bu also became one
o he pilla s o Ame ica’s global economic leade ship.30 The RTAA was an
impo an miles one his o ically, as i ended he US ade p o ec ionis pa a-
digm in e ec since 1860 and eplaced i wi h an in e na ionalis app oach.
This ac laid he co ne s one o US ee ade policy o he nex 70 yea s.
Addi ionally, in 1936, he Uni ed S a es, G ea B i ain, and F ance signed he
T ipa i e Mone a y Ag eemen , which s abilized exchange a es and ended
he cu ency wa o 1931–1936. Fo he s ime in his o y, he Uni ed S a es
played a leading ole in in e na ional mone a y coope a ion. All hese e o s
we e p ecu so s o FDR’s igo ous ad ancemen o in e na ionalism du ing
his second e m.
P esiden F anklin D. Roose el ’s second and hi d e ms ( om 1937 o
1945) can be conside ed he culmina ion o US economic s a ec a . D awing
upon Wilson’s expe ience and lessons, he Uni ed S a es in his pe iod used
i s economic and mili a y powe no only o win Wo ld Wa II, bu also o
es ablish an in e na ional o de ha has las ed o his day. As a suppo e and
belie e o P esiden Wilson’s in e na ional ins i u ionalism, P esiden F ank-
lin D. Roose el concei ed he idea o a pos wa in e na ional sys em as ea ly
as he beginning o Wo ld Wa II. On Augus 14, 1941, FDR and Chu chill
cosigned he A lan ic Cha e , which p oposed he es ablishmen o a “wide
and pe manen sys em o gene al secu i y”. In he second hal o 1943, Wo ld
Wa II ook a s a egic u n in a o o he Allies. P esiden Roose el began
o concep ualize he pos wa wo ld. He belie ed ha coope a ion among he
majo powe s was necessa y o main ain peace and p e en agg ession a e
he wa was o e . He p oposed he es ablishmen o an in e na ional peace
o ganiza ion cen e ed on he Uni ed S a es, G ea B i ain, he So ie Union,
and China o play he “ ole o in e na ional police” o he g ea powe s. A
he Teh an Con e ence on No embe 29, 1943, P esiden Roose el ou lined
his idea o he “ ou policemen” o S alin. He en isioned he es ablishmen o
h ee bodies: (1) a police council composed o he Big Fou , (2) an execu i e
Ame ica’s Economic S a ec a 61
council o add ess all issues excep mili a y ones, and (3) a gene al assembly
in which each coun y, including small coun ies, could exp ess hei iews.31
In 1944, he Dumba on Oaks Con e ence es ablished he amewo k o he
Uni ed Na ions (UN) Cha e , and he UN was o mally es ablished in 1945.
The s udy o economic s a ec a is mo e conce ned wi h how he Uni ed
S a es used i s economic powe o win hegemonic s a us and build he pos wa
in e na ional economic o de . P o esso Zhao Ke poin ed ou ha al hough
he main a ge o US mili a y campaigns was he Axis alliance led by Ge many
and Japan, in ano he “smokeless ba le eld”, he US opponen was p ecisely
i s wa ime ally, G ea B i ain. Bo h sides e cely compe ed o he leade -
ship o he pos wa wo ld h ough economic diplomacy. The Uni ed S a es,
h ough i s in e en ion, s disman led he s e ling a ea and es ablished he
cen al posi ion o he US dolla ; la e , h ough he es ablishmen o a mul i-
la e al ee ade sys em, he Uni ed S a es g adually disman led he bila e al
ade sys em ca e ully c a ed by he B i ish based on he impe ial sys em o
p e e ences. The B i ish Empi e was hus d ained o he las sou ce o i ali y
and ell in o decline.32
The Uni ed S a es began by maximizing he deple ion o B i ain’s gold and
dolla ese es and e oding he c edi base o he pound s e ling. To suppo
he nancially oubled B i ain o con inue he wa agains ascis Ge many,
Cong ess passed he Lend-Lease Ac in 1941, which allowed he US go e n-
men o p o ide supplies o he Allies s , which hey could epay and se le
a e he wa was o e . This was in con as o he p e ious a angemen o
“cash and ca y” o US supplies. Hen y Mo gen hau, hen-US easu y sec e-
a y, unde s ood ha he US go e nmen had decided o aid B i ain, and did
e e y hing possible o o ce B i ain o se le i s ou s anding deb s be o e he
Lend-Lease Ac came in o e ec o p e en B i ain om using he Lend-Lease
Ac o delay epaymen . De e mined o cap he balance o B i ish ese e asse s
a he minimum le el necessa y o su i e he wa , Mo gen hau aimed o keep
B i ain’s ese es below $1 billion o ensu e ha B i ain would be nancially
dependen on he Uni ed S a es going o wa d and o o ce B i ain o comply
wi h he US-led pos wa wo ld o de . He demanded ha B i ain liquida e
a ious cashable asse s, especially la ge p o -making companies. Fo example,
he Ame ican Rayon Company, he la ges and mos p o able US company
owned by B i ain, was sold o an Ame ican bank a hal p ice. Keynes, keenly
awa e o Mo gen hau’s in en ions, ang ily said, “ he Uni ed S a es T easu y
would p e e us o end he wa wi h exiguous gold and dolla ese es so ha
hey will be in a posi ion o o ce solu ions on us”.33
The second s ep aken by he Uni ed S a es was o ha e he B i ish accep
Ame ica’s design o he pos wa in e na ional mone a y sys em, ha is, he
Whi e Plan. Unde he plan, he dolla was pegged o gold a a xed a io,
while o he cu encies we e pegged o he dolla , making he dolla he ancho
o he in e na ional mone a y sys em. A he same ime, he In e na ional
Mone a y Fund (IMF) was es ablished o coo dina e na ional mone a y poli-
cies and o p o ide sho - e m nancing o coun ies wi h balance o paymen
68 Ame ica’s Economic S a ec a
s a ec a is unp eceden ed. In he ace o he once-in-a-cen u y COVID-19
pandemic, he Biden adminis a ion has p io i ized domes ic a ai s, especially
weal h c ea ion. The US scal budge o 2021 was $10.43 illion, he high-
es in he las decade, wi h heal hca e, wel a e, and pensions consuming he
highes sha es. Unde he “Build Back Be e ” ision, he Biden adminis a-
ion has launched he Ame ican Rescue Plan, he Ame ican Jobs Plan, and he
Ame ican Families Plan o aling app oxima ely $6 illion, a numbe compa-
able o Roose el ’s New Deal. In 2021, he US go e nmen spen 45.79% o
i s GDP, mo e han he 45.62% sha e in 1945 – he las yea o Wo ld Wa II.46
Compa ing he economic s a ec a o P esiden s Obama, T ump, and
Biden, he h ee p esiden s each adop ed policies wi h a ying deg ees o
economic na ionalism, and all wi h a o eign policy objec i e o con aining
China’s ise, especially P esiden T ump. The T ump adminis a ion belie ed
ha he Uni ed S a es was losing ou bila e ally, egionally, and mul ila e ally,
and he e o e demanded he ealignmen and comp ehensi e enego ia ions
o US in e na ional ade in e es s, he s eng hening o US echnological
supe io i y, inc eased US expo s, and imp o ed ma ke access o o he coun-
ies, wi h a iew o he e-onsho ing o manu ac u ing, he e u n o jobs and
p ospe i y, and “making Ame ica g ea again” (T ump’s campaign slogan).
The T ump adminis a ion’s demands we e no undamen ally di e en han
hose o he Obama and Biden adminis a ions; hey only di e ed in means.
This conce ned P esiden T ump’s pe sonal s yle and he moun ing p essu e
on he US economy and socie y. P esiden T ump’s “bullying” nego ia ing
s yle was in s a k con as o ha o P esiden s Clin on, Obama, Biden, and
o he mul ila e alis s. I le mos coun ies, including US allies, uncom o -
able and unp epa ed. In dealing wi h China, he Geo ge W. Bush and Obama
adminis a ions ocused on ebalancing US-China economic in e es s h ough
he S a egic Economic Dialogue and he China-US Join Commission on
Comme ce and T ade (JCCT), while he T ump adminis a ion adop ed an
an agonis ic app oach wi h agg essi e puni i e a i s and ideological con on-
a ion. The Biden adminis a ion adjus ed he T ump-e a app oach o gh ing
China alone. I o ged alliances, especially an alliance o Wes e n democ acies,
buil he Indo-Paci c Economic F amewo k, epai ed ansa lan ic ela ions,
ad anced he AUKUS (Aus alia-UK-US) ila e al secu i y pa ne ship, and
imposed unp eceden ed, la ge-scale economic sanc ions on Russia. In e ms
o ade policy, he Biden adminis a ion has la gely con inued p o ec ionis
policies due o p essu e om domes ic labo g oups. On he secu i y on ,
he g ea es challenge o he Biden adminis a ion is he Russia-Uk aine wa ,
bu he adminis a ion has s eng hened NATO and he G7 h ough alliances,
achie ed NATO’s no he n expansion by accep ing Sweden and Finland as
membe s, and b oadened NATO’s sphe e o in uence o he Indo-Paci c
egion, all in an e o o main ain US hegemony. A guably, since P esiden
Obama ook o ce in 2009, he policy pa adigm o US economic s a ec a has
g adually shi ed om i s libe al unde one o a mixed pale e o me can ilism,
impe ialism, and libe alism.

Ame ica’s Economic S a ec a 69
3.3.1 US Economic S a ec a Unde P esiden Obama (2008–2016)
P esiden Obama’s bigges challenge a he beginning o his p esidency was
managing he global economic c isis. When P esiden Obama came in o o ce,
he was old by his economic ad iso s ha he e was one chance in h ee o
a 1930s-s yle dep ession. I he had no a oided ha disas e , all else would
ha e paled.47 In his con ex , P esiden Obama in oduced he la ges eco-
nomic s imulus package in his o y. In e na ionally, he G8 was ans o med
in o he G20. Closely ela ed o his esponse o he economic c isis, Obama
changed he US-China S a egic Economic Dialogue (SED) es ablished unde
Geo ge W. Bush in o he S a egic and Economic Dialogue (S&ED), add-
ing a s a egic ack – ins i u ional inno a ion o US economic s a ec a wi h
China. Th ough he S&ED, he Uni ed S a es could es ablish a kind o linkage
be ween he economic and s a egic acks, hus con ibu ing o he wo-way
con e sion o weal h and powe .
The s a egic ca chph ase o he Obama yea s was “sma powe ”. As hen-
Sec e a y o S a e Hilla y Clin on pu i , “We mus use wha has been called
sma powe , he ull ange o ools a ou disposal – diploma ic, economic,
mili a y, poli ical, legal, and cul u al – picking he igh ool o combina ion
o ools o each si ua ion”.48 Joseph Nye also no ed ha he “sma powe ”
na a i e used by he Uni ed S a es o he 21s cen u y was no abou maxi-
mizing powe o p ese ing hegemony. Ra he , i was abou nding ways o
combine esou ces in success ul s a egies in he new con ex o powe di u-
sion and “ he ise o he es ”.49 Sma powe and economic s a ec a se e
simila pu poses. Economic s a ec a is essen ially abou he wo-way ans-
o ma ion o weal h and powe , which equi es decision make s o be able o
combine esou ces o achie e he objec i es o a g and s a egy.
3.3.2 U.S. Economic S a ec a Unde P esiden T ump (2016–2020)
A e P esiden T ump ook o ce in No embe 2016, US economic s a e-
c a aced i s g ea es pa adigm shi since Wo ld Wa II, wi h a g adual shi
om a libe al ins i u ionalis base o economic na ionalism, o which P esi-
den T ump was a key d i e . The new policy doc ine pu sued by P esiden
T ump and his s a was “Ame ica Fi s ”. P esiden T ump has long held ha
Ame ican poli icians had been negligen in p o ec ing US na ional in e es s;
hey had no done enough, in domes ic o o eign a ai s.
Unde P esiden T ump, he Uni ed S a es announced i s wi hd awal om
UNESCO, he Uni ed Na ions Human Righ s Council (OHCHR), and he
Uni e sal Pos al Union in quick succession. P esiden T ump also h ea ened
o exi he WTO, a guing ha he Uni ed S a es had no been “ ea ed ai ly,
ha he WTO had uled agains he US in many decisions”, and ha he ag ee-
men es ablishing he body “was he single wo s ade deal e e made”.50 I
he WTO does no “shape up”, P esiden T ump said, he Uni ed S a es would
wi hd aw.51 P esiden T ump’s “exi ism” was he g ea es exis en ial h ea o
he global go e nance sys em since Wo ld Wa II.
70 Ame ica’s Economic S a ec a
In e ms o egional ade, P esiden T ump demanded he enego ia ion
o NAFTA, which he called an un ai ade deal ha “sac i ced ou p ospe -
i y and shipped away ou companies, ou jobs, and ou na ion’s weal h”.52 On
his s day in o ce, P esiden T ump announced his wi hd awal om he
T ans-Paci c Pa ne ship (TPP), saying he ag eemen would spell disas e
o he Uni ed S a es and would be eplaced by ai e bila e al FTAs. By he
same oken, P esiden T ump ceased nego ia ion wi h he EU o he T ans-
a lan ic T ade and In es men Pa ne ship (TTIP). T ump disliked he EU as
a egional ade bloc and p e e ed nego ia ing bila e ally wi h membe s a es
a he han wi h he EU as a whole in o de o gain an ad an age. A he
No embe 2017 APEC summi in Danang, P esiden T ump ei e a ed his
in en ion o e ising mul ila e al and egional ade ag eemen s in o bila e al
FTAs, p onouncing ha “wha we will no longe do is en e in o la ge ag ee-
men s ha ie ou hands, su ende ou so e eign y, and make meaning ul
en o cemen p ac ically impossible”. Ra he , he wan ed o build a new ype o
pa ne ship based on he p inciple o ecip oci y.
The T ump adminis a ion exp essed dissa is ac ion wi h he cu en in e -
na ional ade o de ac oss he boa d, a guing ha he Uni ed S a es was a
a disad an age a he bila e al, egional, and mul ila e al le els, and he e o e
demanded ealignmen and a comp ehensi e e amp o he in e na ional ade
o de . The adminis a ion in ended o s eng hen US echnological supe io -
i y, inc ease US expo s, and imp o e ma ke access o o he coun ies o he
e u n o manu ac u ing, jobs, and p ospe i y – and o “make Ame ica g ea
again”.
P esiden T ump’s demand o a eadjus men o he in e na ional ade
o de was no en i ely un easonable. A e all, i had been 70 yea s since he
in e na ional ade o de was es ablished, du ing which ime i had been
dynamically adjus ed. T ump was ying o “ba gain” a ai e ade o de o
he Uni ed S a es. The oo o his ade policy “ e olu ion” was he p og essi e
decline o US hegemony and i s se e ely diminished abili y and willingness o
main ain he cu en libe al in e na ional ade o de . The Uni ed S a es unde
P esiden T ump was inc easingly unwilling and unable o p ese e his o de
ha i had es ablished a e Wo ld Wa II.
In he p ocess o hegemonic decline, he e will be decades o epea ed
s uggles and con en ion be ween he challenge s (mo e han one) and he
hegemonic powe . The ise and all o he hegemon cons i u e he main h ead
o he his o y o in e na ional poli ical economy and is also he esul o each
coun y’s choice o economic s a ec a . The ee ade o de p e iously es ab-
lished by he B i ish Empi e and he Uni ed S a es, coupled wi h globaliza-
ion and he sp ead o democ acy, ine i ably b ough abou he di usion o
knowledge and echnology, which would allow o he coun ies o ca ch up.
The hegemonic powe is hus always in an app ehensi e s a e o mind. This
is an i e a i e ye ine i able his o ical p ocess. As a hegemon ises and alls, i
adap s i s ade policy acco dingly. As a gene al p inciple, a ising powe adop s
ade p ohibi ionism, such as he me can ilism adop ed by B i ain in he 16 h
Ame ica’s Economic S a ec a 71
o 18 h cen u ies. Then i g adually opens up and adop s p o ec ionism wi h
some deg ee o openness, such as B i ain in he s hal o he 19 h cen u y
and he Uni ed S a es in he 1930s. Finally, i emb aces ee ade and es ab-
lishes an in e na ional ee ade o de . Fo example, in he second hal o he
19 h cen u y, B i ain signed he Cobden-Che alie Comme cial T ea y wi h
F ance, which ushe ed in he e a o ee ade. The Uni ed S a es a e Wo ld
Wa II s a ed he e a o ee ade mul ila e alism by es ablishing he B e on
Woods sys em. Wi h he decline o hegemony, ade policies ha e e e ed o
p o ec ionism, o e en p ohibi ionism, comple ing a his o ical cycle. Like a
pendulum, i swings om le o igh be o e e en ually e u ning o he s a -
ing poin . We mus emembe ha i is no libe alism, bu me can ilism ha
has las ed he longes in in e na ional ade since he 1500s. E en he B i ish
Empi e, known o ee ade, p ac iced me can ilism o 300 yea s, om he
16 h cen u y un il he mid-19 h cen u y. While we enjoy he boon o ee
ade, we mus unde s and ha ee ade is a “luxu y” p oduc o he p og ess
o human his o y ha should be che ished.
3.4 Pa adigm Shi in US Economic S a ec a : Pendulum
Be ween Libe alism and Me can ilism
Since i s ounding, he Uni ed S a es has adop ed h ee pa adigms o eco-
nomic s a ec a and has de eloped some a ian s ha he Ame ican con ex
wi h Ame ican cha ac e is ics (such as libe al ins i u ionalism and neolibe -
alism a e Wo ld Wa II, a ian s o he libe al pa adigm). A e achie ing
independence in 1776, he Uni ed S a es s implemen ed me can ilism o
p io i ize he de elopmen o manu ac u ing. A e he Spanish-Ame ican Wa
o 1898, he coun y p ac iced impe ialism o some ime. A e Wo ld Wa II,
libe al ins i u ionalism ook hold, ollowed by neolibe alism in he 1980s. US
economic s a ec a a e he 2008 global nancial c isis was a mix o me can-
ilism, impe ialism, and libe alism. Unde P esiden T ump, he Uni ed S a es
la gely adop ed me can ilism ha was also known as “economic na ionalism”.
Economic na ionalism is no hing new o Ame ican poli ics. In ac , US pol-
icy a o ed economic na ionalism long be o e Wo ld Wa II. In he ea ly days o
Ame ican ade policy a e he Wa o Independence, he Cong ess ook ac ion,
passing he Ta i Ac o 1816, which uni ed Ame ica’s a i policy, and doubled
he a e age a es. This u he shel e ed Ame ica’s indus ies om B i ish com-
pe i ion, and uly se he s age o he explosi e g ow h o Ame ica’s indus ial
e olu ion.53 This endency was bes encapsula ed in he Smoo -Hawley Ta i
Ac o 1930. A ha ime, a la ge majo i y o economis s belie ed he Smoo -
Hawley Ta i Ac would exace ba e he US ecession in o a wo ldwide dep es-
sion. They wa ned ha he a i would “ine i ably p o oke o he coun ies o
pay us back in kind agains ou goods”. Economis s oday, howe e , hold a di -
e en iew o he e ec s o Smoo -Hawley. While economic his o ians gene ally
belie e he a i was misguided and may ha e agg a a ed he economic c isis,
he consensus appea s o elega e i o a mino s a us ela i e o o he o ces.54
72 Ame ica’s Economic S a ec a
This end was only e e sed a e F anklin D. Roose el was elec ed p esi-
den . P esiden Roose el ’s hen-Sec e a y o S a e Co dell Hull was a s aunch
suppo e o ee ade. To epai he damage caused by he Smoo -Hawley
Ta i Ac , he se abou nego ia ing ee ade ag eemen s o lowe a i s
be ween he Uni ed S a es and o he signa o ies. Following he Allied Vic o y
in Wo ld Wa II, he in e na ional communi y a he ime gene ally belie ed
ha g ea e economic in eg a ion would help ebuild he pos wa economy,
and he Uni ed S a es ac i ely p omo ed he signing o he GATT. In he
decades ha ollowed, membe coun ies me many imes o nego ia e s eepe
a i educ ions. Lowe a i ba ie s and close economic in eg a ion we e
impo an componen s o US o eign policy a he ime. The US go e nmen
belie ed ha economic ies and mili a y alliances could help coun e So ie
economic s a ec a .
