American Economic War-Gaming Rages On, Harming US Itself, Displaying I…
Written by Uriel Araujo, researcher with a focus on international and ethnic conflicts
In another chapter of its economic war, on August 9, Washington announced it would restrict US venture capital and private equity firms investments in Chinese artificial intelligence and semiconductors. It is uncertain whether American policy-making has taken into consideration all the possible outcomes of such measures.
American economic security powers lie mostly in the Treasury and Commerce Departments, whose infrastructure is, according to Justi Muzinich, former Deputy Secretary of the US Treasury (from 2018 to 2021), simply not fit for the time of great-power tensions – brought about, one could add, by Washington’s dual containment policy targeting both Russia and China simultaneously. American infrastructure in that regard lacks information and coordination – those have been largely shaped to respond to terrorist threats in the post-911 US.
Muzinich writes that “while the use of economic tactics to gain geopolitical advantage extends back to ancient Greece, globalization has amplified the consequences of potential disruptions in trade and money flows, leaving the United States in unfamiliar territory.” Moreover, Muzinich argues, American integration with China is way greater than it was with its Soviet rival. Apple, which is the world’s largest company, relies on China for no less than one-third of its production about one-fifth of its sales. In Muzinich’s words, today “the United States is at once more economically vulnerable and more powerful than at any time in its history.” It is, therefore, as if American economic might contained within itself the seeds of its destruction,
To address such vulnerability, writing from an American perspective, Muzinich remarks that the US does have “several broad powers that have not been specifically designed for economic security but that can be used to advance its cause”, such as Joe Biden’s August 2022 CHIPS Act, a fiscal policy designed to prevent trade with China. He also mentions other such tools, such as the CFIUS, a Treasury Department chaired committee whose role is to ensure “U.S. companies with strategic technology cannot be purchased by foreigners who could use that technology against the United States.” Sanctions are yet another weapon in this arsenal – the “institutional infrastructure” to implement them took shape after 911, when the Treasury Department created a division to target money financing terrorist organizations. It has come to adapt to “broader needs” today, targeting, according to Muzinich, not only “terrorists and drug lords but also countries”.
Addressing the reality of economic war-gaming as played by the US, the former US Treasury Deputy Secretary, in his Foreign Affairs article, acknowledges that “Washington does not have a team that prepares for economic conflict in the way that military planners game out war plans and scenarios.” He then calls for setting up one or more agencies which would be charged with regularly assessing American economic vulnerabilities, and with “developing intuition and understanding of how the international economic chessboard could evolve were tensions to escalate between China and the United States.” “More imagination,” he claims, is needed to overcome the bureaucratic insularization of departments within the fabric of American governance, and thus promote “strategic thinking on the role of the U.S. dollar in the global economy.”
The very logic of economic war-gaming, however, is part of the problem, and yet another potential vulnerability for theUS itself.
That it is increasingly difficult, today, to insulate industries from geopolitical disputes is a given. Take, for instance, the aforementioned semiconductors, the complicating factor in the Washington-Beijing dispute – the US economic policies in that regard (the “chip war”) in fact further exacerbated today’s supply chain crisis. As of late, Washington has also threatened Moscow with export control regarding semiconductors – which is just another troubling sign that it is becoming harder and harder to separate industries from such geopolitical squabbles.
With chips, it is not even clear how the US plans to enforce a blockade of supply chains that are notoriously so hard to trace in the first place. China has indeed turned geoeconomics into the very core of its geostrategic lines of action, thus deriving political power from economic might with its Belt and Road Initiative, for example – the United States in turn, has alarmingly weaponized economic policies and has in fact weaponized its financial system and, arguably, the world economy. Escalating tensions, however, could further complicate the bottleneck and thereby damage Washington itself.
I’ve written before on the American weaponization of the dollar (the so-called “dollar bomb”). The very dollar system and global energy policies are interwoven together in a complex geoeconomic-geopolitical game because the petrodollar has long been one of the pillars of the US-led Western financial system. There are, however, signs that the times are changing, so to speak.
The early 2022 Russian ruble payment for gas decision was a game changer in itself. The decision by the Reserve Bank of India’s (RBI) to allow the rupee in global trade, in turn, has the potential to become a precursor to making it an international currency. Moreover, the late 2022 OPEC+ decision to cut oil output has marked the possible end of the US-Saudi relationship, a relationship which had thus far been the clearest case of Washington’s “oil-for-security” policy. Saudi Arabia in any case has also promoted de-dollarization by its willingness to trade oil in Chinese Yuan.
Finally, the more the US uses its economic leverage as a weapon to bully other nations, the greater the motivation to seek alternatives against the American order. This is part of the context of the emergence of BRICS Plus. Washington, however, has weaponized its currency and for that reason the inevitable de-dollarization will be seen by the US as a threat – one which it simply has no power to stop.
MORE ON THE TOPIC:
- “The Chips War”: The West versus China
- Biden’s Tech-War Goes Nuclear
- Eric Zuesse: The Big Con Of The NeoCons
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