From Rabobank, November 7:
Summary
- This report underlines that economic statecraft has returned to the fore again and it fundamentally differs from economic policy – Trump’s re-election underlines that point.
- This requires markets to focus not only on macrostrategy but on a broader, more geopolitical hybrid which we dub ‘Grand Macro Strategy’.
- We will first define the differences between economic policy and statecraft as well as the related term of grand strategy, its key concepts, its toolkit, and the latter’s dynamics.
- We will then look at how present economic statecraft in the US and EU sits relative to historical experience and highlight specific episodes from the past perhaps worth considering if the current geopolitical trend continues.
Introduction
Since 2016, RaboResearch has warned of trade wars, Cold War, Great Power competition, global fragmentation, and hot wars. In February, the Atlantic Council noted, “Today, the frequency and potency with which governments deploy “economic statecraft”-which includes sanctions, export controls, tariffs, investment restrictions, and price caps, among other tools- has never been higher”, while the Financial Times underlined ‘how national security has transformed economic policy.’ The re-election of President Trump is obviously set to refocus market thinking in this area.Crucially, economists still discuss developments like tariffs, capital controls, boycotts, and embargoes while being unfamiliar with the “economic statecraft” under which these policies traditionally sit. This knowledge gap means economic analysis lacks a conceptual framework for how or why policy choices are made, can wrongly ascribe the underlying motivation to their introduction, and/or misunderstands what policy may logically flow on afterwards.
This report explains the key differences between economic policy and economic statecraft; the related term ‘grand strategy’ and its schools of thought; and the statecraft policy toolkit, and its dynamics. It then looks at how late-2024 US and EU economic statecraft sit vs. their histories, drawing specific examples as an indication of what may lie ahead in some scenarios.
The conclusion is that markets should be prepared to supplement purely economics-focused macrostrategy with a fusion geopolitical ‘grand strategy-plus-economics’ lens, which we dub ’Grand Macro Strategy’1. After all, a more geopolitical world, by its very definition, should arguably preclude a reliance solely on business-as-usual economic thinking....
....MUCH MORE (22 page PDF)
See also the lawyer, statesman, philosopher, academic etc.:
“nervi belli pecunia infinita” — the sinews of war are infinite money.