Du ing he p ocess, he Uni ed S a es p e e ed global ag eemen s such
as he GATT o e ade ag eemen s among smalle g oups o coun ies.
Howe e , his p e e ence began o shi in he ea ly 1980s when he Uni ed
S a es a emp ed o launch a new ound o GATT nego ia ions, bu ailed,
while Canada o e ed o es ablish a bila e al open ade ag eemen wi h he
Uni ed S a es. In 1988, he US-Canada FTA was concluded, which soon
became NAFTA among he Uni ed S a es, Canada, and Mexico in 1993. Bu
jus as he Clin on adminis a ion was nalizing NAFTA, opposi ion g ew
domes ically, a guing ha he US s a egy o suppo ing globaliza ion was
p oblema ic. The opposi ion was o he iew ha FTAs we e des oying he
ounda ions o he Ame ican middle class by o cing hem o compe e wi h
cheap o eign labo , which was un ai , and ha hese ag eemen s alued eco-
nomic gains a he expense o wo king people. In 1994, he Uni ed S a es
chose o suppo he c ea ion o he WTO, an o ganiza ion ha was con-
side ed he mo al enemy o economic na ionalism, in he U uguay Round
o nego ia ions. The WTO as an in e na ional o ganiza ion sough posi i e
coope a ion among i s membe s and ine i ably, i equi ed membe s o sac-
i ce pa o hei so e eign y on ade policy. Despi e he opposi ion, he
no ion o ee ade s ill p e ailed a he ime. Du ing his p esidency, Geo ge
W. Bush concluded nego ia ions o signed in o o ce bila e al ade ag ee-
men s wi h Jo dan, Chile, Singapo e, Mo occo, Aus alia, he Dominican
Republic-Cen al Ame ica, Bah ain, Oman, Pe u, Colombia, Panama, and
Sou h Ko ea. P esiden Obama, who did li le on ade in his s e m,
became an ac i e ad oca e o TPP in his second e m, a guing i was i al
o he Uni ed S a es and i s pa ne s o se o wa d-looking ules o he
global economy. Bu in he elec ion yea o 2016, poli ical suppo dwindled,
pa icula ly among ank-and- le Republicans, and e en among es ablishmen
Sena e Republicans who held back o a combina ion o economic and poli i-
cal mo i es. The wo leading GOP p esiden ial con ende s we e oci e ous
c i ics o ade ag eemen s, as was Democ a ic hope ul Hilla y Clin on’s chal-
lenge , Be nie Sande s. T adi ional Republican ee-ma ke s alwa s such as
House speake Paul Ryan became inc easingly lonely ee- ade ad oca es.
Ame ica’s Economic S a ec a 73
The hen-p esiden ial candida e Donald T ump’s an i ade posi ion made
many conse a i e Republicans ollow his opinion.
The pa adigm shi in US economic s a ec a om libe alism o me can il-
ism has been a slow p ocess. Libe al ins i u ionalism, which was implemen ed
globally a e Wo ld Wa II, began o lose g ound o neolibe alism du ing
he Reagan yea s. While neolibe alism suppo s ee ade, as US hegemony
slowly declined, i became inc easingly di cul o he Uni ed S a es o
d i e ee ade on a global scale, and e en egional FTAs became inc eas-
ingly di cul o ad ance a e P esiden Clin on le o ce. Since NAFTA
came in o e ec on Janua y 1, 1994, un il he days o P esiden Joe Biden in
2021–2025, he Uni ed S a es has only concluded he nego ia ions o he
US-Dominican Republic-Cen al Ame ica FTA (CAFTA-DR), whe eas he
o he nego ia ion p ocesses o egional FTAs such as he F ee T ade A ea
o Ame icas (FTAA), he US-Middle Eas FTA (MEFTA), he US-Sou he n
A ican Cus oms Union (SACU) FTA, he US-Eu opean T ansa lan ic T ade
and In es men Pa ne ship (TTIP), and he T ans-Paci c Pa ne ship (TPP)
all ailed. This poin s o h ee majo dilemmas aced in he implemen a ion o
US economic s a ec a .
3.4.1 The Dilemma o Deglobaliza ion
The cu en eg ession o globaliza ion began in he de eloped Wes e n coun-
ies ha es ablished he B e on Woods sys em. The T ump Doc ine and
B exi we e jus he ip o he icebe g o his wa e o deglobaliza ion. O e
he pas 30 yea s since he 1990s, mos Ame icans ha e seen sluggish income
g ow h, he middle class has con ac ed, and he Uni ed S a es has g adu-
ally shi ed om being an ad oca e o globaliza ion o being a p oponen o
deglobaliza ion. P io o T ump’s p esidency in 2017, he Uni ed S a es was
al eady showing a endency owa d deglobaliza ion, and when T ump was
elec ed p esiden , he ook a se ies o policy ac ions ha a emp ed decoupling
om globaliza ion, including discou aging ou sou cing by US manu ac u e s,
imposing a i s on impo s, es ic ing immig a ion, and o he “wi hd awal”
ac ions.
Deglobaliza ion has added economic and poli ical p essu es on Ame ica.
Globaliza ion is a majo d i e o low in a ion and low in e es a es, and i
his p ocess is e e sed, p ices and in e es a e ends a e likely o e e se oo.
The US go e nmen and co po a ions a e a mo e indeb ed han any o he
coun y. A he same ime, inc eased a i s and ade ic ions would weaken
nancial globaliza ion, e ode US mul ina ional p o s and s ock ma ke alu-
a ion subs an ially, and educe o eign demand o US T easu ies signi can ly.
These would be coun e p oduc i e o he US agenda o an agg essi e eco-
nomic s a ec a . The COVID-19 pandemic has exace ba ed he deglobali-
za ion dilemma and hampe ed in e na ional coope a ion. Deglobaliza ion
u he ueled p o ec ionism and isola ionism among coun ies and se iously
den ed hei willingness and abili y o coope a e in e na ionally.

74 Ame ica’s Economic S a ec a
3.4.2 The Dilemma o US Hegemony
Gi en he ela i e decline o i s powe , he Uni ed S a es nds i inc easingly
di cul o swallow he mega- egional ade ag eemen s. A e Wo ld Wa II,
he Uni ed S a es ushe ed in he e a o ee ade mul ila e alism by es ablishing
he B e on Woods sys em. Wi h he decline o US hegemony, ade policies
ha e e e ed o p o ec ionism, o e en p ohibi ionism, c ea ing a his o ical
cycle. A e Wo ld Wa II, when US hegemony was in i s p ime, he Uni ed
S a es es ablished a mul ila e al ade o de and sys em. When US hegemony
declined, i could only e u n o egionalism. Now wi h he u he decline o
US hegemony, he coun y could ba ely hold on o he bo om line o open
egionalism. The ins i u ional a angemen s o US o eign ade a e likely mo -
ing owa ds closed egionalism, “small clubs”, and bila e al FTA a angemen s.
In he e olu ion o in e egional ela ions ollowing he Cold Wa , Clin-
on’s policy o egional coope a ion was a u ning poin : Clin on shi ed om
adi ional global mul ila e alism o egional (NAFTA) and in e egional mul-
ila e alism. Howe e , his shi was undamen ally mo i a ed by economic
in e es s and se ed he in e es o he Uni ed S a es in ela i e hegemonic
decline. The US-led APEC, FTAA, and he New T ansa lan ic Agenda (NTA)
in ensely con adic ed he mo e deeply coope a i e egional o ganiza ions
such as he Sou he n Common Ma ke (Me cosu ), he Associa ion o Sou h-
Eas Asian Na ions (ASEAN), and he EU. This is because he Uni ed S a es
is no as keen on such a highly in eg a ed o m o coope a ion as hese h ee
egional o ganiza ions because such coope a ion does no se e US economic
in e es s and would h ea en US global hegemony.
Geo ge W. Bush a emp ed o place his un nished business o in e e-
gional coope a ion unde pos -9/11 secu i y conside a ions in 2001. As a
esul , US in e egional coope a ion in his pe iod was la gely un ui ul. This
con med he ul ima e ailu e o P esiden s Clin on and Bush J .’s a emp s o
e i e declining hegemony and US-led mul ila e alism h ough in e egional
a angemen s, whe he ocused on ee ade o secu i y.
3.4.3 The Dilemma o US Domes ic Poli ics
In he a e ma h o he 2008 global nancial c isis, he Uni ed S a es saw
in ensi ed domes ic economic and social con adic ions. The gap be ween he
ich and he poo u he widened. The middle class saw li le income g ow h
o a p olonged pe iod. Populism s a ed o ise. Labo g oups and bipa i-
san poli ics es ic ed he US go e nmen ’s o eign ade coope a ion. These
social ends ha e g adually disman led he domes ic suppo o ee ade and
egionalism. Sena o Be nie Sande s equen ly and openly a acked ee ade.
An i ade sen imen p omp ed Hilla y Clin on, who p e iously called he TPP
he gold s anda d o ade ag eemen s, o u n agains i . T ump’s suppo e s
we e e en mo e opposed o ee ade.
A e P esiden T ump le o ce in Janua y 2021, he US policy eli es
ha e s a ed o e ec on and c i icize T ump’s economic s a ec a . The e
Ame ica’s Economic S a ec a 75
a e s ong opinions wi hin he Uni ed S a es abou P esiden T ump’s global
ade wa . Fo example, o me T easu y Sec e a y Jacob Lew w o e in Fo -
eign A ai s back in 2018, c i icizing T ump: “His (T ump’s) adminis a ion
is beha ing as i he Uni ed S a es is immune o consequences, whe he in he
o m o ad e sa ies exe ing economic p essu e o allies ejec ing he legi i-
macy o US policy”.55 O he c i icism includes:
he Uni ed S a es is ge ing wo se a economic diplomacy jus as o he
coun ies a e lea ning how o ad oi ly wield economic ins umen s. By
ocusing on s icks o he exclusion o ca o s, he T ump adminis a ion has
squande ed he Uni ed S a es’ economic le e age. In he p ocess, i has also
unde cu wha e e s a egic ad an ages i inhe i ed om i s p edecesso s.56
Bu despi e he c i icism o T ump’s economic s a ec a , we can be ce ain
ha one o he hings ha makes P esiden T ump s and ou om his p e-
decesso s is he equency and ambi ion o his adminis a ion’s app oach o
economic s a ec a . This p esiden has been keen o use economic le e age
o ex ac concessions ac oss a wide a ay o secu i y and economic issues.57 As
T ump has said, he Uni ed S a es had no used i s eno mous capabili ies o
s ike be e ba gains wi h allies and ad e sa ies alike.58
Unlike P esiden T ump, P esiden Biden, as pa o he poli ical es ablishmen
eli e, ad oca es ne- uning he un easonable in e na ional o de , a he han
comple ely o e u ning he old one, as T ump had sugges ed. P esiden Biden
has he dis inc cha ac e o he Silen Gene a ion – pa ien and inclusi e. An
in ellec ual he F ank u School would desc ibe as “social cemen ”, Biden ies
o b ing oge he s akeholde s wi h di e en opinions o wo k owa d a common
goal. Wi h his kind o pe sona, Biden ad oca ed a e u n o mul ila e alism.
Sho ly a e he ook o ce, P esiden Biden a ended he 2021 Munich Secu i y
Con e ence o enew he ansa lan ic pa ne ship unde he slogan, “Ame ica is
back”, ying o inc ease he US poli ical le e age agains China h ough coo -
dina ion and in e ac ion wi h Eu ope. In Feb ua y 2022, a e Russia’s “special
mili a y ope a ion” agains Uk aine, P esiden Biden’s e o s o coo dina e allied
ela ions we e u he ecognized and s eng hened, and despi e he many di -
e ences wi hin he G7 and NATO, he e was o e all ag eemen on he s a egy
owa d Russia. This has main ained he s abili y o he alliance and e en expanded
NATO’s membe ship. In sho , P esiden Biden appea s o be mo e disciplined
han T ump on diplomacy. Howe e , he has no e e sed he his o ical cou se o
US economic s a ec a ’s slide om libe alism o me can ilism.
No es
1 D enzne , D. W. (2019). Economic S a ec a in he Age o T ump. The Washing on
Qua e ly, 42(3), p.7.
2 This cha is based upon and upg aded he ela ed cha o Flin , C., & Taylo , P. (2018,
May 4). Poli ical Geog aphy: Wo ld-Economy, Na ion-S a e and Locali y (7 h edi ion).
B ussels: Rou ledge.
5
10
15
20
25
76 Ame ica’s Economic S a ec a
3 See www.go in o.go /con en /pkg/GPO-CDOC-106sdoc21/pd /GPO-CDOC-
106sdoc21.pd
4 Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, p.120.
Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, p.122.
6 Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, p.124.
7 Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, p.123.
8 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, p.44.
9 Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, pp.54–55.
Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, p.57.
11 Ellis, J. J. (2000). Founding B o he s: The Re olu iona y Gene a ion. New Yo k:
Vin age Books, p.57.
12 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, p.47.
13 Zaka ia, F. (1998). F om Weal h o Powe : The Unusual O igins o Ame ica’s Wo ld
Role. P ince on, NJ: P ince on Uni e si y P ess, p.4.
14 Zaka ia, F. (1998). F om Weal h o Powe . P ince on, NJ: P ince on Uni e si y
P ess, p.8.
Zaka ia, F. (1998). F om Weal h o Powe . P ince on, NJ: P ince on Uni e si y
P ess, pp.8–9.
16 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, p.47.
17 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, 2012, pp.47–48.
18 Go don, R. J. (2016). The Rise and Fall o Ame ican G ow h: The U.S. S anda d o
Li ing Since he Ci il Wa . P ince on, NJ: P ince on Uni e si y P ess, p.2.
19 Go don, R. J. (2016). The Rise and Fall o Ame ican G ow h: The U.S. S anda d o
Li ing Since he Ci il Wa . P ince on, NJ: P ince on Uni e si y P ess, p.624.
Go don, R. J. (2016). The Rise and Fall o Ame ican G ow h: The U.S. S anda d o
Li ing Since he Ci il Wa . P ince on: P ince on Uni e si y P ess, p.624.
21 Go don, R. J. (2016). The Rise and Fall o Ame ican G ow h: The U.S. S anda d o
Li ing Since he Ci il Wa . P ince on, NJ: P ince on Uni e si y P ess, p.2.
22 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, p.48.
23 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, p.49.
24 Wang, L. (2015). Hesi an Hegemony: The Iden i y Con usion and he Pu sui o
O de a e he Rise o Ame ica (1913–1945) (in Chinese). Beijing: China Social
Sciences P ess, p.1.
Wang, L. (2015). Hesi an Hegemony: The Iden i y Con usion and he Pu sui o O de
a e he Rise o Ame ica (1913–1945) (in Chinese). Beijing: China Social Sciences P ess.
26 Kissinge , H. (1994). Diplomacy. New Yo k: Simon & Schus e .
30
35
40
45
50
Ame ica’s Economic S a ec a 77
27 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy (2nd edi ion). Ox o d: Ox o d Uni e si y
P ess, p.52.
28 Nye, J. (2017). The Kindlebe ge T ap. P ojec Syndica e, Janua y 9, see www.
bel e cen e .o g/publica ion/kindlebe ge - ap
29 Go don, R. J. (2016). The Rise and Fall o Ame ican G ow h: The U.S. S anda d o
Li ing Since he Ci il Wa . P ince on, NJ: P ince on Uni e si y P ess, p. IV.
Des le , I. M. (2005). Ame ican T ade Poli ics (4 h edi ion). Washing on, DC:
Ins i u e o In e na ional Economics, p.6.
31 Li, S. (1995). On he His o ical Cou se o Rela ions Be ween he Uni ed S a es
and he Uni ed Na ions. The Chinese Jou nal o Ame ican S udies, 2, pp.91–98.
32 Zhao, K. (2014). On he S a egic Goals o G ea Powe Economic Diplomacy:
Ame ican Economic Diplomacy and he Collapse o he B i ish Empi e. China
Jou nal o Eu opean S udies, 32(4), pp.63–75.
33 S eil, B. (2013). The Ba le o B e on Woods. P ince on, NJ: P ince on Uni e si y
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34 Zhao, K. (2014). On he S a egic Objec i es o G ea Powe Economic Diplo-
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Ga dne , R. N. (1969). S e ling-Dolla Diplomacy. New Yo k: McG aw-Hill Book
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36 Zhao, K. (2014). On he S a egic Objec i es o G ea Powe Economic Diplo-
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37 Kennan, G. F. (1967). Memoi s 1925–1950. Bos on: Li le, B own and Company,
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38 Kennan, G. F. (1967). Memoi s 1925–1950. Bos on: Li le, B own and Company,
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39 LaFebe , W. (2012). The US Rise o Wo ld Powe , 1776–1945. In Michael Cox &
Doug S okes (Eds.), US Fo eign Policy. New Yo k: Ox o d Uni e si y P ess, p.55.
S ein, A. A. (1984). The Hegemon’s Dilemma: G ea B i ain, he Uni ed S a es,
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41 Bayne, N. (2010). Economic Diploma : The Memoi s o Si Nicholas Bayne KCMG.
Du ham: The Memoi Club, p.115.
42 Kennan, G. F. (1947). The Sou ces o So ie Conduc . Fo eign A ai s, July, 25(4),
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43 Saull, R. (2012). Ame ican Fo eign Policy Du ing he Cold Wa . In Michael Cox &
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44 US Spending, De ense Spending, see www.usgo e nmen spending.com/de ense_
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US Spending, De ense Spending, see www.usgo e nmen spending.com/de ense_
spending
46 US Spending, Go e nmen Spending, see www.usgo e nmen spending.com/spending_
cha _1940_2026USp_23s2li111mcny_F0
47 Nye, J. (2012). Obama and Sma Powe . In Michael Cox & Doug S okes (Eds.),
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48 Clin on, H. (2009). Con ma ion Hea ing o Sec e a y o S a e. New Yo k Times,
see h ps://www.ny imes.com/2009/01/13/us/poli ics/13 ex -clin on.h ml
49 Nye, J. (2012). Obama and Sma Powe . In Michael Cox & Doug S okes (Eds.),
US Fo eign Policy. New Yo k: Ox o d Uni e si y P ess, p.106.
Bloombe g. (2018). T ump Th ea ens o Pull U.S. Ou o WTO I I Doesn’
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ump-says-he-will-pull-u-s-ou -o -w o-i - hey-don- -shape-up.
84 The EU’s Economic S a ec a
Myanma , and Hai i, a e s ill e ec i e. Among he sanc ion measu es, he e
is gene ally economic sanc ion. Fo ins ance, du ing he Uk ainian c ises, he
EU issued ounds o economic sanc ion agains Russia, u ilizing he linkage
s a egy o combining economic and mili a y secu i y issues.
The ou h is he s uc u al o eign policy. The s uc u al o eign policy
means he EU de elops linkages wi h neighbo ing coun ies and emo e pa -
ne s by signing coope a ion ag eemen s. A ea u e o his o eign policy is
ha i emphasizes long- e m ins ead o sho - e m objec i es. I a emp s o
change o he coun ies’ condi ions o ac ion s ep by s ep. To exe i s powe ,
he ci ilian mode a he han he mili a y mode is he basis. The objec i e is o
s eng hen coope a ion, each a consensus, consolida e in e na ional mecha-
nisms, and sp ead mul ila e alism o e e y le el. This policy does no exclude
a compulso y dimension, which means ha he EU, by se ing condi ions, can
dep i e o he coun ies o hei p o s when he la e e use o accep he
EU’s condi ions. I au ho izes a coun y pa y o en e he Eu opean ma ke
o add o he a i o a hi d pa y.20 The s uc u al o eign policy is also called
he coope a ion policy o coope a ion powe .
