"Panopticons and Chokepoints": The Real Result of Globalization

From The Wilson Quarterly, Spring 2020:

A provocative new view of international relations puts global networks – and how they can be weaponized – at its center. What’s the future of regulation in this new landscape?

Students of international relations tend to focus on nations as separate entities with sovereignty, borders, economies. They examine the formal and informal institutions through which they cooperate, compete and coerce. The power of states to regulate in areas such as commerce and immigration is a key subject of interest.

Globalization wrought an irrevocable shift. Markets were liberated and made more efficient. Mutual advantages were mined from deep interconnectedness. The stakes of sovereignty and the effectiveness of coercive force seemingly were diminished. And yet, researchers largely continued to interpret these explosive effects within inherited conceptual architectures.

Scholars Henry Farrell and Abraham Newman now argue that globalization has created a much different world than its proponents and detractors have trumpeted. The new pathways of connection forged in recent decades are lopsided, extending vast powers of surveillance and coercion over markets and security to a few countries that control key strategic positions within these networks.

Last summer Farrell and Newman published “Weaponized Interdependence: How Global Economic Networks Shape State Coercion” in the journal International Security. It was the starter’s pistol for a fundamental reassessment of globalization’s impact on state power.

"The debate we see at the moment is never going to be about trade and open markets in the same kind of way anymore."

The newly-developed asymmetric information and financial networks yield what the authors call “panopticon” and “chokepoint” effects. The “weaponization” of these networks promises – at minimum – to transform traditional notions of statecraft, the role of corporations in national security, and the global projection of hard and soft power.

Farrell and Newman’s paper closely examined the immense power wielded by the United States in areas such as global payment systems and web traffic. But among the piece’s most thought-provoking conclusions was that this power would not go unchallenged.

"The United States and its allies find themselves in a new and uncertain world,” write Farrell and Newman, “where rival powers and adversaries are seeking to insulate themselves from global networks, or perhaps over the long run to displace these networks."

Farrell – a professor of Political Science and International Affairs at George Washington University (and a former Wilson Center Fellow) – and Newman – a professor with appointments in Georgetown University’s Edmund A. Walsh School of Foreign Service and its Department of Government – launched a website to track manifestations of “weaponized interdependence.” They are also co-authors of a book, Of Privacy and Power: The Transatlantic Struggle over Freedom and Security (2019, Princeton University Press).

“There’s a lot that’s been happening in the world economy,” says Farrell in an interview with the WQ. “So that people have been able to figure out that there's a ‘there there,’ but not be able to put a name on it. So I think that we – for better or worse – turned out to be some of the very early people to try to put a name on it – and try and identify it.” 

Farrell and Newman have extended their arguments in broader venues such as Foreign Affairs and Harvard Business Review. In mid-March, as the coronavirus pandemic swept from outbreaks in China and Italy and into the United States and many other nations throughout the world, they examined the sweeping implications of the pandemic for supply chain networks in Foreign Affairs:

As policymakers around the world struggle to deal with the new coronavirus and its aftermath, they will have to confront the fact that the global economy doesn’t work as they thought it did. Globalization calls for an ever-increasing specialization of labor across countries, a model that creates extraordinary efficiencies but also extraordinary vulnerabilities. Shocks such as the COVID-19 pandemic reveal these vulnerabilities.

“We are starting to think about fragility in the supply chain system,” says Newman to the WQ. “You do see that in the pharmaceutical industry with India, but they’re not weaponizing that to a strategic end. You just notice that these supply chains that everybody thought were redundant are not redundant.” 

Bigger Isn’t Stronger

Farrell and Newman’s work also has implications for how we evaluate the efficacy of state regulation. Even if they take a roundabout to get there.

“We’re proceeding from a direction I think is orthogonal to most of the regulation literature,” says Farrell, “because that literature has been primarily a literature about markets and the best ways to achieve various kinds of policy outcomes…. Rather than thinking about regulation and how it might lead to a different way of thinking about interdependence, we instead started with network structure and start thinking about interdependence from that perspective – which has all of these interesting consequences for regulation. 

“When you start thinking about the world through this perspective, you really begin to think that a lot of the standard arguments about regulation and the benefits or lack of benefits are basically kind of misconceived -- or miss the point of how regulations will emerge or work – for better or for worse – in the future.” 

A key element in their research is a rejection of the notion that globalization diffuses or democratizes power evenly – or, in many cases, at all. “A country's ability to leverage these new tools is very much dependent on the institutions that oversee markets,” says Newman. “It’s not just about having a big market. China has a big market. Japan has a big market. But in many areas, they do not have the leverage over the global economic networks that the U.S. does. A lot relies on what we would call regulatory capacity – the ability to monitor, defend, define, and sanction a set of political objectives that you have.”

The International Security paper fastened tightly on the advantages that the U.S. and other industrialized economies possess in a world of asymmetric networks. Edward Snowden’s revelations in 2013 revealed that the U.S. has a window into global web communications that makes the authors’ choice of the panopticon apt. The paper also explored how the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system has become another key chokepoint in global networks that is controlled by the U.S. and key European allies. 

“There aren't that many countries aside from the United States and Europe that really have access to those key chokepoints in the networks,” says Newman. “China is doing it in the 5G debate. That's what the 5G debate is all about. They are encroaching. Can they establish the next hub? I don't think either Russia or India play that role.”....

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