'Weaponized Interdependence: How Global Economic Networks Shape State Coercion' by Henry Farrell and Abraham L. Newman in (2019) 44(1) International Security 42–79 comments
In May 2018, Donald Trump announced that the United States was pulling out of the Joint Comprehensive Plan of Action agreement on Iran's nuclear program and re-imposing sanctions. Most notably, many of these penalties apply not to U.S. firms, but to foreign firms that may have no presence in the United States. The sanctions are consequential in large part because of U.S. importance to the global financial network. This unilateral action led to protest among the United States' European allies: France's finance minister, Bruno Le Maire, tartly noted that the United States was not the “economic policeman of the planet.”
The reimposition of sanctions on Iran is just one recent example of how the United States is using global economic networks to achieve its strategic aims. While security scholars have long recognized the crucial importance of energy markets in shaping geostrategic outcomes, financial and information markets are rapidly coming to play similarly important roles. In Rosa Brooks's evocative description, globalization has created a world in which everything became war. Flows of finance, information, and physical goods across borders create both new risks for states and new tools to alternatively exploit or mitigate those risks. The result, as Thomas Wright describes it, is a world where unprecedented levels of interdependence are combined with continued jockeying for power, so that states that are unwilling to engage in direct conflict may still employ all measures short of war.
Global economic networks have security consequences, because they increase interdependence between states that were previously relatively autonomous. Yet, existing theory provides few guideposts as to how states may leverage network structures as a coercive tool and under what circumstances. It has focused instead on trade relations between dyadic pairs and the vulnerabilities generated by those interactions. Similarly, work on economic sanctions has yet to fully grasp the consequences of economic networks and how they are being weaponized. Rather, that literature primarily looks to explain the success or failure of direct sanctions (i.e., sanctions that involve states denying outside access to their own markets individually or as an alliance). Power and vulnerability are characterized as the consequences of aggregate market size or bilateral interdependencies. In addition, accounts that examine more diffuse or secondary sanctions have focused more on comparative effectiveness than on theory building.
In this article, we develop a different understanding of state power, which highlights the structural aspects of interdependence. Specifically, we show how the topography of the economic networks of interdependence intersects with domestic institutions and norms to shape coercive authority. Our account places networks such as financial communications, supply chains, and the internet, which have been largely neglected by international relations scholars, at the heart of a compelling new understanding of globalization and power. Globalization has transformed the liberal order, by moving the action away from multilateral interstate negotiations and toward networks of private actors. This transformation has had crucial consequences for where state power is located in international politics, and how it is exercised.
We contrast our argument with standard liberal accounts of complex interdependence. The initial liberal account of interdependence paid some attention to power, but emphasized bilateral relationships. Subsequent liberal accounts have tended either to avoid the question of power, focusing on mutual cooperative gains, to suggest that apparently lopsided global networks obscure more fundamental patterns of mutual dependence, or to posit a networked global order in which liberal states such as the United States can exercise “power with” (the power to work together constructively with allies) to achieve liberal objectives.
Our alternative account makes a starkly different assumption, providing a structural explanation of interdependence in which network topography generates enduring power imbalances among states. Here we draw on sociological and computational research on large-scale networks, which demonstrates the tendency of complex systems to produce asymmetric network structures, in which some nodes are “hubs,” and are far more connected than others.
Asymmetric network structures create the potential for “weaponized interdependence,” in which some states are able to leverage interdependent relations to coerce others. Specifically, states with political authority over the central nodes in the international networked structures through which money, goods, and information travel are uniquely positioned to impose costs on others. If they have appropriate domestic institutions, they can weaponize networks to gather information or choke off economic and information flows, discover and exploit vulnerabilities, compel policy change, and deter unwanted actions. We identify and explain variation in two strategies through which states can gain powerful advantages from weaponizing interdependence; they respectively rely on the panopticon and chokepoint effects of networks. In the former, advantaged states use their network position to extract informational advantages vis-à-vis adversaries, whereas in the latter, they can cut adversaries off from network flows.
To test the plausibility of our argument, we present detailed analytic narratives of two substantive areas: financial messaging and internet communications. We selected these areas as they are significant to a range of critical security issues including rogue-state nonproliferation, counterterrorism, and great power competition. Moreover, global finance and the internet are often depicted as being at the vanguard of decentralized economic networks. As such, they offer an important test of our argument and a contrast to the more common liberal perspective on global market interactions.
At the same time, financial messaging and internet communications see important variation in the level and kind of control that they offer to influential states. In the former, the United States, in combination with its allies, has sufficient jurisdictional grasp and appropriate domestic institutions to oblige hub actors to provide it with information and to cut off other actors and states. In internet communications, the United States solely has appropriate jurisdictional grasp and appropriate institutions to oblige hub actors to provide it with information, but does not have domestic institutions that would allow it to demand that other states be cut out of the network. This would lead us to expect that in the case of financial messaging, the United States and its allies will be able to exercise both the panopticon and chokepoint effects—so long as they agree. In contrast, in internet communications, the United States will be able to exercise the panopticon effect even without the consent of its allies, but it will not be able to exercise the chokepoint effect. This variation allows us to demonstrate the limits of these network strategies and also show that they are not simply coterminous with United States market size or military power. Empirically, the cases draw on extensive readings of the primary and secondary literature as well as interviews with key policymakers. Our argument has significant implications for scholars interested in thinking about the future of conflict in a world of global economic and information networks. For those steeped in the liberal tradition, we demonstrate that institutions designed to generate market efficiencies and reduce transaction costs can be deployed for coercive ends. Focal points of cooperation have become sites of control. For those researchers interested in conflict studies and power, we show the critical role that economic relations play in coercion. Rather than rehashing more conventional debates on trade and conflict, we underscore how relatively new forms of economic interaction—financial and information flows—shape strategic opportunities, stressing in particular how the topography of global networks structures coercion. Here, we use basic insights from network theory to rethink structural power, linking the literatures on economic and security relations to show how coercive economic power can stem from structural characteristics of the global economy. Finally, the article begins to map the deep empirical connections between economic networks—for example, financial messaging, dollar clearing, global supply chains, and internet communication—and a series of pressing real-world issues—including counterterrorism, cybersecurity, rogue states, and great power competition.
We begin by explaining how global networks play a structural role in the world economy. Next, we describe how these networks, together with domestic institutions and norms, shape the strategic options available to states, focusing on what we describe as the panopticon and chokepoint effects. We provide detailed parallel histories of how networks in financial communication and internet communication developed and were weaponized by the United States. We conclude by considering the policy implications of clashes between countries such as the United States that have weaponized interdependence and other states looking to counter these influences.