The h is he g and ba gain s a egy, whose majo ehicles a e mixed
ag eemen s con aining a ious issue a eas signed by he EU and hi d coun-
ies,21 he s a egic pa ne ships,22 and he summi sys em. The nego ia ion
mode o he g and ba gain does no exis solely in he EU, bu is widely used
in poli ical games and mul ila e al nego ia ions. Fo ins ance, he nego ia ion
mode inside he WTO is a package deal ha o ganizes mul iple issues and
ealizes a g and ba gain. This nego ia ion mode is conduci e o he ealiza ion
o an o e all balance o in e es s. I also compensa es depa men s and g oups
ha ha e hei domes ic in e es s impai ed in c oss-bo de nego ia ions and
hus acili a es he eaching o domes ic consensus. Such a package nego ia-
ion is pa icula ly signi can o he EU as a nonmili a y powe . Wi h he
long- e m comp ehensi e pa ne ship, he EU can exe long- e m and sub le
in uence on i s pa ne s.
The six h is pa y linkage – linkage wi h a hi d pa y o he EU. The e m
“pa y linkage” s appea s in Sebenius’s a icle, “Nego ia ion A i hme ic:
Adding and Sub ac ing Issues and Pa ies”, published in he jou nal In e -
na ional O ganiza ion in 1983.23 Sebenius con ends ha he numbe o
issues and pa ies in a nego ia ion is a a iable. Thus, o add mo e pa ies wi h
subs an ial in uence o e he na u e o he nego ia ion o ma e ial in e es s
in ol ed in he nego ia ion can inc ease one pa y’s ba gaining powe o legi i-
macy. In he EU’s o eign policy p ac ice, cases o adding pa ies a e nume -
ous. In ac , when he EU ini ia es o eign nego ia ions, iden i ying pa ies
wi h compa ible in e es s and cons uc ing a nego ia ion alliance is a key s ep.
Allies could be adi ional g ea powe s ou side he EU o de eloping and
small coun ies. As long as hey can enhance he EU’s s a us in nego ia ions,
he EU will conside hem. Ne e heless, when he EU nego ia es wi h poli i-
cal and mili a y powe s wi h di e en alues, i ends o bo ow powe om
he Uni ed S a es. To he Uni ed S a es, he EU is always ambi alen . I wan s

The EU’s Economic S a ec a 85
o id i sel o he Uni ed S a es’ es ic ion and seek au onomy, bu o sepa a e
o ally om he Uni ed S a es is di cul . D i en by his ambi alence, he EU
has o med a en a i e pa y linkage s a egy wi h he Uni ed S a es. In o he
e ms, on he global poli ical and economic s age, he EU keeps a close eye on
he Uni ed S a es and is eady o wo k o spli wi h he la e , ollow i o ac
independen ly, and coope a e o compe e wi h i .
In he cu en con ex , he discussion on he EU’s s a egic au onomy and
ea mamen has in ensi ed, which in u n, has ueled in e nal deba e on he
EU’s economic s a ec a , he cen al objec i e o which is o enhance he
EU’s coo dina ed use o a ious powe endowmen s (especially economic
powe endowmen s) o achie e i s o eign policy objec i es (i.e., he ans-
o ma ion o weal h in o powe , he mos impo an subjec o ou s udy on
economic s a ec a ). The e is now enewed u gency o he EU o launch i s
weal h-powe s a egy o push economic s a ec a o he cen e o he EU’s
o eign policy agenda.
The EU is looking o ways o expand he sou ces o i s weal h. The Nex
Gene a ion EU (NGEU) p og am has au ho ized he EU o issue bonds. The
NGEU p og am is adically changing he way he EU in e ac s wi h nancial
ma ke s because o i s ambi ious and g ound-b eaking new public deb p o-
g am. The EC has adop ed a new, di e si ed bo owing s a egy, simila o
ha o o he majo issue s, o aise money sa ely, eliably, and in a cos -e ec i e
manne . Membe s a es au ho ized he EC o bo ow up o EUR 750 billion
in 2018 p ices (a ound EUR 806.9 billion a cu en p ices) un il 2026. This
means ha he EU will bo ow up o app oxima ely EUR 150 billion pe yea
o e he nex ew yea s.24
4.2 Upda ing he EU’s Economic S a ec a
“Toolbox” Since 2020
Since 2020, a he con uence o a ious challenges such as he COVID-19 pan-
demic, geopoli ical ensions be ween majo powe s, and he Russia-Uk aine con-
ic , he op poli ical, diploma ic, and business minds o he EU and i s membe
s a es ha e begun o plan new economic s a ec a and apidly upda e hei “ ool-
box”. Such economic s a ec a has clea s a egic objec i es, issue a eas, imple-
men a ion means, and ins umen s, as mani es ed in he ollowing ways.
4.2.1 P omo e he Fu he Ins umen aliza ion o Mili a y and
Economic Powe o C ea e a “Eu opa Geopoli ica” 25
The new Eu opean Commission belie es ha ha d powe (i.e., c edible mili-
a y capabili ies) is an impo an ins umen .26 The es ablishmen o a “Eu o-
pean a my” has become he consensus among membe s a es, led by F ance
and Ge many. The Eu opean Commission led by P esiden Von De Leyen is
ully awa e o he in ensi ca ion o geopoli ical compe i ion and i s own ina-
bili y o deal wi h geopoli ical issues. Speaking a he Wo ld Economic Fo um
86 The EU’s Economic S a ec a
in Da os on Janua y 22, 2020, U sula on de Leyen said, “We mus also do
mo e when i comes o managing c ises as hey de elop. Bu o be mo e asse -
i e in he wo ld, we know we mus s ep up in some elds”. The EU is a mas e
o ebuilding, bu i mus de elop ha d powe – “c edible mili a y capabili ies” –
o in uence wo ld e en s. She s essed ha he e is a Eu opean way o o -
eign policy and o eign secu i y policy whe e ha d powe is an impo an ool.
These capabili ies will be complemen a y o and “di e en ” om NATO.27
Von de Leyen endo sed he concep o an “EU a my”, a leas as a so o
he o ical call o imp o ing he bloc’s collec i e mili a y and de ense capabili-
ies, a he han a li e al expec a ion o soldie s in EU uni o ms. Josep Bo ell,
EU High Rep esen a i e o Fo eign A ai s and Secu i y, said, “We see he
ebi h o geos a egic compe i ion”, no ably be ween China, Russia, and he
Uni ed S a es, and he EU mus s ep up, and i “has he op ion o becom-
ing a playe , a ue geos a egic ac o , o being mos ly he playg ound”.28 He
endo sed inc easing he EU’s mili a y capabili ies and quo ed Du ch P ime
Minis e Ma k Ru e as saying, “I we only p each he me i s o p inciples, and
shy away om exe cising powe in he geopoli ical a ena, ou con inen may
always be igh , bu i will seldom be ele an ”.29 In e ms o building a c ed-
ible mili a y o ce, he EC unde on de Leyen’s p esidency has pu o wa d
a numbe o ideas o s eng hening EU de ense policy, including inc easing
he EU De ense Fund (EDF), o which he EC p oposes o in es EUR 13
billion be ween 2021 and 2027 (an a e age o 1.8 billion eu os pe yea ) o
und coope a i e de ense esea ch and he join de elopmen o Eu opean
mili a y capabili ies.30
4.2.2 P omo e a “So e eign Eu ope” and P o ec he “Economic
So e eign y” o Eu ope
Economic so e eign y has become he co e demand o he cu en EU eco-
nomic s a ec a . To pu sue economic so e eign y, he EU needs o bols e i s
abili y o pa icipa e in de ning he ules o he game o he global economy;
boos Eu ope’s esea ch, scien i c, echnology and inno a ion base; p o ec
asse s c i ical o na ional secu i y om o eign in e e ence; en o ce a le el
playing eld in bo h domes ic and in e na ional compe i ion; and s eng hen
Eu opean mone a y and nancial au onomy.31 The key objec i e o he EU’s
new ade policy is o seek he so-called “Open S a egic Au onomy”. I means
s iking he igh balance be ween a Eu ope ha is open o business and a
Eu ope ha de ends i s companies and consume s om un ai compe i ion
and hos ile ac ions.32 Mo eo e , in pu sui o s a egic economic so e eign y,
he EU is ac i ely building esilience in o i s indus ial alue chains, p omo -
ing g een ans o ma ion, and main aining economic and indus ial secu i y.
In pa icipa ing in he wo ld geoeconomic compe i ion, he EU is ca e ully
managing i s in e dependence wi h o he majo ading powe s, closely moni-
o ing i s supply ne wo ks, di e si ying i s p oduc ion chains, and minimizing
i s eliance on a single ac o (whe he a company, coun y, o egion).
The EU’s Economic S a ec a 87
4.2.3 P omo e he “Geoeconomic Eu ope” Agenda by Vigo ously
Implemen ing Economic Diplomacy
The EU S a egy o Coope a ion in he Indo-Paci c, he EU-Asia Connec-
i i y S a egy, he Globally Connec ed Eu ope S a egy, and he EU Global
Ga eway ini ia i e a e emblema ic s a egies o EU economic diplomacy
ha poin o he key a eas and main objec i es o EU economic diplomacy
oday.
In i s s a egic compe i ion in he Indo-Paci c egion, he EU p io i izes
he egula iza ion o ade ela ions wi h he egion and ac i ely pa icipa es
in shaping he egion’s poli ical and economic o de . F om 2018 o 2020,
he EU signed ee ade ag eemen s wi h Japan, Singapo e, and Vie nam,
and eached a s a egic pa ne ship ag eemen wi h he Associa ion o Sou h-
eas Asian Na ions (ASEAN). In Ap il 2021, he EU Fo eign A ai s Council
adop ed he Council Conclusions on he EU S a egy o Coope a ion in
he Indo-Paci c, s a ing ha he EU wished o accele a e he educ ion o
i s economic dependence on China by s eng hening economic ies wi h
India, Japan, and ASEAN. The EU plans o conclude he Pa ne ship and
Coope a ion Ag eemen (PCA) nego ia ions wi h Malaysia and Thailand;
s a nego ia ions on he PCA wi h he Maldi es; conclude ade nego ia-
ions wi h Aus alia, Indonesia, and New Zealand; es a ade nego ia ions
wi h India; and conclude nego ia ions wi h he Eas A ican Communi y on
he Economic Pa ne ship Ag eemen (EPA). Clea ly, he EU is di ec ing
mo e esou ces o s eng hen pa ne ships wi h like-minded coun ies such
as Japan, India, and ASEAN and o connec such e o s wi h i s exis ing
ini ia i es in he egion.
4.2.4 Economic Coe cion Is an Inc easingly Impo an Tool
in he EU’s Economic S a ec a
Since on de Leyen became he new EC p esiden , he EU has upda ed and
ein en ed i s ade policy oolbox o include he In e na ional P ocu emen
Ins umen (IPI), he Supply Chain Due Diligence Ac , and he An i-Eco-
nomic Coe cion Ins umen (AECI), among o he s.
Take he IPI as an example. In 2012, he EC submi ed he “Regula ion o
he Eu opean Pa liamen and o he Council on he Access o Thi d-Coun y
Goods and Se ices o he Union’s In e nal Ma ke in Public P ocu emen
and P ocedu es Suppo ing Nego ia ions on Access o Union Goods and Se -
ices o he Public P ocu emen Ma ke s o Thi d Coun ies”, bu i ailed o
be adop ed by he Council o he Eu opean Union. Howe e , he si ua ion
has changed since 2021, and he e is a new a i ude wi hin he EU owa ds
his ins umen . Anna Michelle Asimakopoulou, ice-chai o he In e na-
ional T ade Commi ee (INTA), belie es ha he IPI and o he associa ed
measu es aim o de e malp ac ice and le el he playing eld o he Eu opean
Union in his new geopoli ical ade game. The EU’s new, mo e asse i e
ade s ance is no only necessa y and p agma ic, bu also he mos in elligen
88 The EU’s Economic S a ec a
cou se o ac ion.33 BusinessEu ope is mly con inced o he u gen need o
ha e he IPI in place. I iews he EU’s IPI as an indispensable ins umen
ha can complemen exis ing EU ools in he ade policy a ea.34 As a esul ,
he IPI has ga ne ed mo e suppo om Eu opean poli icians and businesses.
The EU belie es ha i s exis ing go e nmen p ocu emen ules o e ly insis
on he p inciples o ee ade, ye i s ade nego ia ion coun e pa s and
compe i o s e use ecip ocal opening, e en as hey gain ee access o he
EU ma ke . Agains he backd op o he wo ld economic down u n and he
in ensi ying economic c isis in Eu ope, and in he ace o he inc easingly
challenging ade en i onmen , he EU began o shi i s posi ion by ying o
open he go e nmen p ocu emen ma ke s o coun ies ha ha e p e iously
denied he EU access o adop ed es ic i e measu es – in pu sui o “de ac o
ecip oci y”. The IPI allows he EU o de elop a “ e iew-nego ia e- e alia e”
p ocess, whe eby he EC has he powe o ini ia e a e iew o a hi d coun y
and o impose p o isional p ice penal ies on supplie s and p oduc s om ha
hi d coun y. The e o e, he IPI can be used by he EU as a new o ensi e
ade ool, demanding ha he ma ke access oppo uni ies p o ided by he
EU a e ecip oca ed by i s ading pa ne s. This can inc ease he EU’s ba -
gaining powe in bila e al nego ia ions wi h coun ies such as China, India,
B azil, and Russia.
Le us also examine he An i-Economic Coe cion Ins umen (ACI). The
ACI is he EC’s ins umen o imposing puni i e sanc ions on coun ies ha
y o in uence EU poli ical policy h ough economic coe cion. On Decem-
be 8, 2021, he EC o cially published he long-awai ed d a “Regula ion
on he P o ec ion o he EU and I s Membe S a es om Economic Coe cion
by Thi d Coun ies”. The d a egula ion seeks o supplemen and s eng hen
he EU’s legal ins umen s o de e and coun e ac economic and ade
es ic ions om o he coun ies. EC Execu i e Vice-P esiden and T ade
Commissione Valdis Domb o skis said ha “A a ime o ising geopoli ical
ensions, ade is inc easingly being weaponized, and he EU and i s Membe
S a es a e becoming a ge s o economic in imida ion. We need he p ope
ools o espond”.35 In he egula ion, he EC s a ed he aim o his ins u-
men was o “ emedy a legisla i e gap” o “ensu e he e ec i e p o ec ion
o he in e es s o he Union and i s Membe S a es whe e a hi d coun y
seeks, h ough measu es a ec ing ade o in es men , o coe ce he Union
o a Membe S a e in o adop ing o e aining om adop ing a pa icula ac ”
and “p o ide a amewo k o he EU o espond in such si ua ions wi h he
objec i e o de e , o ha e he hi d coun y desis om such ac ions, whils
pe mi ing he Union, in he las eso , o coun e ac such ac ions”. I sug-
ges s ha he ACI “s eng hens he EU’s oolbox and will allow he EU o
be e de end i sel on he global s age”. Wi h his new ins umen , he EU
will be able o espond o cases o economic coe cion in a s uc u ed and
ha monized manne .
The EU’s Economic S a ec a 89
4.3 The His o y o EU Fo eign Policy F om he
Pe spec i e o Economic S a ec a
Gi en ha economic s a ec a is inc easingly becoming an impo an com-
ponen o EU o eign policy p ac ice and s udy, i is necessa y o e iew he
his o y o EU in eg a ion and o eign policy om he pe spec i e o economic
s a ec a . Based on he Kond a ie long wa es and he c i ical junc u es in he
EU in eg a ion p ocess, I di ide he his o y o EU in eg a ion and i s o eign
policy in o e s ages (see Table 4.1).
Table 4.1 S ages o EU In eg a ion and I s Fo eign Policy om he Pe spec i e o
Economic S a ec a
Yea s Pa adigm o he S ages o EU In eg a ion The EU’s Powe
EU’s Economic and Fo eign
S a ec a Policy Model
1945–1967/71
Kond a ie long
wa e IV-A
1967/71–1986
Kond a ie long
wa e IV-B
1986–2001/08
Kond a ie long
wa e IV-B
2008–2025/2035?
Kond a ie long
wa e V-B
Libe alism
Libe alism +
me can ilism
Libe alism
F om libe alism
o me can ilism
Ini ia ion s age: he
Schuman Decla a ion o
1950; es ablishmen o
he Eu opean Coal and
S eel Communi y; T ea y
o Rome en e ed in o
o ce on Janua y 1, 1958
Pa ience s age: “Emp y
Chai C isis”; economic
s agna ion in he 1970s;
Eu opean Economic
Communi y (EEC)
enla gemen (UK, I eland,
Denma k, and G eece)
Relaunch s age: Single
Eu opean Ac o 1986;
Delo s’ Plan; EU
enla gemen (Spain and
Po ugal); end o he
Cold Wa ; en y in o o ce
o he Maas ich T ea y
o 1992; bi h o he
Eu opean Union; launch
o he eu o in 1999; EU
enla gemen (Aus ia,
Finland, and Sweden)
C isis s age: global nancial
c isis o 2008; Eu opean
deb c isis; e ugee c isis;
geopoli ical c isis; he ise
o he a igh ; B exi
In e na ional
ac o , bu no
ye eme ged
as a signi can
o ce
Ci ilian Powe
Eu ope
No ma i e Powe
Eu ope
Linkage Powe
Eu ope

90 The EU’s Economic S a ec a
4.3.1 The Founda ion o Eu opean Powe (1950–1967)
In he con ex o he bipola con on a ion be ween he Uni ed S a es and he
So ie Union, i is easy o o e look he majo poli ical and economic e en s
ha colo ed he ise o Eu ope. The pe iod om he 1950s o he mid-1960s
saw he laying o he “Eu opean Mansion” ounda ion. This was also a o ma-
i e s age o he EU’s economic and ma ke powe , pa ing he way o weal h
c ea ion on he con inen .
The 1950s saw he s peak o he cons uc ion o he “Eu opean Man-
sion”. In Sep embe 1950, he hen-F ench Fo eign Minis e Robe Schuman
s p esen ed he Schuman Plan, which p oposed he c ea ion o a Eu opean
Coal and S eel Communi y (ECSC), placing coal and s eel o a ms p oduc ion
in a cen al sup ana ional body wi h a iew o “a a ewell o a ms”. This plan –
d a ed by Jean Monne and endo sed and pu in o ac ion by Schuman – was he
guide and p og am o ac ion o Eu opean in eg a ion. In he plan, Schuman
ad ised Ge man Chancello Kon ad Adenaue o ake join cha ge o he coal
and s eel indus ies o he membe s a es and o exemp ela ed a i s, and he
la e immedia ely ag eed. On Ap il 18, 1951, F ance, he Fede al Republic o
Ge many, I aly, Belgium, he Ne he lands, and Luxembou g signed he ea y
es ablishing he ECSC in Pa is, which en e ed in o o ce on July 25, 1952. This
was he s example o in e s a e coope a ion in Eu opean his o y, whe eby
na ion s a es ceded some o hei powe s o a sup ana ional body. The ea y
acili a ed a signi can imp o emen in F anco-Ge man ela ions and ma ked
he beginning o F anco-Ge man app ochemen , a p ecu so o he union o
wes e n Eu ope. By 1954, i ually all he ade ba ie s o coal, coke, s eel,
and pig i on among he six na ions had been emo ed. The ECSC wen on o
es ablish a se ies o common egula ions o moni o ca els and egula e me g-
e s. I s cen al execu i e body de e mined p ices, se p oduc ion quo as, and was
au ho ized o penalize companies ha iola ed he ea y and i s egula ions. On
Ma ch 25, 1957, u he o he ECSC, he heads o go e nmen and o eign
minis e s o F ance, he Fede al Republic o Ge many, I aly, he Ne he lands,
Belgium, and Luxembou g signed he Rome T ea y, es ablishing he Eu opean
Economic Communi y (EEC) and he ea y es ablishing he Eu opean A omic
Ene gy Communi y (EAEC), la e collec i ely known as he T ea y o Rome. In
1967, he ins i u ions o he Eu opean Coal and S eel Communi y, he ECSC,
EEC, and EAEC we e me ged o o m he Eu opean Communi y. This was an
impo an miles one o Eu opean in eg a ion. A his ime, he EC had become
a key in e na ional playe bu had no ye become a majo o ce.
This pe iod wi nessed he bi h o Eu opean economic s a ec a , he
essence o which is o con e he ma ke powe o he poli ical cons uc ion
o Eu opean communi ies.
4.3.2 The “Upwa d Spi al” o Eu opean Powe (1967–2008)
This pe iod saw he ise o Eu opean powe , which coincided wi h he decline
o Ame ican hegemony. F om a long-cycle pe spec i e, his phase consis s o
Kond a ie long wa es IV-B and V-A (see Figu e 3.1). This phase began in
The EU’s Economic S a ec a 91
1967/1971 and was ma ked by he “Nixon Shock” ha o ced he dolla o
be unpegged om gold, he oil shock ha began in 1973, and he s ag a ion
ha ippled h ough Wes e n economies. In Kond a ie long wa e IV-B, he e
was an economic dep ession and de elopmen s agna ion, as well as he ise
and all o he majo powe s. The ela i e decline o he Uni ed S a es, he
ela i e ise o Japan and wes e n Eu ope, and in ensi ed compe i ion be ween
he Uni ed S a es, Japan, and Eu ope cha ac e ized his shi in he balance
o majo powe s. The Eu opean Communi y aspi ed o a g ea e ole in he
in e na ional a ena as a nonmili a y “ci ilian powe ”.
The ise o Eu opean powe du ing his 40-yea pe iod was a om smoo h
sailing. F om he pe spec i e o economic s a ec a , I s ocus on he impac
o Eu opean in eg a ion on Eu opean economic powe , which was a a low
ebb om he 1960s o he mid-1980s. Jean Monne , “ he Fa he o Eu ope”,
desc ibed he pe iod o 1964–1972 as “a ime o pa ience” o he de elop-
men o he Eu opean Communi y. The “Emp y Chai C isis”, a key e en in
he p ocess o Eu opean in eg a ion, happened du ing his ime. This c isis
occu ed in 1965, when Wal e Halls ein, p esiden o he Commission o he
Eu opean Economic Communi y, ied o expand he powe s o he Eu o-
pean Pa liamen and he Eu opean Commission by shi ing owa ds sup ana-
ionalism. F ench P esiden Cha les de Gaulle ehemen ly opposed his and
ecalled he F ench ep esen a i e o he Eu opean Economic Communi y
(EEC), which esul ed in no F ench ep esen a ion a he EEC mee ings o
six consecu i e mon hs, e ec i ely c ippling he wo k o he EEC. The e o e,
eal de elopmen o he EEC was no ealized un il a e 1972.
While he EC su i ed he Emp y Chai C isis, he economy o wes e n
Eu ope was expe iencing he g ea es ecession since Wo ld Wa II. The h ee
decades a e Wo ld Wa II we e a pe iod o g ea economic exube ance o
he capi alis economies o wes e n Eu ope. In pa icula , om 1945 o 1971,
he en i e Wes e n capi alis sys em expe ienced an ex ao dina y boom ol-
lowing Wo ld Wa II.36 Bu a e ha , he capi alis wo ld encoun e ed cycli-
cal changes, wi h slowe g ow h, ising unemploymen , ising in a ion, and
declining pu chasing powe among wo ke s. Hesi a ion, anxie y, and pen -up
ange ueled igh -wing sen imen in Eu ope and he Uni ed S a es.37
F om he la e 1960s o he la e 1980s, he wo ld economy en e ed a down-
wa d cycle. F om he pe spec i e o he long cycle o he wo ld economy, he
la e 1960s/ea ly 1970s o a ound 1990 was Kond a ie long wa e IV-B, a
pe iod o s agna ion. Du ing his pe iod, he Wes su e ed om he s and
second oil c ises (1971–1973 and 1980–1981). Eu opean economies we e
se e ely ba e ed. US powe was in i s pos -Wo ld Wa II p ime be o e en e -
ing a pe iod o ela i e decline a e he Vie nam Wa ollowed by a e i al
a e he end o he Cold Wa in 1989. These d ama ic changes in he wo ld
economic and poli ical landscape p o ided an impo an backd op o he
adjus men o he EC’s diploma ic s a egy.
In he la e 1980s and ea ly 1990s, wi h he end o he Cold Wa and he
e u n o he wo ld economy o an upwa d ajec o y, Eu opean in eg a ion
gained mo e space o de elopmen . In 1986, he EC adop ed he Single
92 The EU’s Economic S a ec a
Eu opean Ac , which s a ed quali ed majo i y o ing in he single ma ke .
In 1989, he Delo s’ Plan was adop ed, which p oposed an economic and
mone a y union. Wi h he accession o Spain and Po ugal o he Eu opean
Communi y in 1986, he numbe o EC membe s a es g ew o 12, and i s
s eng h, s a us, and in uence con inued o expand. In Feb ua y 1992, he
12 EC membe s a es o mally signed he T ea y on Eu opean Union in he
Du ch bo de ci y o Maas ich , also known as he Maas ich T ea y. A e
expe iencing s agna ion in he la e 1970s and he s hal o he 1980s, he
Eu opean economy g adually came ou o he dold ums wi h a g ea e i al
o s eng h and con dence. The economic eco e y o he EC, he apid p o-
g ess on in eg a ion, and he d ama ic changes ha we e aking place in he
So ie Union and Cen al and Eas e n Eu ope (d i en by Go bache ’s “new
hinking”) led he EU o e ec on i s powe dynamics. The iden i y o he
EU, which Eu opean schola s la e e med “no ma i e powe ”, was g adually
aking shape.
F om a global economic pe spec i e, he wo ld economy om he 1990s
o he global nancial c isis is e e ed o as he G ea Mode a ion. The main
ea u es o he wo ld economy du ing his pe iod we e ha mac oeconomic
ins abili y was conside ed o ha e been e adica ed and ha low and s able
in a ion and “sus ainable” global economic g ow h we e conside ed likely o
coexis in he long e m.38 The Washing on Consensus and neolibe al policies
we e in ull swing. F om he powe shi s andpoin , he Uni ed S a es had
es o ed i s powe . A e he end o he Cold Wa , he US libe al-democ a ic
wo ld iew ou shined all o he s. EU in eg a ion p og essed apidly du ing his
pe iod. The eu o was launched, and he EU achie ed i s la ges expansion in
i s his o y, wi h a o al o 25 membe s a es.
4.3.3 Decline o Eu opean Powe (Since 2008)
In Kond a ie long wa e V-B (2001/08–2025/35), we wi nessed he Sep em-
be 11 e o is a acks, he global nancial c isis o 2008, and he ou b eak o
he Eu opean Deb C isis in 2009. Ca men Reinha d , a senio esea ch ellow
a he Pe e son Ins i u e o In e na ional Economics, and Kenne h Rogo , a
p o esso a Ha a d Uni e si y, ha e desc ibed he e ec s o he c isis as he
Second G ea Con ac ion, ollowing he G ea Dep ession o he 1930s. In
e ms o powe shi s, he Wes is in ela i e decline. Populism is on he ise.
In he Uni ed S a es, populis P esiden T ump was elec ed. The UK le he
EU. The EU has expe ienced mul iple c ises – including he e ugee c isis and
geopoli ical c ises ( he wo Uk ainian con ic s) – and slow economic eco -
e y. Economic na ionalism wi hin he EU is on he ise and pushing Eu ope
owa ds “Fo ess Eu ope”, wi h ising p essu es o p o ec ionism and pop-
ulism. This onslaugh o complex c ises has o e whelmed he EU, s un ed he
p ocess o Eu opean in eg a ion, and unde mined he o e all powe s a us
o he EU. I will discuss he changes in Eu opean powe om h ee aspec s:
poli ical, economic, and ins i u ional.
The EU’s Economic S a ec a 93
4.3.3.1 The Decline o Eu ope’s Poli ical-S a egic Powe
Fi s , he ou b eak o mul iple c ises, such as he Eu opean deb c isis and
B exi , deal a hea y blow o he poli ical-s a egic powe o he EU. Fo some
ou side obse e s, hese mul iple c ises may be he p ecu so o he disin e-
g a ion o he EU and he eu ozone. In his book The T u h o he Eu opean
Deb C isis, Shi Hanbing a gues ha in he absence o s ong s a esmen in
Eu ope who can d i e Eu ope owa ds a poli ical union, he b eakup o he
eu ozone is nea ly he only possible endgame.39 Indeed, a he heigh o he
G eek c isis in 2015, bo h Ge man and G eek leade s conside ed he op ion
o a G eek exi om he eu ozone. Ahead o he July 5, 2015, e e endum on
whe he G eece should accep an in e na ional bailou plan, P ime Minis e
Alexis Tsip as called on he G eek people o ejec “blackmail” and o e no
in he e e endum. Ea lie , Eu opean leade s wa ned ha o ing “No” could
mean G eece exi ing he eu ozone.40 In he end, G eek o e s o e whelm-
ingly ejec ed he in e na ional bailou package, wi h 61.3% o ing agains he
plan.41 Ge man Finance Minis e Wol gang Schäuble said on July 16, 2015,
ha a empo a y exi om he eu ozone would gi e G eece he exibili y
o wo k o e he deb issue. Schäuble s essed ha o discoun o o gi e
G eece’s massi e public deb o mo e han EUR 300 billion was no in line
wi h eu ozone membe ship. He implied ha G eece would ge i s bes sho a
a subs an ial cu in i s deb only i i was willing o gi e up membe ship in he
Eu opean common cu ency.42 In he 2017 F ench elec ion, Jean Louis Ma ie
Le Pen, leade o he F ench a - igh pa y Na ional F on , a gued ha F ance
should lea e he EU, like he UK, saying ha i elec ed p esiden , she would
lead F ance ou o he eu ozone (F exi ). This shows ha since he Eu opean
deb c isis, Eu opean in eg a ion has aced se ious headwinds. Some membe
s a es exi ing he eu ozone o e en he EU has become a plausible policy
op ion. This would clea ly be a majo a on o he EU’s in e na ional s a us.
Second, he EU is in e nally di ided and unable o each consensus on
economic, poli ical, and en i onmen al policy e o ms. In e ms o economic
policy, he e is hea ed deba e wi hin he EU. Since he Eu opean deb c i-
sis, Ge many has ad oca ed aus e i y ac oss Eu ope. This policy las ed un il
a ound 2013, when i began o mee widesp ead c i icism. Ge many and i s
allies pushed o he con inua ion o ha sh aus e i y measu es o add ess he
scal de ci s o membe s a es and o p e en a epea o he deb c isis. On
he o he hand, some membe s a es, led by F ance and I aly, p oposed end-
ing aus e i y and es o ing economic g ow h h ough inc eased spending.
A e all, economic condi ions and poli ical cons ain s a y signi can ly om
s a e o s a e. A e F ench P esiden F ançois Hollande ook o ce in May
2012, a pi o o economic g ow h a he han aus e i y inc easingly began
o domina e F ance’s Eu opean policy. In he p ocess, F ance has g adually
o med an alliance wi h I aly and he Eu opean Cen al Bank o p omo e eco-
nomic g ow h and s imulus p og ams.43 Ge man Chancello Angela Me kel,
on he o he hand, was isola ed. In e ms o clima e and ene gy policy, he
di e gence in emissions educ ion wi hin he EU has in ensi ed due o he
100 China’s Economic S a ec a Unde Xi Jinping
beginning a he end o 2019 u he wo sened China’s economic si ua ion
and s ained China’s economic powe esou ces o an ambi ious majo coun-
y diplomacy. To a la ge ex en , he new economic s ess ha China has been
expe iencing since 2012 de e mines ha Xi’s economic s a ec a needs o
ocus on de elopmen , ins ead o asse i e ou each.
5.1 Wha Was P esiden Xi’s Economic S a ec a in His Fi s
Te m (2012–2017)?
P esiden Xi’s new economic s a ec a in 2012–2017 had wo o igins: one
ex e nal and he o he domes ic.5 Ex e nally, Xi’s new economic s a ec a
s emmed om a us a ion o e P esiden Hu Jin ao’s low-p o le diplomacy.
Speci cally, he us a ion was exp essed in e a eas. The s was on ade.
China had no assumed leade ship in he global economy h ough he Doha
Round mul ila e al ade nego ia ions ha s a ed in 2001, and i did no
espond e ec i ely when he Uni ed S a es shi ed ocus om Doha o egional
and bila e al ade alks in 2004 and a e wa ds. Thus a in i s mode n his o y,
China has no ealized global economic leade ship, despi e i s clea posi ion as
he wo ld’s la ges bene cia y o an open mul ila e al ading sys em.
Finance is he second o igin o he Chinese pe spec i e on economic s a e-
c a . Fo example, in 2009 du ing he peak o he nancial c isis, he Chi-
nese cen al bank go e no Zhou Xiaochuan’s p oposal o a “supe -so e eign
in e na ional ese e cu ency” e ec ed China’s aspi a ions and dissa is ac-
ion wi h US dolla hegemony. Zhou p oposed a supe -so e eign in e na ional
ese e cu ency o eplace he US dolla as he wo ld’s ese e cu ency.
Thi d, on ene gy, China was deeply and inc easingly conce ned abou
po en ial dis up ions o i s sea lanes o economic supply, especially he na ow
passage o he Malacca S ai , which om Beijing’s pe spec i e could be easily
blockaded o he de imen o China’s economic de elopmen and secu i y.
Acco dingly, China is seeking o lock up sou ces o supply and c ea e al e na e
ou es o deli e y ha equi e i s inno a i e use o channels o in es men no
beholden o he Wes .
Fou h, on echnology, China has become e en mo e deeply us a ed
wi h he pe sis en a ms emba go and expo con ols o dual-use p oduc s
imposed by he Wes e n wo ld. Some o hese measu es da e om no maliza-
ion and ha e e ol ed; ha e olu ion was a ec ed by he “Tiananmen Inci-
den ” on June 4, 1989. These and o he equally s ongly held iews on he
lack o ai ness o he co e ins i u ions o he in e na ional o de d i e o eign
policy p io i ies ha combine o de ne China’s desi e o ecogni ion as a
“majo coun y” and o uel popula expec a ions o a “g ea eju ena ion o
he Chinese na ion”.
Finally, on he s uc u e o he in e na ional o de , China has been us a ed
wi h he lack o e o m o he In e na ional Mone a y Fund, he G oup o 20
(G20), and he Wo ld T ade O ganiza ion, among o he s, and has no ye suc-
ceeded in eshaping hese ins i u ions owa d g ea e ecogni ion o China.

China’s Economic S a ec a Unde Xi Jinping 101
Xi came o powe cognizan o hese us a ions and de e mined o ea n
a place in his o y ha would e ec his abili y o sa is y he Chinese peo-
ple’s hunge o epudia e his o ical weakness and sa is y hei desi e o see
China ake i s igh ul place in he wo ld. He has adop ed a mo e asse i e
o eign policy, cha ac e ized by willingness o de y con en ion and o o e -
come obs acles.6
On he basis o his pe cep ion ha China has na u ally e ol ed in he ea ly
21s cen u y owa d a g ea e ole in global economic leade ship, and ha
China has g ea e le e age in a pos -G ea Recession wo ld, he Xi adminis a-
ion ini ia ed a di e se a ay o ini ia i es, including he land-based Silk Road
Economic Bel and he Ma i ime Silk Road (known as he Bel and Road
Ini ia i e, BRI), he China-Pakis an Economic Co ido (CPEC), and he
Bangladesh-China-India-Myanma Economic Co ido ” (BCIM-EC), which
in ol ed in as uc u e in es men and o he o ms o economic coope a ion.
Mo eo e , P esiden Xi p oposed a “new concep o mo ali y and in e es s”
(新型义利观) is-à- is de eloping coun ies, pu ing mo ali y (Yi, 义in Chi-
nese)7 be o e in e es s (Li, 利in Chinese) in he Chinese pe spec i e.8 Xi’s new
concep o mo ali y o igina es om China’s adi ional Con ucian unde s and-
ing o he ela ionship be ween weal h and mo ali y, which ends o pu mo als
(o i ues) abo e economic in e es s. Con ucius and his disciples belie e ha
“ he gen leman unde s ands wha is mo al and he small man unde s ands
wha is p o able”.9 Fo Xi, economic in e es s can be subjec o a highe mo al
au ho i y, and in many cases s a egic and poli ical in e es s in China’s ela ions
wi h o he de eloping coun ies a e simila ly subo dina e o he same highe
mo al au ho i y. In o he wo ds, Xi’s unde s anding o economic s a ec a is
in uenced by China’s adi ional poli ical hough and philosophy, which s ill
has ele ance in oday’s in e na ional poli ics.
Xi’s economic s a ec a is also designed o o e come a ea o insecu i y,
inc easing e i o ial in eg i y, ene gy supply, ood secu i y, and a g ea e abili y
o wi hs and po en ial economic and nancial shocks in he global economy.
Mo eo e , Xi’s new economic s a ec a had i s domes ic o igins. China’s eco-
nomic g ow h – based on xed asse in es men , he main engine o weal h c e-
a ion – had s a ed o decele a e in 2012 and en e ed a “new no mal”. This new
phase ep esen s a downshi ing om a high-speed g ow h pa e n o 1992–
2012 owa d a sus ainable, mid- o high-speed g ow h a e wi h highe e -
ciency and lowe cos s. The economic slowdown had complica ed implica ions.
On he one hand, i spu ed China’s ambi ious agenda o economic s a ec a ,
such as he BRI, and, on he o he , signi can ly cons ained he ansla ion
o China’s weal h in o powe and global in uence. The e o e, Xi’s economic
s a ec a has dual objec i es: o de elop he economy and o achie e he s a-
egic goals o a majo coun y. F om a long- e m pe spec i e, hese wo goals
complemen each o he . Wi h s onge na ional economic s eng h, China will
mo e easily be able o achie e he s a us o a majo coun y. Howe e , in he
sho un, hese wo goals migh con ic one wi h he o he . The o e s e ch o
a coun y’s economic s eng h o s a egic goals cos s he sus ainabili y o ha
102 China’s Economic S a ec a Unde Xi Jinping
coun y’s economic g ow h. O e he pas decades since China’s e o m and
opening-up in 1978, economic g ow h had always been he co e objec i e o
China’s economic s a ec a .10 Only a e P esiden Xi came o o ce, did he e
appea o be mo e in e nal deba es abou which objec i e akes p ecedence –
economic g ow h o achie ing he s a egic goals o a majo coun y. The dual
na u e o China’s economic s a ec a is de e mined by China’s dual iden i ies
as bo h a de eloping coun y and a g ea powe .
In discussing wha p inciples China should adop o economic diplomacy,
o me Chinese Comme ce Minis e Gao Hucheng sugges ed, “We mus
insis on he s a egic guideline ha diplomacy should se e he economy”.11
Du ing P esiden Xi’s s e m, majo economic diplomacy ini ia i es such as
he BRI, high-speed ailway diplomacy, and nuclea powe diplomacy we e all
closely linked o China’s domes ic de elopmen agenda. The Silk Road Eco-
nomic Bel was designed o p omo e de elopmen o China’s wes e n egion,
especially Xinjiang Uygu Au onomous Region, and o ed ess he une en
de elopmen be ween China’s eas e n and wes e n egions. The Bangladesh,
China, India, and Myanma Economic Co ido (BCIM) and China-Pakis an
Economic Co ido (CPEC) we e designed o de elop he sou hwes egion o
China, imp o e anspo a ion and communica ion connec i i y in he sou h-
wes , s imula e economic g ow h in he bo de a eas o he sou hwes , na ow
egional de elopmen dispa i ies, and consolida e bo de de ense. High-speed
ailway diplomacy was implemen ed o expo China’s excess capaci y o high-
speed ailway manu ac u ing. In China, high-speed ailway had been gi en
high hopes and emendous esou ces o imp o e mode niza ion, echnologi-
cal sophis ica ion, economic powe , in e na ional compe i i eness, and capac-
i y o independen inno a ion. As a esul , in unde a decade, he high-speed
ailway mileage China buil has al eady exceeded he combined mileage o
new high-speed ailways buil by de eloped coun ies in he Wes in he las 50
yea s o so. Excess manu ac u ing capaci y o high-speed ailways led China o
implemen high-speed ailway diplomacy o expo i s la ge-scale, high-speed
ailway echnology and manu ac u ing capaci y o o he coun ies.
As China’s economy con inued o slow in 2014, P esiden Xi c ea ed a new
ph ase o “New No mal”. Fo Xi, he “New No mal” is a s a emen based on
his comp ehensi e assessmen o he long cycles o he wo ld economy and he
di e en s ages o China’s de elopmen and how hese wo in e ac .12 Since
e o m and opening-up, China’s manu ac u ing capaci y in all sec o s has seen
explosi e g ow h, a conside able amoun o which was amassed du ing he
golden pe iod o wo ld economic g ow h o mee ing ex e nal demand and
du ing he s age o apid economic g ow h a home. Some capaci ies u he
expanded in esponse o he impac o he global nancial c isis.13
P esiden Xi u he s a ed,
As ou cu en challenges a e la gely non-cyclical, a V-shaped ebound
h ough sho - e m s imulus measu es may be unlikely, and ou economic
ajec o y may be L-shaped. We should be p epa ed o gh a p o ac ed
China’s Economic S a ec a Unde Xi Jinping 103
ba le, endu e pain ul ibula ions, app op ia ely manage expec a ions o
a gea shi and speed educ ion, and s p o ec ou downside be o e
seeking eco e y. We should ace up o he di cul ies, de ne ou pa h,
boos ou con dence, and make join e o s o s eng hen ins i u ional
dynamics and o ganic i ali y, unlock he huge po en ial o ou economic
g ow h, and lead ou economy o he nex le el.14
P esiden Xi’s analysis o “New No mal” is la gely based on Ma xis dialec-
ical and his o ical ma e ialism. Xi obse ed,
In he con ex o longe his o y, China’s economic de elopmen will
always be eaching o a new s a e, a new pa e n, and a new s age. The
New No mal o economic de elopmen is pa o his long p ocess and is
ully consis en wi h he law o mo ion o an upwa d spi al. To comp e-
hensi ely unde s and and g asp he New No mal equi es a spa io em-
po al iew o China’s de elopmen .15
Despi e P esiden Xi’s Ma xis belie , he and his economic ad iso s decided
o implemen supply-side s uc u al e o m, a p esc ip ion o China’s eco-
nomic gloom a guably ha ing a semblance o Reaganomics.16 I seems ha
he CPC does no ejec Wes e n economics. Du ing he global nancial c i-
sis s a ing in 2008, P esiden Hu Jin ao and P emie Wen Jiabao adop ed a
la ge-scale economic s imulus package la gely inspi ed by Keynesianism. Bu
we also need o bea in mind ha he CPC economics canno be sepa a ed
om he Ma xis conce n abou he people’s li elihood.
Du ing Xi’s s e m, he was e y much conce ned abou wo “ aps”:
one is he “Thucydides ap” and he o he is he “middle-income ap”. Fo
Xi, he o me is poli ical, ha is, how o manage he ela ionship wi h he
Uni ed S a es and o he majo coun ies. The la e is economic, ha is, how
o imp o e he quali y and e ciency o China’s economic de elopmen .17 In
Xi’s mind, economic de elopmen emained his p io i y, an o e iding objec-
i e o China’s socialism.
On in e na ional economic policy, P esiden Xi launched a se ies o s a e-
gic economic nego ia ions. Fo China, eaching high-quali y ag eemen s wi h
key ading pa ne s is bo h a majo end in global ade and in es men and
an a emp by he new CPC Cen al Commi ee leade ship o o ge ahead,
p omo e supply-side s uc u al e o m, and inc ease ins i u ional openness.
China launched o accele a ed a numbe o majo ex e nal economic nego ia-
ions du ing 2012–2013, including he US-China BIT, he EU-China BIT,
RCEP, and he China-Japan-Ko ea F ee T ade Ag eemen . Among hem, he
US-China and EU-China BITs we e he mos ambi ious and conce ned he
highes le el o ma ke opening, p e-es ablishmen na ional ea men , and
nega i e lis model. Howe e , hese ag eemen s we e “ha d bones” ha would
ace many obs acles a he ope a ional le el, so hey we e s a egic decisions
ha we e made despi e many cons ain s a ha ime.
104 China’s Economic S a ec a Unde Xi Jinping
A e he new CPC Cen al Commi ee and S a e Council ook o ce in 2012–
2013, he Chinese go e nmen began o se iously conside using la ge-scale
ade and in es men nego ia ions as a le e o adop ing ad anced in e na ional
ade ules while d i ing domes ic e o ms h ough opening-up. The launch o
hese s a egic economic nego ia ions was based upon a enewed con dence by
he new gene a ion o Chinese leade ship ha China’s economy had achie ed
signi can g ow h and gained g ea e esilience. A he h US-China S a egic
and Economic Dialogue in July 2013, China o mally accep ed and announced
ha i would en e in o subs an i e nego ia ions wi h he Uni ed S a es based on
he “p e-es ablishmen na ional ea men and nega i e lis ” model. The nego-
ia ions on he EU-China Comp ehensi e Ag eemen on In es men (CAI, also
called he EU-China BIT) began in No embe 2013 du ing he 16 h EU-China
Summi , ou mon hs la e han he launch o he US-China BIT. On Decembe
30, 2020, Chinese and Eu opean leade s join ly announced ha he CAI nego-
ia ions we e concluded on schedule a e 35 ounds o e se en yea s.
The nego ia ions on a China-US BIT la gely ailed. The nego ia ions came o
a s op one week be o e Donald T ump became p esiden in Janua y 2017. The
Chinese side expe imen ed wi h he “p e-es ablishmen na ional ea men ” and
he “nega i e lis ” unde he ea y in Shanghai be o e olling hem ou ac oss he
coun y by es ablishing mul iple pilo ee ade zones. Du ing he G20 Hang-
zhou Summi in 2016, China and he Uni ed S a es we e close o eaching an
ag eemen . Once he Obama adminis a ion was eplaced by he T ump adminis-
a ion, he posi i e ecip oci y mode be ween he Uni ed S a es and China ga e
way o nega i e ecip oci y and climaxed in a his o ical ade wa in 2018–2020.
To summa ize, he s e m o P esiden Xi’s economic s a ec a was cha -
ac e ized by bo h ambi ious geoeconomic p ojec s such as he BRI, and an
economic libe aliza ion agenda as well as supply-side s uc u al e o m wi h
a semblance o Reaganomics. I ’s he e o e a cock ail app oach o socialis
people- s economics and Wes e n-s yled ma ke economy d i en by China’s
p o ound mo i a ion o a g ea eju ena ion.
Du ing P esiden Xi’s s e m in 2012–2017, he e we e clea e o s
made by China’s o eign policy communi y o achie e a wo-way con e sion
be ween weal h and powe . Fo hese o eign policy eli es, he mu ual con-
e sion o economic esou ces and diploma ic esou ces a e wo sides o a
coin ha mus bo h emain iable. These eli es a e seeking China’s way o
managing in e na ional ela ions and a iable in e na ional o de ha d aws
inspi a ion om China’s his o y. Fo hem, in he ace o new in e na ional
ci cums ances, China needed o adop he igh concep o mo ali y and
in e es s, con inuously cul i a e i s in e na ional ins i u ional powe , achie e
inc eased economic powe and e ec i e con e sion o diploma ic manoeu es.
5.2 Wha Was P esiden Xi’s Economic S a ec a in His
Second Te m (2017–2022)?
The yea 2018 ma ked a new wa e shed o China’s economic s a ec a ,
spu ed by he US-China ade wa . Bu se e al yea s be o e, he e we e al eady
China’s Economic S a ec a Unde Xi Jinping 105
wo ying signs e e ywhe e, such as he C imean c isis, B exi , and he change
in US domes ic poli ics. The ise o populism and deglobaliza ion seems o
ha e become he dominan spi i o he imes. A he end o 2017, P esiden
Xi made a judgemen abou he global con ex , claiming ha he wo ld was
unde going “p o ound changes hi he o unseen o a cen u y”.18
When P esiden Xi labeled he global con ex as “changes unseen o a
cen u y”, he labeled China’s domes ic con ex as “ he bes momen since
he Opium Wa o [ he] 1840s”.19 Xi made ha s a emen in he climax o
an unexpec ed ade wa wi h he Uni ed S a es in 2018. The ade wa
was launched by P esiden Donald T ump in Feb ua y 2018. Be o e ha ,
US-China economic ela ions we e managed in an ins i u ionalized en i-
onmen , ep esen ed by he US-China S a egic & Economic Dialogue
(S&ED) and he Join Commission on Comme ce and T ade (JCCT). P es-
iden T ump abandoned his s a egic dialogue app oach and launched an
economic wa .
P esiden T ump launched his economic wa a e in a Bli zk ieg way. The
Chinese side was caugh by su p ise. When P esiden T ump isi ed China
in No embe 2017, h ee mon hs be o e he b eakou o he ade wa , he
eaped he bigges o de s e e in human his o y, o US $253.5 billion: 300
Boeing ai planes; a 20-yea $83.7 billion in es men by China Ene gy In es -
men Co p in shale gas de elopmen s and chemical manu ac u ing p ojec s
in Wes Vi ginia; and Qualcomm signed nonbinding ag eemen s wo h $12
billion wi h Xiaomi, OPPO, and Vi o. The Chinese adminis a ion hough
un ealis ically ha i could do business wi h P esiden T ump, as i had wi h
p e ious GOP p esiden s. Howe e , P esiden T ump was al eady de e mined
o gh China in a d ama ic way. On Augus 18, 2017, wo mon hs be o e
his isi in China, he had al eady signed a p esiden ial memo andum ega d-
ing he esul s o a Sec ion 301 in es iga ion, p epa ing o an economic wa .
The ade wa wi nessed mu ual imposi ions o high a i s and las ed un il
Janua y 2020, when he s phase o a ade ag eemen was nally signed. As
a esul , US-China bila e al ade ela ions we e signi can ly damaged. P esi-
den Joe Biden kep he high a i s in place.
As a esul o hese unexpec ed e en s, P esiden Xi’s pe cep ion o he
in e na ional con ex u ned inc easingly ealis ic. He wa ned agains he so-
called “black swan” inciden s as well as “g ey hino” ones. P esiden Xi u ged
his senio o cials o adhe e o bo om-line hinking and making e o s o
p e en and esol e majo isks in he ace o he eache ous in e na ional
si ua ion, he complex and sensi i e a mosphe e, and he daun ing and a du-
ous asks o e o m, de elopmen , and s abili y.20 Eigh mon hs la e in 2019,
P esiden Xi again wa ned o majo isks a he Cen al Pa y School:
Cu en ly and going o wa d, China is na iga ing h ough a pe iod o
con uence, in which isks and challenges a e likely inc easing ... hose
o you in leade ship posi ions mus be able o sensibly disce n po en ial
isks and unde s and whe e hey will come om, how hey will ma e ial-
ize and e ol e, and i a gh is ine i able – like knowing a dee passing

106 China’s Economic S a ec a Unde Xi Jinping
h ough g ass when you hea lea es mo e, a ige coming when pine
lea es a e u ed, and au umn a i ing when a lea changes colo .21
Inc easingly, P esiden Xi emphasized he spi i o s uggle. He s men-
ioned in his Repo o he 19 h CPC Cong ess in Oc obe 2017 ha “Real-
izing ou g ea d eam demands a g ea s uggle”.22 On Sep embe 3, 2019, he
eemphasized he “g ea s uggle”.23 P esiden Xi emphasized ha he g ea
eju ena ion o he Chinese na ion can ne e be achie ed h ough hal -meas-
u ed e o s o by loudly bea ing a d um, and ha a g ea s uggle is necessa y
o achie e a g ea ambi ion.24 Fo Xi, “As communis s, we gh wi h an aim,
a posi ion, and p inciples. The bigge goal is o unswe ingly adhe e o he
leade ship o he CPC and ou socialis sys em”.25 The US-China ade wa
and he chao ic global con ex has been pe cei ed by he CPC as majo isks
h ea ening he su i al o he CPC.
Immedia ely a e he ade wa , China su e ed ano he majo blow.
COVID-19 in ec ions hi China unexpec edly and badly in 2020–2023.
China was he s coun y o expe ience he COVID-19 pandemic. The
s clus e o pneumonia pa ien s was disco e ed in la e Decembe 2019 in
Wuhan, Hubei P o ince, and a public no ice on he ou b eak was dis ibu ed
on Decembe 31, 2019.26 The Chinese go e nmen adop ed a ze o-COVID
policy, wi h lockdowns in many ci ies. These measu es signi can ly educed
he dea h oll bu weighed hea ily on China’s economy and u ned ou o be
unsus ainable. The pandemic la gely cu o China’s in e na ional exchanges.
In 2020, China’s economy slowed o 2.3%. Despi e 8.1% g ow h in 2021,
China’s economy su e ed a majo se back in 2022, wi h a low g ow h a e o
3.0%. Finally, he Chinese go e nmen ended i s ze o-COVID policy in ea ly
Decembe 2022.
As China’s economic si ua ion u ned inc easingly di cul , P esiden Xi
e ocused on economic g ow h. Supply-side s uc u al e o m, he Dual Ci -
cula ion S a egy and High-Quali y De elopmen o med he backbone o
P esiden Xi’s de elopmen -o ien ed economic s a ec a .
In 2020–2023, o keep China’s economy g owing and ackle he d ama ic
changes bo h in and ou side o China, he Chinese go e nmen o mu-
la ed a se ies o economic policies, s , he “Dual Ci cula ion”（双循环）;
second, “High Quali y De elopmen ” (高质量发展), and hi d, “ he S a -
egy o Boos ing Domes ic Consump ion”. High Quali y De elopmen is he
nal goal o China’s de elopmen . The domes ic-in e na ional Dual Ci cu-
la ion is he layou o China’s de elopmen . Mo e speci cally, he dual ci -
cula ion is a s a egy o eo ien China’s economy by p io i izing domes ic
consump ion (“in e nal ci cula ion”) while emaining open o in e na ional
ade and in es men (“ex e nal ci cula ion”). On Decembe 14, 2022,
China se ou plans o expand domes ic consump ion and in es men as he
economy s uggled wi h he COVID-19 pandemic and weakening ex e nal
demand.27 The supply-side s uc u al e o m launched in 2015 emained as
a way o imp o e he quali y o China’s de elopmen . As a esul , China’s
China’s Economic S a ec a Unde Xi Jinping 107
de elopmen -o ien ed economic s a ec a adop ed a mix u e o Keynesian
demand-side and Reaganomics supply-side p esc ip ions. In pa allel wi h
Wes e n-s yle economic emedies, China also adop ed an a ay o Ma xis
economic na a i es wi h Chinese cha ac e is ics, such as dual ci cula ion and
high-quali y de elopmen .
On he on o in e na ional economic policy, he BRI emained a op
p io i y. The Bel and Road Fo um o In e na ional Coope a ion (BRF) was
launched in 2017 and became inc easingly ins i u ionalized. Recognizing
inc easing challenges and in e na ional esis ance, P esiden Xi publicly sug-
ges ed ha he BRI app oach needed o shi om b oad-b ush o me iculous
pain ing. While la gely pe cei ed as a geoeconomic ins umen , he BRI is a
de ac o ins umen o China’s de elopmen -o ien ed economic s a ec a . The
o e iding objec i e o he BRI is no s uggling o powe in an impe ialis
mindse , bu seeking de elopmen , and la gely in a Ma xis mindse , o build
a communi y o mankind.
Du ing P esiden Xi’s second e m, China’s economic s a ec a e ol ed
la gely due o ex e nal p essu es and us a ions. The nego ia ions on he
BITs wi h he Uni ed S a es and he EU bo h s alled. The BIT nego ia ion
wi h he Uni ed S a es came o a hal a e Donald T ump became p esiden .
The nego ia ion wi h he Eu opeans on a CAI was comple ed by he end
o 2020, bu i s a i ca ion was ozen due o he EU’s human igh s sanc-
ion agains China and China’s coun e sanc ions simul aneously announced
in Ma ch 2021. The only ha es o P esiden Xi’s economic libe aliza ion
agenda was he RCEP.
The us a ions o e he in e na ional economic nego ia ions, as well as he
economic wa a e launched agains China by he Uni ed S a es and he EU
spu ed China o de elop i s own economic coe cion ins umen s, such as he
P o isions on he Un eliable En i y Lis , adop ing measu es in esponse o he
hos ile ac ions aken by a o eign en i y in in e na ional economic, ade, and
o he ele an ac i i ies such as: (1) endange ing na ional so e eign y, secu i y,
o de elopmen in e es s o China; (2) suspending no mal ansac ions wi h
an en e p ise, o he o ganiza ion, o indi idual o China o applying disc imi-
na o y measu es agains an en e p ise, o he o ganiza ion, o indi idual o
China, which iola es no mal ma ke ansac ion p inciples and causes se ious
damage o he legi ima e igh s and in e es s o he en e p ise, o he o ganiza-
ion, o indi idual o China.28 On June 10, 2021, China’s Na ional People’s
Cong ess S anding Commi ee passed he An i-Fo eign Sanc ions Law, gi ing
he Chinese go e nmen a legal ool o espond o o eign sanc ions wi h i s
own coun e sanc ions. Acco ding o A icle 3 o he law, indi iduals o o gani-
za ions in ol ed in he making o implemen a ion o a o eign coun y’s “dis-
c imina o y measu es agains Chinese ci izens” o “in e e ence wi h China’s
in e nal a ai s” a e eligible o be placed on a blacklis , o “coun e -lis ”.29
These nega i e economic s a ec a ins umen s esul ed om o e h ee yea s
o escala ing poli ical and economic dispu es wi h o eign coun ies, includ-
ing he Uni ed S a es and he EU. They indeed o m a s a k con as o he
108 China’s Economic S a ec a Unde Xi Jinping
posi i e economic s a ec a ins umen s China has adi ionally adop ed since
he ea ly days o i s e o m and opening-up.
Du ing P esiden Xi’s second e m, China’s o eign policy communi y
inc easingly el a misma ch be ween China’s economic clou and i s poli i-
cal in uence.30 P esiden Xi’s conduc o “Majo -Coun y Diplomacy wi h
Chinese Cha ac e is ics” equi es a la ge-scale weal h-powe con e sion.
While China’s ela ions wi h he Wes is de e io a ing, China has o ely
inc easingly on i s pa ne ships wi h he g oup o de eloping coun ies.
Tha means China will con inue o ad ance he BRI and aid diplomacy.
While China’s economy con inues o slow, China’s economic s a ec a
will ha e o balance be ween an asse i e diplomacy and a low-p o le one.
Inc easingly, he e a e conce ns ha China’s “Majo -Coun y Diplomacy”
is being o e s e ched.
5.3 Conclusion and Fu u e Scena ios
P esiden Xi is p obably he s Chinese leade who has had he luxu y o
mobilize wo ld-class economic powe o achie ing China’s g ea powe s a us
on he wo ld s age. Bu he de e io a ing zei geis ( he spi i o he imes) is a
majo obs acle o Xi’s ambi ion.
Fo P esiden Xi’s wo e ms as China’s op leade (2012–2022), China’s
economic s a ec a was ully mani es ed in his agship p ojec , he BRI (which
he p oposed du ing his ips in cen al and sou heas Asia), he economic lib-
e aliza ion agenda ep esen ed by RCEP, he BITs wi h he Uni ed S a es and
he EU, and he ade wa wi h he Uni ed S a es. The essence o P esiden Xi’s
economic s a ec a is a wo-way con e sion be ween China’s na ional weal h
and i s global in uence (and powe ). Fo acqui ing inc eased na ional weal h,
economic de elopmen is a mus .
Di e en om hegemons in his o y and o he g ea powe s, China has a
my hical wo ship o de elopmen . P esiden Xi is no excep ion. F om Deng
Xiaoping’s ime, he Chinese leade ship has always pu de elopmen a he
cen e o hei s a ec a . Tha ’s o say, de elopmen is always he cen al goal
o China’s economic and diploma ic s a egies. The undamen al mo i a-
ion o he BRI o any o he ins umen s o China’s economic s a ec a is
de elopmen .
China’s economic s a ec a is essen ially a new ype o de elopmen alism
wi h Chinese cha ac e is ics. China is a e a new ideology o de elopmen al-
ism, which is he esul o he collec i e wisdom o se e al gene a ions o lead-
e s: om he “Th ee Rep esen s” ( ep esen ing ad anced p oduc i e o ces,
he o ien a ion o he ad anced cul u e, and he undamen al in e es s o he
b oades masses o he people) p oposed by P esiden Jiang Zemin,31 o he
“Scien i c Ou look on De elopmen ” p oposed by P esiden Hu Jin ao32, and
he “Xi Jinping Though on Socialism wi h Chinese Cha ac e is ics o he
New E a”33 and he “Chinese Pa h o Mode niza ion”.34
China’s Economic S a ec a Unde Xi Jinping 109
Du ing he p esidency o Hu Jin ao (Xi Jinping’s p edecesso ), he guiding
ideology o economic s a ec a was ha
China is in he p ima y s age o socialism and will emain so o a long
ime o come. Amid inc easingly- e ce in e na ional compe i ion o
comp ehensi e na ional powe , i is o g ea s a egic signi cance o a
la ge de eloping coun y such as China o speed up mode niza ion by
pu ing economic g ow h a he cen e , seizing and e ec i ely using he
pe iod o impo an s a egic oppo uni y, and igo ously libe a ing and
de eloping he social p oduc i e o ces.35
The se e e acu e espi a o y synd ome (SARS) epidemic in 2003 was
closely linked o he o mula ion o he Scien i c Ou look on De elopmen
in he same yea . The SARS epidemic was he s majo challenge Hu Jin ao
g appled wi h a e aking o ce, and i had a g ea impac on his hough s.
Fo Hu, he ic o y in he gh agains SARS ully demons a ed he g ea
supe io i y o China’s socialis sys em. Howe e , he ou b eak and sp ead o
SARS also e ealed new con adic ions and weaknesses, such as he lack o
coo dina ed g ow h, unde de eloped public heal h in as uc u e, and he
inadequa e eme gency esponse mechanism a e a s age o apid economic
g ow h. I u he igge ed p o ound e ec ions o he CPC Cen al Com-
mi ee on China’s de elopmen unde new ci cums ances. The CPC Cen al
Commi ee was con on ed wi h he impo an heo e ical and p ac ical ques-
ions o “wha kind o de elopmen do we wan and how do we achie e i ?”
In la e Augus and ea ly Sep embe 2003, Hu Jin ao pu o wa d he
hough o he Scien i c Ou look on De elopmen du ing his isi o Jiangxi
P o ince, whe e he s essed he need o comp ehensi e, coo dina ed, and sus-
ainable de elopmen . In Oc obe , o he s ime in an o cial pa y docu-
men , he Thi d Plenum o he 16 h CPC Cen al Commi ee o malized he
Scien i c Ou look on De elopmen in i s en i e y, a guing ha i is necessa y
o “pu people s ; es ablish a concep o comp ehensi e, coo dina ed, and
sus ainable de elopmen ; and p omo e comp ehensi e economic, social, and
human de elopmen ”.
He e is one example o how and why P esiden Hu Jin ao a ached impo -
ance o economic de elopmen . As Hen y Paulson, he o me US sec e a y
o he T easu y ecalled, when P esiden Geo ge W. Bush asked P esiden Hu
wha kep him up a nigh , Hu answe ed i was o c ea e 25 million jobs a yea .
China’s leade ship pu s s abili y abo e all else, and ha means a s ong econ-
omy is a mus . Acco dingly, China needs mo e ma ke -o ien ed e o ms and
a mu ually bene cial ela ionship wi h i s mos impo an ading pa ne , he
Uni ed S a es. Essen ially, he CPC has made a deal wi h he Chinese people
o ensu e p ospe i y in exchange o long- e m poli ical powe . China’s leade -
ship has oo ed i s c edibili y wi h he people in economic oppo uni y, job
c ea ion, and ising li ing s anda ds, which was he glue holding he sys em
116 Compe ing Economic S a ec a s
and poli ically asse i e China. In his new mul ipola wo ld, di e en coun-
ies and models o go e nmen a e compe ing o powe and in uence.6
Ano he Ge man poli ician, U sula on de Leyen, p esiden o he Eu o-
pean Commission, an icipa ed he wo sening geopoli ical si ua ion by clea ly
posi ioning he Eu opean Commission as a “Geopoli ical Commission”. On
No embe 12, 2019, in a speech a he Pa is Peace Fo um, she emphasized
he c ea ion o a genuine “Geopoli ical Commission” o build a mo e ou -
wa d-looking EU ha would de end Eu opean alues and in e es s wo ldwide.
Josep Bo ell, he EU High Rep esen a i e o he Union o Fo eign A ai s
and Secu i y Policy and Vice P esiden o he EC, insis ed ha he EU mus
now “lea n o use he language o powe ”.7 F ench P esiden Mac on e en
wa ned ha wi h he escala ing compe i ion be ween China and he Uni ed
S a es, Eu ope would isk “disappea ing geopoli ically”.8
In sho , he hi d decade o he 21s cen u y is des ined o be u bulen and
unse ling. Fo China, he yea s 2021–2049 o e lap wi h he his o ical in e sec-
ion o he “ wo cen ena ies”, when he old cen ena y ends and he new one
begins. The old cen ena y is om 1921, when he Communis Pa y o China
(CPC) came in o being, o 2021, he 100 h anni e sa y o he CPC. The new
cen ena y is om 1949, when he People’s Republic o China was es ablished,
o 2049, he 100 h anni e sa y o he ounding o he PRC.9 Fo he Uni ed
S a es, 2026 ma ks he 250 h anni e sa y since independence. Bo h China and
he Uni ed S a es hope o emba k on a new jou ney in he hi d decade o he
21s cen u y. Un o una ely, he Uni ed S a es and China ha e ailed o co-
e ol e in a ha monious way. Bo h P esiden s T ump and Biden ha e de ned
China as a “s a egic compe i o ” o be con ained on mul iple le els. The expec-
a ion is ha he 2020s will be a de ning pe iod in he his o y o US-China ela-
ions. I he Uni ed S a es and China can p ope ly manage hei di e ences, he
ship o US-China ela ions will ha e a chance o na iga e on a no mal cou se;
in he case o s a egic miscalcula ion, i is e y likely ha wa and la ge-scale
geopoli ical con ic will b eak ou be ween he wo supe powe s, which would
p o oundly change he cou se o his o y and he u u e wo ld landscape.
Du ing he 2020s, he EU eposi ioned China and i s ela ions wi h China
ha e de e io a ed. In he policy pape “EU-China: A S a egic Ou look”, pub-
lished in Ma ch 2019, he EU ede ned China as, “a coope a ion pa ne wi h
whom he EU has closely-aligned objec i es”, “an economic compe i o in he
pu sui o echnological leade ship”, and “a sys emic i al p omo ing al e na-
i e models o go e nance”.10 The mu ual us is ge ing hin be ween he
EU and China. China’s ambiguous posi ion on he Russia-Uk ainian Wa has
signi can ly damaged China’s image in he EU.
6.2 The Mani es a ions o Compe ing Economic S a ec a s
and Consequences
China’s launch o he Bel and Road Ini ia i e in 2013 ma ks a wa e shed
in he new age o compe ing economic s a ec a . I s global co e age and

Compe ing Economic S a ec a s 117
la ge-scale le e aging o economic esou ces pu China in he spo ligh o
global poli ical economy. As a posi i e ins umen o economic s a ec a ,
he BRI spu ed he Uni ed S a es o come up wi h compe ing connec i i y
p ojec s, s he B3W ini ia i e ( he Build Back Be e Wo ld) announced by
P esiden Joe Biden in June 2021, and hen he PGII ( he Pa ne ship o
Global In as uc u e and In es men ) announced a he G7 Summi in June
2022, which in ended o aise US $600 billion o e he nex e yea s o
p o ide de eloping coun ies wi h nancing o in as uc u e de elopmen .
Al hough China was no explici ly men ioned in he s a emen , he PGII was
widely seen as an “al e na i e” o he BRI, aimed a weakening he in e na-
ional in uence o he BRI.
Since China’s launch o he BRI, he EU has come up wi h a se ies o posi-
i e economic s a ec a p ojec s, including he EU S a egy o Coope a ion
in he Indo-Paci c, he EU-Asia Connec i i y S a egy, he Globally Con-
nec ed Eu ope S a egy, and he EU Global Ga eway ini ia i e in 2020–2022.
The e is a ime lag o a ound eigh yea s be ween China’s s mo e
o g and economic s a ec a , p ojec BRI announced in 2013 and he
Uni ed S a es’ B3W, as well as he EU’s symbolic economic s a ec a p o-
jec s such as he Global Ga eway announced in 2021. Why is he e such a
ime lag? Fi s , i ook a while be o e o he majo economies ealized he
geoeconomic (and geopoli ical) spillo e s o China’s BRI, and managed
o o ganize al e na i e connec i i y p ojec s as a esponse. In 2013–2017
be o e he US-China ade wa b oke ou in 2018, he e was a window o
oppo uni y o China, he Uni ed S a es, and he EU o collabo a e on
connec i i y. A ypical example was he EU-China Connec i i y Pla o m
es ablished in 2014. Un o una ely, he alue o his pla o m has been
la gely unde app ecia ed.
Second, acing China’s geoeconomic ise, he s esponse was ini ia ed
by an a ypical Ame ican p esiden , Donald T ump, who decided o choose a
nega i e economic s a ec a ins umen (an economic wa a e o a bullying
na u e) o o e whelm China. The US-China ade wa las ed om Ma ch
2018 and un il Janua y 2020 be o e he Uni ed S a es ealized ha he e is
no winne in an economic wa , and i is impossible o de ea China single-
handedly. I is no un il Joe Biden’s ime as p esiden ha a uni ed Wes e n
on was o be o ganized o con on China’s economic s a ec a .
Howe e , nega i e economic s a ec a ins umen s such as a ade wa o
sanc ions can ha dly be e ec i e because o hei double-edged swo d e ec s,
c ea ing bo h winne s and lose s domes ically. In he US-China ade wa in
2018–2020, he sec o s bene ing om US-China ade ela ions su e ed.
Acco ding o Ga y Hu baue , a senio ellow o he Pe e son Ins i u e o
In e na ional Economics, i US expo s we e cu by a hi d in an all-ou ade
wa , he Uni ed S a es would lose abou $50 billion o expo s annually. Abou
250,000 US wo ke s would lose hei jobs. P esiden T ump would no be
able o di use he poli ical backlash by calling on Ame icans o be pa io s and
accep hei economic ha dships.11
118 Compe ing Economic S a ec a s
When bo h China and he Uni ed S a es we e exhaus ed by he ade wa ,
hey sa down o a uce, which led o he so-called Phase One T ade Ag ee-
men signed on Janua y 15, 2020.12 Al hough he e we e expec a ions by he
business communi ies o bo h sides ha he puni i ely high a i s would be
li ed, he e has been li le p og ess in ha di ec ion in 2021–2022 du ing
he Biden adminis a ion. Donald T ump was inspi ed by he wo sened spi i
o he imes and also con ibu ed o he u he wo sening o i . Economic
na ionalism (o me can ilism) is aking a s ong hold in he Uni ed S a es
while China is inc easingly in o e ed. Di e en om Japan o Ge many,
wo ising powe s in his o y, China is a as coun y wi h one o he wo ld’s
bigges domes ic ma ke s. The e o e, China’s ypical esponse o a chao ic
global con ex is a na u al e u n o he own ma ke and ocus on he own
a ai s.13
F om a longe pe spec i e, China’s economic s a ec a is a esponse o he
Uni ed S a es’ economic s a ec a ep esen ed by he “New Silk Road Ini ia-
i e”14 and he “Asia Pi o ”15 en isioned in 2011. The BRI is “China’s Ma ch
Wes ” in esponse o Obama-Clin on’s Asia Pi o .16 China’s nego ia ion o he
RCEP was o espond o he US-led TPP. China’s alks wi h he Uni ed S a es
and he EU o BITs we e o boos domes ic e o m and in oduce he mos
ad anced in e na ional economic ules so as o ca ch up wi h he highes le el
o economic ule making.
In e ospec , he Wes has squande ed China’s posi i e economic s a ec a
ini ia i es ep esen ed by he BRI and P esiden Xi’s economic libe aliza ion
agenda. The Wes ’s dissa is ac ion wi h P esiden Xi’s ideological pi o u he
igh ened he global economic s a ec a compe i ion.
We a e now going h ough a phase o compe ing connec i i y. Connec i -
i y (and in e dependence) is being ins umen alized and e en weaponized. I
he T ump adminis a ion aised he idea o a comple e economic decoupling
om China,17 he Biden adminis a ion and his like-minded allies a e ying
o a pa ial decoupling. The essence o decoupling is an ul ima e nega i e
usage o economic esou ces by ejec ing he i al coun y’s access o ma ke s,
key esou ces, high echnologies, and c i ical human esou ces. Decoupling is
an upg ade o ade wa and a ypical example o economic wa a e.
Al hough Joe Biden ejec s he ade wa model is-à- is China, he global
con ex is g adually lu ing he Wes o adop an economic wa a e app oach.
This is la gely inspi ed by he Wes ’s economic sanc ions agains Russia, and
inc easingly used agains China, especially in he high- ech a eas. The Biden
adminis a ion ied o adop a “small ya d, high ence” s a egy by c ea ing
“choke poin s” o c i ical US echnologies is-à- is China. As Jake Sulli an,
Biden’s na ional secu i y ad iso , said,
Founda ional echnologies ha e o be inside ha ya d and he ence
has o be high because ou s a egic compe i o s should no be able o
exploi Ame ican and allied echnologies o unde mine Ame ican and
allied secu i y.18
Compe ing Economic S a ec a s 119
In he da k days o he wo ld economy and wa ing s a es pe iod o global
economic s a ec a , we a e wi nessing d ama ic inno a ion o economic s a e-
c a oolki s. To deny Russia he nancial esou ces o und i s in asion o
Uk aine, he US-led coali ion immobilized Russia’s so e eign weal h und and
cen al bank ese es.19 To deny China’s abili y o acqui e o de elop high-end
chips, as well as educe he dependence on c i ical echnologies om China,
he Uni ed S a es passed he Chips Ac 2022.20 To s and o i s alues, he EU
es ablished a global human igh s sanc ions egime on Decembe 7, 2020,
which allows i o a ge indi iduals, en i ies, and bodies – including s a e and
nons a e ac o s – esponsible o , in ol ed in, o associa ed wi h se ious human
igh s iola ions and abuses wo ldwide, no ma e whe e hey occu ed.21 This
global human igh s sanc ions egime has been applied on se e al occasions,
including agains Russia and China. The EU’s sanc ions agains China on
he g ound o human igh s iola ions in Xinjiang igge ed China’s u ious
coun e sanc ions.
The EU s ands ou in p ac icing ade s a ec a since Von De Leyen
became p esiden o he Eu opean Commission in 2019. A he EU le el, a
se ies o ade legisla ions ha e been p oposed wi h geopoli ical implica ions,
such as he An i-Economic Coe cion Ins umen (ACI), aimed a coun e ing
he use o economic coe cion by hi d coun ies.22 The Eu opean Commission
also p oposed he Due Diligence Di ec i e, In e na ional P ocu emen Ins u-
men and An i-Subsidy Regula ion, all o which a e gi ing ee h o he EU o
inc ease i s capabili ies in adap ing o he bi h o a “Geopoli ical Eu ope”.23
Apa om inno a ion o oolki s, he nego ia ion s a egies o economic
s a ec a a e also going h ough “sma ” econ gu a ion. As he wo ld seems
o become mul ipola , he global poli ics o economic s a ec a appea o en e
an e a o a s a egic iangle among he Uni ed S a es, he EU, and China. The
Biden adminis a ion success ully e i ed he A lan ic alliance despi e some
ade disag eemen s. Russia’s in asion o Uk aine la gely euni ed he Wes .
P esiden Von De Leyen has eme ged as he pe son o call when US o cials
wan o call Eu ope.24 The Uni ed S a es is awa e ha sanc ions a e mos
e ec i e when coo dina ed wi h allies and pa ne s, bo h because coo dina ion
bols e s diplomacy and because mul ila e al sanc ions a e ha de o e ade.25
China’s posi ion is signi can ly weakened in such a s a egic iangle, wi h
China on he one side and he Uni ed S a es and he EU on he o he . Tha
being said, he s a egic iangle is cons an ly changing. The ul ima e goal
o he EU’s geopoli ical pi o is o seek so-called “s a egic au onomy”, an
au onomous posi ion is-à- is bo h he Uni ed S a es and China.26
6.3 Compe ing Though s Behind Compe ing Economic
S a ec a s
Facing he de e io a ing spi i o he imes, he economic s a ec a compe i-
ion o igina es om compe ing pa adigms o go e ning a s a e (o an econ-
omy). The e eme ged in he Wes , h oughou his o y, ou ypes o economic
120 Compe ing Economic S a ec a s
s a ec a pa adigms: me can ilism, libe alism, impe ialism, and Ma xism.
Acco dingly, di e en models o go e nance and s a ec a ha e been g own
on he soils o he Uni ed S a es, he EU, and o he Wes e n coun ies.
China is a e y di e en model, a hyb id o e e y his o ical “ism”, ideologi-
cally guided by Ma xism wi h a de elopmen alis pu sui o Chinese “g ea
eju ena ion”. Tha makes any simplis ic labeling o China’s model o go -
e nance misleading and quickly obsole e. The labeling o China’s go e nance
model as “s a e capi alism” is misleading, because China adhe es o i s Ma xis
poli ical egime and ideology. Nei he can such a labeling explain P esiden
Xi’s socialis campaigns such as “E adica ion o Ex eme Po e y”27 and “Seek-
ing Common P ospe i y”.28 An al e na i e in unde s anding China’s go e n-
ance model is an eclec ic one. Since he People’s Republic was ounded in
1949, Chinese leade s ha e emb aced di e en guiding hough s o economic
s a ec a , anging om Ma xism o me can ilism and libe alism (Table 6.1).
China’s economic s a ec a has a his o ical logic, which is inspi ed by Chi-
na’s “ ianxia sys em” (天下 in Chinese, li e ally meaning “all unde hea en”).
In ancien China and impe ial China, ianxia deno ed he lands, space, and
a ea di inely appoin ed o he Chinese so e eign by uni e sal and well-de ned
p inciples o o de . The cen e o his land was di ec ly appo ioned o he
Chinese cou , o ming he cen e o a wo ld iew ha cen e ed on he Chi-
nese cou and wen concen ically ou wa d o majo and mino o cials and
hen he common subjec s, ibu a y s a es, and nally ending wi h inge
“ba ba ians”.29 This wo ld iew gi es China’s economic s a ec a i s ci iliza-
ional a ibu es and his o ical dep h.
Al hough China’s “ ibu a y sys em” has been abandoned wi h he col-
lapse o China’s las impe ial dynas y in 1911, China’s wo ld iew o ianxia
has ne e been abandoned. I is al eady inco po a ed in China’s philosophy
and cul u e. China’s economic diplomacy oday is also inspi ed by he ian-
xia wo ld iew. I includes a “new concep o mo ali y and in e es s”, which
ad oca es a dual ocus on mo ali y and in e es s and p io i izes mo ali y o e
p o in dealing wi h de eloping coun ies.30 Se e al episodes in China’s his-
o y a e pa icula ly commended as good examples o economic diplomacy:
Zhang Qian’s expedi ion o he wes e n egions led o he es ablishmen
o diploma ic ies be ween he Han Dynas y and he ibes in he wes e n
egions, sp eading iendship along he ancien Silk Road and b inging back
o China he ci iliza ion, knowledge, and goods o he Wes . The spi i o he
ancien Chinese explo e and diploma Zheng He’s se en oyages o he wes -
e n oceans was “ o be iend he dis an people, make peace wi h all na ions,
and sha e p ospe i y wi h he wo ld” and o acili a e economic exchange and
ade ows. This is in s a k con as o he sla e ade and colonial ule o
he Wes e n powe s h ough hei migh y wa ships and cannons.31 China’s
dis inc i e ci iliza ional a ibu es and his o ical expe iences helped China o
cha a di e en pa h o economic diplomacy unlike o he g ea powe s – o
p omo e ela ions wi h o he coun ies om he dimension o ci iliza ion and
o implemen he so-called “majo coun y diplomacy” in a Chinese way. Since
Compe ing Economic S a ec a s 121
Table 6.1 China’s Economic S a ec a om Mao o Xi
Poli ical Economic ideology Main Tasks Weal h-Powe -
Ideology S a egy
Mao Zedong Communis Ma xis mixed
wi h China’s
adi ional
way o
hinking
as a cen al
kingdom
Deng Xiaoping Communis Libe alism
Jiang Zemin Communis Libe alism
Hu Jin ao Communis Libe alism
+ ligh
me can ilism
Xi Jinping Communis Ligh
me can ilism
+ embedded
libe alism
+ socialism
+ his o ic
logic
An i-impe ialism,
independence,
sel -su ciency,
building a
s ong s a e
Economic
de elopmen ,
building a
s ong s a e
Economic
de elopmen ,
building a
s ong s a e,
he g ea
eju ena ion o
China, “Th ee
Rep esen s”
Economic
de elopmen ,
building a
s ong
s a e, g ea na ional
eju ena ion
The Ou look
o Scien i c
De elopmen
Economic
de elopmen ,
“China D eam”,
building a
s ong s a e,
he g ea
eju ena ion
o China, Two
Cen ena y goals
Suppo ing he
Communis
Re olu ion,
de eloping
coun ies,
suppo ing a new
in e na ional
economic o de
Gene al Ag eemen
on T ade and
Ta i s (GATT)
accession
GATT/
Wo ld T ade
O ganiza ion
accession
Eme ging s a egic
indus ies,
sel -inno a ion,
Bel and Road
Ini ia i e; Asian
In as uc u e
In es men
Bank; B azil,
Russia, India,
China, Sou h
A ica (BRICS)
De elopmen
Bank;
compe i i e
egionalism,
Regional
Comp ehensi e
Economic
Pa ne ship, F ee
T ade A ea o
he Asia-Paci c;
ee ade zone

122 Compe ing Economic S a ec a s
he Bel and Road Ini ia i e was p oposed, China’s ela ions wi h de eloping
coun ies in Asia, A ica, and La in Ame ica ha e become inc easingly close,
g adually o ming a BRI “ci cle o iends”.
China’s his o ical pu sui o a cen al posi ion in he wo ld is being imple-
men ed by a highly o ganized poli ical pa y equipped wi h a Ma xis ideology.
Tha signi can ly acili a ed China’s ise in a sho ime span. Bu China’s ise
is a om being comple ed. I equi es a con inuous ans o ma ion o weal h
o powe .
Economic g ow h is he e o e a p econdi ion o China’s ise, and China’s
economic s a ec a is la gely de elopmen o ien ed.
In compa ison, he Uni ed S a es, as an es ablished hegemon, is p ac icing a
hegemonic economic s a ec a , he essence o which is o main ain Ame ica’s
hegemony h ough a wo-di ec ional con e sion be ween weal h and powe .
Since he end o WWII, he guiding hough s behind he Ame ican economic
s a ec a has e ol ed om libe alism o me can ilism. Wha P esiden T ump
implemen ed was a kind o me can ilism (economic na ionalism), ocusing on
“Ame ica Fi s ”, launching global ade wa s and oa ing he idea o a com-
ple e economic decoupling om China. A he same ime, he T ump admin-
is a ion ans o med mili a y and s a egic powe in o nego ia ing le e age in
pu sui o weal h, such as enego ia ing he “nigh ma e NAFTA”32 and u n-
ing i in o he USMCA (U.S.-Mexico-Canada Ag eemen ). A global ade
wa was launched agains he EU, China, Tu key, I an, and India. Me can ilis
ade policy unde P esiden T ump made he Uni ed S a es go a e e en i s
own allies in he name o “Ame ica Fi s ”. This was un hinkable when he US
economic s a ec a was la gely in uenced by libe alism. The US-China ade
wa was also essen ially a me can ilis wa waged by he Uni ed S a es, only
la e pain ed as an ideological wa by Sec e a y o S a e Mike Pompeo.33 The
Biden adminis a ion has no changed P esiden T ump’s me can ilis ade
policy signi can ly, keeping high a i s on China’s impo s and olling ou he
CHIPS Ac as well as he In a ion Reduc ion Ac , he la e o which igge ed
complain s om wo US allies, he EU and Sou h Ko ea.
Di e en om bo h China and he Uni ed S a es, he EU is p ac is-
ing a de ensi e economic s a ec a , some hing we may call “geoeconomic
s a ec a ”. The goal o he EU’s economic s a ec a is o achie e “s a egic
au onomy” and “s a egic so e eign y”.34 In his con ex , he EU is seeking
s a egic au onomy om China and he Uni ed S a es, in oducing an “an i-
coe cion ins umen ”, seeking o become a leading in e na ional ad oca e o
clima e change, imposing in es men s sc eening, in oducing an in e na ional
p ocu emen ins umen , and implemen ing a se ies o economic diploma ic
ini ia i es wi h geopoli ical o e ones. The EU’s economic s a ec a pa adigm
is s ill libe alism, bu he libe al pa adigm is shi ing om posi i e ecip oci y
o nega i e ecip oci y. Soon, he e may be a pa adigm shi o me can ilism.
The EU’s weal h-powe s a egy is based la gely upon i s iden i y as a ci ilian
and no ma i e powe . The e o e, he EU’s weal h-powe s a egy is ocused
la gely on ansla ing economic s eng hs o global in uence and ule se ing.

Compe ing Economic S a ec a s 123
Al hough he EU is p obably he weakes link in he US-China-EU s a egic
iangle, i is p obably he mos s a egic one, poised o change he balance o
powe .
The global con ex is he s d i e o all he majo changes in in e na-
ional poli ics. In he good old days o globaliza ion in he high Vic o ian days
o he mid-19 h cen u y and he Reagan-Clin on yea s o he 1980s–1990s,
all he majo economies bene ed om mu ual openness and in e depend-
ence, whe he i was a libe al capi alis economy o a socialis ma ke economy
(like China). Ideological di e ences we e less emphasized and in e na ional
coope a ion was widely emb aced. Howe e , when globaliza ion en e ed in o
i s da k days like now, domes ic go e nance in majo economies encoun e ed
di cul ies and yes e day’s pa ne s became scapegoa s and i als. Ideologi-
cal di e ences a e being eemphasized and economic s a ec a is inc easingly
weaponized.
O e all, he compe i ion o economic s a ec a can now be ega ded as
a pa adigm compe i ion. Mul iple pa adigms coexis , e ol e, ans o m, and
in uence one ano he . The e is i al y, compe i ion, and coope a ion among
hem. The Uni ed S a es is now e ol ing “in e -pa adigm”, back acking om
libe alism o me can ilism. The EU is e ol ing “in a-pa adigm”, s ill hold-
ing on o he libe al pa adigm, bu acing eno mous me can ilis p essu e and
shi ing om libe al geoeconomics o inc easingly ealis geopoli ics.
Tha is why we see he inc easing compe i ion among me can ilism ( he
Uni ed S a es), weakened libe alism ( he EU), and Ma xism-de elopmen al-
ism (China) in he de e io a ing global con ex (Table 6.2). In such a com-
pe ing iangle, economic s a ec a is gaining p ominence. The essence o
economic s a ec a compe i ion is he compe i ion among he Uni ed S a es,
he EU, and China in hei weal h-powe sys ems and weal h-powe s a egies.
Table 6.2 The Compe ing Weal h-Powe Sys em and S a egies among he Uni ed
S a es, he EU, and China since 2018
Uni ed S a es EU China
Compe ing models
o economic
s a ec a
Guiding hough s
Weal h-powe
sys em
Weal h-powe
s a egy
Hegemonic Geoeconomic
economic s a ec a
s a ec a
Me can ilism Weakened
libe alism
Libe al democ acy Regula o y libe al
democ acy
Indo-Paci c Global Ga eway,
s a egy, G een Deal,
nega i e digi al ansi ion,
ecip oci y, Nex Gen, s a egic
ade wa au onomy
De elopmen alis
economic s a ec a
Ma xism-
de elopmen alism
Socialis ma ke
economy wi h
Chinese cha ac e is ics
Bel and Road
Ini ia i e, high-le el
de elopmen , dual
ci cula ion, domes ic
consump ion
124 Compe ing Economic S a ec a s
These h ee weal h-powe sys ems we e o med by his o ical ci cums ances
and a e s ill e ol ing. In he long un, wha dic a es he u u e ise and all o
g ea powe s is, a guably, which weal h-powe sys em is he mos iable: he
one ha ep esen s he mos ad anced p oduc i e o ces, he one ha keeps
up wi h he imes, and he one ha bes ep esen s he in e es s o he majo i y
o i s people. Fo he momen , we ha e a leas h ee coexis ing weal h-powe
sys ems, and he compe i i e and coope a i e ela ionship be ween hese h ee
sys ems will shape he u u e global poli ical economy.
In he sho and medium e m, one needs o look o weal h-powe s a e-
gies: how well do weal h and powe wo k oge he ? And wha is he s a egy?
Because his will de e mine he a e o he weal h-powe sys em. Fo example,
he socialis bloc ep esen ed by he So ie Union su e ed he a e o disin-
eg a ion because o he ailu e o i s weal h-powe s a egies. I is s ill oo
ea ly o ell whe he China ep esen s a mo e e cien and powe ul weal h-
powe sys em. The answe depends on he ou come o he long ace wi h
o he weal h-powe sys ems in hei espec i e weal h-powe s a egies.
In his con ex , China, he Uni ed S a es, and he EU a e coinciden ally
pi o ing owa d a new, inwa d-looking economic s a egy. The Uni ed S a es
wan s o “Build Back Be e ”, he EU is a e “s a egic so e eign y”, and
China is looking o shape a new de elopmen pa adigm. The common ea u es
a e ha China, he Uni ed S a es, and he EU a e gi ing a bigge ole o he
go e nmen . The scal, mone a y, indus ial, and egula o y policies a e being
mobilized a he same ime. The in uence o ma ke -based esou ce alloca ion
is g adually losing i s lus e .
The US go e nmen has adop ed a se ies o p oac i e policies and legisla-
ion, such as he Buy Ame ican Ac , he Ame ican Rescue Plan, he Ame ican
Jobs Plan, and he Ame ican Families Plan. Mo e esou ces a e now being
di ec ed o suppo ing onsho e manu ac u ing, imp o ing he ha d and so
in as uc u e, and inc easing he po en ial economic g ow h a e.
The Eu opean Commission unde P esiden Von De Leyen has se he ol-
lowing goals: o digi alize and g een he economy wi hin he union, s eng hen
he esilience and independence o he supply chain, p omo e mul ila e al eco-
nomic diplomacy ou side he union, and commi o he WTO as he main
channel o mul ila e al ade.
Simila ly, China has se ambi ious goals o li ing China owa ds he op
posi ion in he wo ld economy: o achie e high-quali y economic de elop-
men in he new jou ney owa ds he second cen ena y goal; imp o e o al
ac o p oduc i i y h ough echnology ad ances; imp o e indus ies h ough
co e echnology and dis up i e inno a ion; con inue o consolida e i s posi-
ion as he wo ld’s op manu ac u ing powe house; and o m a egional alue
chain wi h China a he co e o he Asia-Paci c egion h ough indus ial
ans o ma ion, upg ading, and eloca ion (simila o Japan’s ying geese
pa adigm in p e ious imes). While balancing he objec i es o de elopmen
and secu i y, China will make use o he esou ces in “ex e nal ci cula ion”
Compe ing Economic S a ec a s 125
and ully le e age i s comp ehensi e s eng hs as a la ge economy, ma ke ,
and p ocu e o inc ease he in e ac ion and ci cula ion wi h he ex e nal
economy.
D i en by he jus i ca ions o hei espec i e agendas, he go e nmen s
o he h ee majo economies ha e ound a be e aison d’ê e. Compe i ion
has also become he mos impo an law o su i al. China, he Uni ed S a es,
and he EU combined accoun o wo hi ds o he wo ld’s g oss domes ic
p oduc . Bu among hem, one’s gain is inc easingly pe cei ed as he loss o
he o he . This ealis ic (and pessimis ic) u n o economic s a ec a hinking
is de ning he u u e g ea powe poli ics.
In o he u u e, economic s a ec a is inc easingly used as ools o com-
pe i ion. The Chinese Ma xis -de elopmen alis s a ec a is he mos e cien
due o China’s Communis egime, which is good a mobilizing esou ces o a
s a e goal. Howe e , his weal h-powe sys em may easily ge o e s e ched by
exhaus ing i s economic esou ces. The e o e, China’s weal h-powe s a egy
mus ha e a solid adhe ence o he de elopmen dimension. O he wise, i will
soon lose momen um.
The US hegemonic economic s a ec a is he mos di cul o manage
since a hegemon has cons an challenge s. To main ain i s hegemonic posi-
ion, he hegemon has o woo i s allies by gi ing economic concessions and
compe e agains i s main challenge s. Tha means he hegemon has a weal h-
powe dilemma, leading o o e s e ching ei he on he weal h end o on he
powe end. The in e -pa adigm shi o economic s a ec a om libe alism o
me can ilism is a i id demons a ion o his dilemma.
The EU’s geoeconomic s a ec a is he mos di cul o sus ain. The
Eu opean Commission’s sel -iden i y as geopoli ical is po en ially suicidal.
The EU i sel is a libe al p ojec , while geopoli ics by de ni ion is an ilibe al,
which emphasizes ze o-sum and be e me can ilis philosophy. Mo eo e ,
he EU’s pu sui o s a egic so e eign y ia geopoli ics is almos an impos-
sible mission. The Russia-Uk aine wa is p oducing an ene gy c isis in he
EU, mo ing Eu opean indus ies ou o Eu ope, causing capi al igh o he
Uni ed S a es, and anning populis ange as a esul o sky- ocke ing ene gy
p ices.
In he days o compe ing economic s a ec a s, mu ual us is ge ing
sca ce. A na ion’s weal h expansion b ings powe spillo e , which is an impo -
an sou ce o s a egic anxie y o o he na ions. This e a o s a ec a compe-
i ion will no end un il he wo ld economy en e s a new phase o p oduc i i y
g ow h spu ed by a new echnological e olu ion. Bu om now o he
nex phase o p ospe i y, g ea powe s will con inue o compe e in economic
s a ec a s. D i en by compe ing pa adigms and weal h-powe sys ems (and
weal h-powe s a egies), he Uni ed S a es, he EU, and China may en e a
icious cycle o compe i ion and con on a ion. Du ing his ela i ely long
pe iod o di cul days, he hope lies in people’s con dence ha he good old
days will always come back.
132 Index
Eu opean Union (EU) o eign policy:
economic s a ec a , pe spec i e
89; his o y, economic s a ec a
(pe spec i e) 89–96
eu ozone, G eece (exi ) 93
EU S a egy o Coope a ion in he
Indo-Paci c 87, 117
exchangeable alue 20–21
expo s, excess 29
ex e nal ba ba ian in asions, Roman
Empi e esis ance 28
Falkland Islands Wa 21
ascis agg ession, esis ance (Anglo-
Ame ican coope a ion) 62
Fede alis Pape s 50–51
eudalism, aboli ion 37
eudal mona chs, weal h-powe 35
Fi s Repo on Public C edi 51
Fi s Wo ld Wa 57
Flo ida, US acquisi ion 51
o eign ade, app aisal 29
“Fo ess Eu ope”: cha ac e is ics 95–96;
shi 92
ounda ional echnologies, impac 119
F anco-Ge man ela ions, imp o emen 90
F eedom’s Fo ge (He man) 16
ee/libe al ade policies, es o a ion 62
ee ma ke s (economic libe alism
componen ) 36
ee ade: mul ila e alism 71; p inciples
88; suppo (Hull) 72
ee ade ag eemen s (FTAs): di cul y,
inc ease 73; pe cep ion 72
F ee T ade A ea o Ame icas (FTAA)
73, 74
ee ade impe ialism 37; collapse 41
F ench Re olu ion 35
F iedman, Mil on 21
F om Weal h o Powe (Zaka ia) 55
Gadsden Pu chase 51
Gallaghe , John 38
Gao Hucheng 102
Gene al Ag eemen on Ta i s and
T ade (GATT) 63, 72; China,
ejoining 67
Gene alized Sys em o P e e ences,
o e ing 82
geoeconomic compe i ion, e oci y 14–15
Geoeconomic Eu ope agenda
(p omo ion), economic
diplomacy (implemen a ion) 87
geoeconomic s a ec a 122
“Geopoli ical Commission,” c ea ion 116
Geopoli ical Eu ope, bi h 119
geopoli ics, e m (a oidance) 82
Ge many, Nazism (inc ease) 59
global ag eemen s, US p e e ence 72
global nancial c isis 92
Global Ga eway ini ia i e 29
globaliza ion: apidi y 114–115; T ump
decoupling 73
Globally Connec ed Eu ope S a egy
87, 117
Glo ious Re olu ion 35
gold, dolla (alignmen ) 61–62
Go bache , Mikhail 92
Go don, Robe 54, 60
g and ba gain s a egy 84
G ea Dep ession 7, 59–60, 92; US
hegemony, inc ease 54
G ea Leap Fo wa d 41
G ea Mode a ion 92
g ea powe , ise (key) 5
G eece, eu ozone exi 93
G een Sp ou s Law 22
“g ey hino” inciden s 105
G oup o Eigh (G8) 69
G oup o Se en (G7), US economic
s a ec a (connec ion) 66, 75
G oup o Twen y (G20) 69; e o m,
absence (Chinese us a ion)
100–101
Hamil on, Alexande 50–51
Hanbing, Shi 93
Han Dynas y, diploma ic ies 120
ha d powe , de elopmen 86
Hawaiian Kingdom, ee ade ag eemen
(signing) 532
Hay, John 55
hegemonic cycles 45–47; e olu ion 48
hesi an hegemony 57
Hideyoshi, Toyo omi 22
his o y, ins uc ion 35
Hobson, John A. 10, 38–39
Hollande, F ançois 93
Hoo e , He be 59
House, Edwa d 57
Huang, Ray (Renyu) 22
Hu baue , Ga y 117
Hu Jin ao 108; Bush con ac 109–110;
economic s a ec a , guiding
ideology 109; low-p o le
diplomacy 100; Scien i c

Index 133
Ou look on De elopmen
pe spec i e 109; weal h- o-powe
ans o ma ion 110
Hull, Co dell 60, 63; ee ade suppo 72
Hund ed Yea s’ Wa 22
impe ialism 28; age 38–41; his o ical
me hod 39
Impe ialism (Hobson) 38
“Impe ial P e e ence,” u u e
(p ejudice) 62
“impe ial sys em o p e e ences” 62;
Lend-Lease Ac , connec ion
62–63
indi idual consume s/ ms/
households (economic libe alism
componen )36
indi idualis capi alism, e ec s 9–10
Indo-Paci c Economic F amewo k 68
Indo-Paci c Economic S a ec a
Ini ia i e 1
indulgence le e , sale 20
Indus ial De elopmen Con e ence 10
indus ializa ion, impac 6
Indus ial Re olu ion 37, 54
in o mal empi e 19
in as uc u e, imp o emen 83
In e -Ame ican Child en’s Ins i u e,
c ea ion 56
In e -Ame ican Commission o Women,
c ea ion 56
In e -Ame ican Commission on Human
Righ s, c ea ion 56
In e -Ame ican Commi ee on Po s,
c ea ion 56
In e -Ame ican Cou o Human Righ s,
c ea ion 56
In e -Ame ican De ense Boa d, c ea ion 56
In e -Ame ican D ug Abuse Con ol
Commission, c ea ion 56
In e -Ame ican Ins i u e o Coope a ion
on Ag icul u e, c ea ion 56
In e -Ame ican Ju idical Commi ee,
c ea ion 56
in e -Ame ican sys em 51
In e -Ame ican Telecommunica ion
Commission, c ea ion 56
in e dependence, weaponiza ion 80
in e nal di ision, Roman Empi e
esis ance 28
in e nal peace, enjoymen 21
In e na ional Mone a y Fund
(IMF): es ablishmen 61–62;
membe ship, So ie Union
e usal 64; e o m, absence
(Chinese us a ion) 100–101
In e na ional P ocu emen Ins umen
(IPI) 23, 87; p oposal 119
In e na ional T ade Commi ee (INTA) 87
in e na ional ade o de , eadjus men
(T ump demand) 70
Japan, impe ialis economic s a ec a 39
Jay T ea y 49–50
Je e son, Thomas 50
Jiang Zemin 108; s a egic
oppo uni ies 115
Join Commission on Comme ce and
T ade (JCCT), ep esen a ion 105
Jus ice S udies Cen e o he Ame icas,
c ea ion 56
“Kabul Momen ” 67–68
Ka ainen, Jy ki 13, 79
Kennan, Geo ge 64
Kennedy, Paul 16
Keynesianism, impac 103
Ke, Zhao 61
Kindlebe ge , Cha les 59
King Louis XIV, economic s a ec a 19
King Sebas ião, dea h 33
Kissinge , Hen y 66
Knox, Philande Chase 56
Kond a ie Cycle 115; e olu ion 48
Kond a ie long wa es 47, 89; IV-B 90–91;
V-A 90–91, 95; V-B 92, 95
Kond a ie , Nikolai 44
Ku iha a, Kenne h K. 10
Ku iha i, Kenne h K. 10
labo p oduc i i y, inc ease 37
Land Su ey and Equi able Tax Law 22
League o Na ions: joining (Sena e
e usal) 57; membe ship, Wilson
p oposal 57
LeFebe , Wal e 55
Lend-Lease Ac (1941) 61; impe ial
sys em o p e e ences, connec ion
62–63; le e age 62; nego ia ions,
implemen a ion 62
Lenin, Vladimi 38–39, 41
Lew, Jacob 75
libe al ins i u ionalism, impac 5
libe alism 28; degene a ion 95;
me can ilism, pendulum 71–75;
pa adigm 4; weakening 123
134 Index
Lisbon T ea y (2009): dual-ha ed
posi ion 95; a i ca ion 94–95
Lis , F ied ich 20–21, 33–35, 40
Lixin, Wang 57
London Economic Con e ence, ailu e 60
London School o Economics and
Poli ical Science (LSE) 12
long economic cycle 44
long- un p ospe i y 18
“Long Teleg am” (Kennan) 64
long wo ld economic wa e, pe spec i e
45–47
Louisiana Pu chase 50
Lu he , Ma in 20
Luxembu g, Rosa 38–39
Maas ich T ea y 92
Magna Ca a, in oduc ion 22
“Majo -Coun y Diplomacy wi h Chinese
Cha ac e is ics” (Xi) 99, 108
mani es des iny 50–52, 54
manu ac u ed goods, p ice (inc ease) 21
manu ac u ing powe , de elopmen 21
Mao Zedong 41
Ma i ime Silk Road 101
Ma ke Exchange Law 22
Ma shall, Al ed 9, 20, 24
Ma shall Plan 3, 44, 64
Ma xism 28, 41–42; impac 120;
pa adigm 4
Ma xism-de elopmen alism 123
Ma xis dialec ical/his o ical ma e ialism,
basis 103
Ma x, Ka l 42; e olu ion heo y, Lenin
de elopmen 39
ma e ial capi al, impac 35
McKinley, William (wa decla a ion) 55
Mea sheime , John 15, 23
Meiji Res o a ion, impac 39
Memoi s (Kennan) 64
men al capi al, impac 35
me can ilism 28; app oach 115;
compe i ion, inc ease 123;
economic s a ec a , e e ence
9; elemen s 29, 33; libe alism,
pendulum 71–75; medie al
eudal sys em, con as 5;
pa adigm 4
me can ilis policies, elimina ion 37
me can ilis s a ec a , implemen a ion 35
Me kel, Angela (isola ion) 93–94
Mexican-Ame ican Wa 51
middle-income ap 103
mili a iza ion 39
mili a y/economic powe ,
ins umen aliza ion
(p omo ion) 85–86
mili a y-powe balances, shi 16
mili a y secu i y, in e es 18
Mill, John S ua 24
minimal s a e in e en ion (economic
libe alism componen ) 36
mixed economic s a ec a 10
mona chy, sup emacy (no ion) 28
mone a y wa , cessa ion 60
Monne , Jean 90–91
Mon oe Doc ine 51, 55–56
Mon oe, James 51
Mo gen hau, Hen y 61–62
mul ila e al coope a ion, basis 95
Munich Secu i y Con e ence 75
na ional policy: app aisal 29; weal h/
powe , ela ionship 18
na ional p oduc i e powe s, heo y 325
na ional weal h, inc ease 37
Na iga ion Ac s 34, 36–37
nega i e economic s a ec a (T ump) 117
“Nego ia ion A i hme ic: Adding and
Sub ac ing Issues and Pa ies”
(Sebenius) 84
“new cold wa ” 3
New Deal 59–60; “Build Back Be e ”
(compa ison) 68
“New No mal” (Xi analysis) 102, 103
“New Silk Road Ini ia i e” (US
economic s a ec a ) 118
New T ansa lan ic Agenda (NTA) 74
Nex Gene a ion EU (NGEU) p og am 85
Nine y-Fi e Theses (Lu he ) 20
Nixon Shock 65, 91
non-capi alis sphe es, compe i ion 38–39
nonmili a y ci ilian powe , mobiliza ion 5
no ma i e powe , mobiliza ion 5
No h Ame ican F ee T ade
Ag eemen (NAFTA) 74;
es ablishmen 66–67,
72; enego ia ion 122;
enego ia ion, T ump
demand70
No h A lan ic T ea y O ganiza ion
(NATO): es ablishmen 64;
s eng hening 68
No h, Douglas 34
No h Sea, wa zone decla a ion 4
Nye, Joseph 69, 81
Index 135
Obama, Ba ack 67–68; global economic
c isis, managemen 69
Oc obe Re olu ion 41
oil emba go, impac 65
Okano-Heijmans, Maaike 12, 80
Open Doo policy 54–55
open economic wo ld, dic a o ship
coope a ion ( e usal) 64
Open S a egic Au onomy 86
Opium Wa (1840s) 105
O ganiza ion o Ame ican S a es (OAS),
c ea ion 56
o he g ea powe s, ise (con ex ) 67–71
Panama ( ebellion), Roose el
(assis ance) 55
Pan Ame ican Heal h O ganiza ion,
c ea ion 56
Pan Ame ican Ins i u e o Geog aphy
and His o y, c ea ion 56
“pa adox o powe ” (Nye) 81–82
Pa is Peace Con e ence (1919) 10, 57–59
Pa ne ship and Coope a ion Ag eemen
(PCA) nego ia ions 87
pa y linkage 84
Paulson, Hen y 109
Pax Ame icana, es ablishmen 60
Pea l Ha bo , a ack 39, 57
People’s Republic o China (PRC),
ounding (anni e sa y) 116
Pe y Expedi ion 52
Pe y, William 22
Phase One T ade Ag eemen (2020) 118
plunde , weal h p oduc ion 19–20
policy, aming/execu ion (na ionalis ic
e ms) 29
poli ical o eign policy, pu sui 33
poli ical-s a egic powe , decline
(Eu ope) 93–94
populism: app oach 115; ise 92
Po ugal, weal h s a egy (absence) 33
pos wa in e na ional o de , Uni ed S a e
(impac ) 64
pos wa in e na ional sys em, concep ion 60
pound s e ling, c edi base (e osion) 61
powe : de ni ions 15; dis ance 50;
Eu opean powe , ounda ion
(1950–1967) 90; Eu opean
powe , upwa d spi al
(1967–2008) 90–92; ha d powe ,
de elopmen 86; pa adox 81–82;
pu sui , weal h (usage) 17;
s a egy, mani es a ion 38;
s a egy, ein en ion 5;
ans o ma ion 2; ans o ma ion,
smoo hness/e ciency 5–6;
wo-way s ee 11; weal h,
ans o ma ion 4
p e-es ablishmen na ional ea men
(China expe imen a ion) 104
P inciples o Economics (Ma shall) 9,
10–11, 24
P oclama ion o Neu ali y 49–50
p oduc ion, powe s 34
p oduc i e powe , heo y 20–21
p ospe i y, elemen 33
p o ec i e du ies, suppo 21
p o ec i e a i s, in oduc ion 35
Pu nam, Robe 12
Qing Empi e, T ea y o Wangxia signing 52
Qixuan, Huang 23
Reaganomics, impac 66, 103
Recip ocal T ade Ag eemen s Ac
(RTAA) 60
ecip oci y 95–96
Reco e y and Resilience Facili y 79
Re o ma ion 20
“Re o ms o Wang Anshi” 22
Regional Comp ehensi e Economic
Pa ne ship (RCEP): economic
libe aliza ion agenda 107;
nego ia ions 99, 103
Reinha d , Ca men 92
Renaissance banke s, loans 35
Repo o he 19 h CPC Cong ess
(2017) 106
esou ce, de ni ion 15
e iew-nego ia e- e alia e p ocess, EU
de elopmen 88
Rise and Fall o G ea Powe s, The
(Kennedy) 16
Robinson, Ronald 38
Rocke elle , John D. 53
Rogo , Kenne h 92
Roose el Co olla y 55–56, 59–60
Roose el , F anklin D. 72; Chu chill
mee ing 62; “ ou policemen”
idea 60–61; isola ionis policy 60
Roose el , Theodo e 55–56
Royal Ins i u e o In e na ional
Rela ions (EGMONT) 79
ule o law 95
Russian Empi e, mili a y con ic 40
Russian Re olu ion 39
136 Index
Russia-Uk aine wa (Russo-Uk ainian
Wa ) 3, 14, 68, 80–81, 116;
ene gy c isis 125
Russo-Japanese Wa 56
Ru e, Ma k 86
Ryan, Paul 72–73
Sande s, Be nie 72–74
Sande s, William S ephen 9–11
sca ci y, e m (usage) 18
Schäuble, Wol gang 93
Schmid , Helmu 19, 66
Scholz, Ola 115–116
Schuman, Robe 90
Schumpe e , Joseph 44
Scien i c Ou look on De elopmen ,
o mula ion 109
Second Empi e 19
Second G ea Con ac ion 92
Second Wa o Independence (1812–1815)
47, 50–52
Second Wo ld Wa 57
“Seeking Common P ospe i y” (Xi Jinping)
120
Se en Yea s’ Wa 34
se e e acu e espi a o y synd ome
(SARS) epidemic (2003) 109
Sho well, James T.
Silen Gene a ion, cha ac e is ics 75
Silk Road Economic Bel 101
Single Eu opean Ac , EC adop ion 91–92
“sma powe ,” usage 69
Smi h, Adam 9, 20–22, 24, 36–37
Smoo -Hawley Ta i Ac 59, 71–72
socialism: p ima y s age (China) 109;
se back 42
socialis ma ke economy sys em 42
social p oduc i e o ces, libe a ion/
de elopmen (China) 109
Song Dynas y, demise 22
Sou he n Common Ma ke (Me cosu ) 74
So e eign Eu ope, p omo ion 86
So ie people/ egime, dialec ical
ela ionship 64
So ie Union: con ainmen 64;
disin eg a ion 42
Spain/Po ugal, eligious/ e i o ial
dispu es 34
Spain, eligious ana icism 33
Spanish-Ame ican Wa 54–55
Spanish Habsbu gs, Ca holic ule 36
“Spi i o he Times, The” (change)
114–116
S aa swissenscha (s a e economics) 24
s ag a ion, p oblem 21
S alin, Jose : “ ou policemen” idea
(Roose el ) 60–61
S alin, Jose (public owne ship sys em) 41
S anda d Oil Company 53
s a e: ac ual powe 15–16; economics
18; ole 18
s a e banks, eenginee ing 40
s a e-cen e ed ealism 6, 53
s a e-cen ism, economic s a ec a
( ela ionship) 81
s a ec a : de ni ion 13; e m, usage 14
s a e economics (S aa swissenscha ) 24
s a e in e en ion policies, elimina ion 37
s a egic ad en u ism, impac 6–7, 39
S a egic and Economic Dialogue
(S&ED) 69
s a egic au onomy 119
S a egic Economic Dialogue 68
s a egic economy, ad ocacy 17
s a egic indisc e ions 2
s a egic o e d a 2, 6–7
s a egic pa ne ships, usage 84
s a egy, plan o ac ion 23
s uc u al o eign policy 84
Sulli an, Jake 118–119
summi sys em, usage 84
supe -so e eign in e na ional ese e
cu ency p oposal (Zhou
Xiaochuan) 100
Supply Chain Due Diligence Ac 87
sup ana ionalism, shi 91
Ta dolla diplomacy 56
Ta i Ac (1816) 71
Teh an Con e ence 60–61
Tha che , Ma ga e 21
heo y o na ional p oduc i e powe s 35
heo y o p oduc i e powe 20–21
Thi d Plena y Session o he 18 h
Cen al Commi ee o he
Communis Pa y o China
(2013) 99
Thi d Wo ld, independence 65
Thucydides ap 103
Tiananmen Inciden (1989) 100
ianxia sys em 120
o al ac o p oduc i i y (TFP)
g ow h54
T ade Ac (1974) 65
ade balance 29, 33
T ade Expansion Ac (1962) 65
Index 137
ade policies: ins umen s,
weaponiza ion 13; usage 82
ade wa model, Biden ejec ion 118
T agedy o G ea Powe Poli ics, The
(Mea sheime ) 16, 23
T ansa lan ic T ade and In es men
Pa ne ship (TTIP): geopoli ical
s a egic signi cance 82–83;
nego ia ions 94
T ansa lan ic T ade and In es men
Pa ne ship (TTIP) nego ia ion 82;
T ump cessa ion 70
ans o ma ion: s a egy 23; e m, usage 16
T ans-Paci c Pa ne ship (TPP) 73, 118;
Obama ad ocacy 72–73; T ump
wi hd awal 70
T ea ise o Taxes and Con ibu ions, A
(Pe y) 22
T ea y o Ams e dam 83
T ea y o Rome 90
T ea y o Ve sailles 10; Cong essional
ejec ion 58; joining, Sena e
e usal 57–58
T ea y o Wangxia 52
T ea y on Eu opean Union (Maas ich
T ea y) 92
T i n pa adox, o e coming (inabili y) 65
T ipa i e Mone a y Ag eemen 60
T uman Doc ine 44, 64
T uman, Ha y S. 29
T ump Doc ine, deglobaliza ion e o 73
T ump, Donald: “Ame ica Fi s ”
doc ine 69; an i ade posi ion
73; b oad-based economic
s a ec a 67; bullying
nego ia ing s yle, con as
68; economic na ionalism 69;
economic s a ec a , c i icism
74–75; economic wa a e
105; exi ism 69; global ade
wa ini ia ion 29; nega i e
economic s a ec a 117; ade
ealignmen / enego ia ions
demands 68; ade wa 105
T u h o he Eu opean Deb C isis, The
(Hanbing) 93
sa is Russia, economic s a ec a 40
Tsip as, Alexis 93
wo-le el game heo y 12
UNESCO, T ump wi hd awal 69
Union o U ech , o ma ion 36
Uni ed Kingdom, me can ilism 34–35
Uni ed Na ions Human Righ s Council
(OHCHR) 69
Uni ed S a es o Ame ica: bailou
p og ams 67; domes ic poli ics,
dilemma 74–75; economic
c isis 59; economic diplomacy,
wo sening 75; economic
g ow h 53–54; economic
le e age, squande ing (T ump
adminis a ion) 75; economic
na ionalism policy, adop ion 59;
expansionism 52; o eign policy,
indecision 58–59; o eign ade
ag eemen s 51–52; ounding
47, 49–51; hegemony, decline
65–66; in ancy 49; in e na ional
p es ige 50; in a-pa adigm 123;
isola ionis policy 60; na ional
bank up cy, sense 53; na ional
powe , deple ion 65; non-
in e en ion 51; powe , decline
91; secu i y, unde mining 119;
sup emacy, decline (absence)
7; a i ac s 52; echnologies,
unde mining 118; Wa o
Independence 34; weal h-powe
sys em/s a egies, compe i ion 123
Uni ed S a es o Ame ica economic
s a ec a 44; B i ish hegemony
(1775–1898) con ex 47–53;
e olu ion 45–47; G7,
ela ionship 66; Obama con ol
69; o he g ea powe s, ise
(con ex ) 67–71; pa adigm shi
71–75; T ump con ol 69–71
Uni ed S a es o Ame ica hegemony:
decline (1967/73–2001/08)
65–67; dilemma 74; economic
s a ec a , con ex 53–67;
hesi ance 57–59; ma u a ion
63–64; ise 54–56; iumph 57,
59–63
Uni e sal Pos al Union 69
US-Canada FTA, conclusion 72
US-China bila e al ade ela ions,
damage 105
US-China BIT 103
US-China economic in e es s,
ebalancing 68
US-China S a egic Economic Dialogue
(SED) (S&ED) 69, 105
US-dolla hegemony cessa ion (Zhou
Xiaochuan) 110

138 Index
US-Dominican Republic-Cen al
Ame ica FTA (CAFTA-DR) 73
US-Eu opean T ansa lan ic T ade and
In es men Pa ne ship (TTIP) 73
U.S.-Mexico-Canada Ag eemen
(USMCA) 122
US-Middle Eas FTA (MEFTA) 73
US-Sou he n A ican Cus oms Union
(SACU) FTA 73
Venice, colonial ad en u e 33
Vie nam Wa , impac 65
Vine , Jacob 18
on de Leyen, U sula 29, 80, 85,
116,119
Wa o Independence (USA) 34
wa , weal h p oduc ion 19–20
Washing on Consensus 92
Washing on, Geo ge 47, 49
Wa e loo, Napoleon de ea 49–50
weal h: ex ac ion 21–22; maximiza ion 38;
p oduc ion 19–21; p oduc ion,
powe 21; pu sui , powe (usage)
17; s a egy, ein en ion 5;
ans o ma ion 2; ans o ma ion,
smoo hness/e ciency 5–6; wo-
way s ee 11
Weal h o Na ions, The (Smi h) 9, 22, 24,
36–37
weal h-powe dilemma 39
weal h-powe pa adox 38
weal h/powe s a egies ac o s,
dicho omy 37
weal h-powe s a egy (WPS) 28–29,
124; sus ainabili y 6–7
weal h-powe sys em 23
weal h-powe -sys em 23
weal h-powe ans o ma ion 19, 23
weal h- o-powe s a egy 67–68
Webe , Max 15
Welles, Sumne 62
Wen Jiabao (la ge-scale economic
s imulus package) 103
Wenmu, Zhang 17
Wes e n hegemonies, economic s a ec a
30–32
Wes e n Hemisphe e coun ies, ex e nal
in asion (a oidance) 56
Whi e Plan 61–62
Wilson, Wood ow: idealism 57; a i
policy 10
Woolcock, S ephen 12
Wo ld Bank membe ship, So ie Union
e usal 64
Wo ld Economic Fo um 85–86
Wo ld Heal h O ganiza ion 56
Wo ld in Dep ession (Kindlebe ge ) 59
Wo ld T ade O ganiza ion (WTO):
China accession 67; c ea ion
72; e o m, absence (Chinese
us a ion) 100–101; ade
nego ia ions, Doha ound
(launch) 67
Xi Jinping 41; “Changes Unseen in
a Cen u y” 115; con ol 99;
de elopmen -o ien ed economic
s a ec a 106; economic
libe aliza ion agenda 107, 118;
economic s a ec a , iden i ca ion
(2012–2017) 100–104;
economic s a ec a , iden i ca ion
(2017–2022) 104–108;
“E adia ion o Ex eme Po e y”
120; “Majo -Coun y Diplomacy
wi h Chinese Cha ac e is ics” 99,
108; “New No mal” analysis 103;
non-cyclical challenges, de ning
102–103; powe 101; Repo o he
19 h CPC Cong ess (2017) 106;
isks, wa ning 105–106; “Seeking
Common P ospe i y” 120
Yang ze, blocking 38
Yinhong, Shi 17
Yun, Chen 22
Zaka ia, Fa eed 5–6, 52–53, 55
Zei enwende 115–116
zei geis (spi i o he imes) 108
Zhang Qian, expedi ion 120
Zheng He ( oyages) 120
Zhou Xiaochuan: supe -so e eign
in e na ional ese e cu ency
p oposal 100; US-dolla
hegemony cessa ion 110
Zicheng, Li 22