The differences between geopolitics and geoeconomics

Studies of geopolitics and of intelligence have a long history of coexistence, with mutual influence and inspiration. Members of the world's intelligence organizations, officers of the armed forces, politicians, and civil servants have always been keen readers of geopolitical writings. Recently, managers and executives of private-sector organizations have also become more interested in geopolitical ideas, as international business has expanded and managers' perspectives of the world have become truly global. At the same time it has become clear that this is not geopolitics in the old sense, but a new version. Hence we need to draw out the similarities and differences between geopolitics and geoeconomics.

The power dimension is common to both subjects, but the forms and the perspectives, the emphases, and the variables they choose to study and analyse are often different, as suggested in the table below:

Table 4.2: Variables for Competitive Advantage






objectives, goals, mission


geographical location, size

business ideas; strategy


natural resources

financial strength, ownership


population size

number of employees, market shares, key success factors


education; science

level of general competence, fit between competence and business


political stability; laws, organization

organizational structure and culture



buildings, land, assets



legal competence





exportable pop-culture

exportable products and company culture

Despite the somewhat different perspective from the doctrine of Realpolitik, these two subjects ultimately operate in a sort of symbiosis. There will always be a strong political component in geoeconomics and a strong economic component in geopolitics. How we approach the real political doctrine very much depends on our perspective, whether we are a private-sector organization or a nation state. A responsible company will tend also to view problems from the perspective of the nation state, and vice versa.

Some will argue that there is no real difference between geopolitics and geoeconomics, that in the end politics is all about economics, since it all comes down to resources which can be translated into quantities, expressed in some monetary form. But even if this is true in the last analysis, it is too simplistic. The fundamental differences have to do with (i) the users, managers versus public administrators, but also (ii) the circumstances of the respective studies, in terms of their different working environments. Decision-makers in private-sector organizations differ in a number of ways from their colleagues in the public sector:(a) they are more focused on financial goals, and (b) they pay less attention to political agendas and public opinion. The circumstances differ, first of all in terms of (a) competition, (b) regulations, and (c) internationalization. There is also (iii) a difference in the academic home associated with these studies : political science for geopolitics, and international business and management for geoeconomics. An expert on political affairs is seldom an expert on international business, if for no other reason than because such people move in different circles and in a different social context, have different goals and tactics, but also because they will have had different training and education. This has also led to contrasting organizational cultures. A diplomat will typically know little of managerial accounting, and likewise a businessman will lack knowledge of the ways (legal, administrative, social) in which a nation state functions.

When the idea of power and geography was new there was only strategy, with no separation between State, economic, or military intelligence. We find an example of this in Sun Zi's Art of War. Lack of separation between the political and the economic spheres continued much later, as in Machiavelli's Prince. (These two books are still used as primary literature in many courses on geopolitics and geoeconomics.) The first attempt to separate economics and political science in connexion with the study of geography was made in Germany, under the term Wirtschaftsgeographie (Haushoffer 1924: 1). This process of divergence has continued, to the point where there is no longer much politics left in the discipline of economics. In consequence that discipline has achieved a higher level of abstraction and specialization, but has simultaneously become less relevant as a body of literature to help us understand larger, more complex social issues. Another weakness in the modern discipline, from the perspective of economic reality, is that it systematically omits the power dimension. Current studies of economics and management show insufficient interest in who has most resources, how they use their resources, where they live, and how they think. These are vital data which have a significant effect on economic growth in general. But such information is often regarded as trivial, and left to more popular magazines, such as Forbes, Focus, or Le Nouvel Observateur. Academics view themselves and their work as something more significant, conducted at a higher level: they deal in theory. So we should not be surprised when their findings turn out to have little relevance for the world of economic reality. Every year hundreds of my students search for scientific papers relating to whatever practical problem they are studying. There are tens of thousands of articles out there, but they rarely seem to provide clear answers. Consequently there is a disjunction nowadays between economic theory and economic reality. Another consequence is that many economists prefer to gain their information about economic facts from magazines like The Economist rather than any of the 245 or so economics journals ranked by the ISI Web of Knowledge. The Economist has pitched upon a good mix of history, geography, politics, and real-life descriptions of economic phenomena, probably in large part because it was shaped by successful practical businessmen, such as the Rothschild family.

The situation of political science is even more problematic. Politics is impossible to understand without a proper helping of political realism. The biggest problem with political science lies in its over specialization, and in the fact that it has forsaken most understanding of economic realities, treating these as the domain of economics and international business. Political science has lost so much of this understanding of basic economic mechanisms that it seems no longer capable of explaining what makes a State strong or weak. Instead it occupies itself with "piecemeal social engineering": descriptions of organizational structures, party politics, and legal questions. As a result both subjects, economics and political science, have become weaker as disciplines, less able to understand and describe the reality we observe.

Geopolitics and geoeconomics recognize an obligation to keep these two dimensions in mutual contact, and that is very much appreciated by students and by practical men of affairs. Interdisciplinary lies at the heart of both subjects. Thus it is no surprise that courses in geopolitics have become highly favored subjects not only in military and naval academies, but at schools of political science, public administration, and business.68Harold Wilensky (quoted in Risen 2001) says that the greatest threats to the intelligence function are specialization, centralization, and hierarchy, in that order.

What kind of questions, then, are raised in the discipline of geoeconomics? On one hand there are economic and political issues, as discussed above. On the other hand there are the geo-questions, so often neglected. The real strength of geoeconomics first becomes apparent when we combine the two. To take some examples, the location of centralized capitals such as Paris and Moscow can be explained through the fact that many rivers lead to these places, providing both a safe haven, but more importantly a site for trade. Shanghai is located halfway along the Chinese coastline near the naturally-sheltered outlet of the third longest river in the world. Ultimately these patterns are so pervasive that it is hard to find exceptions: most of the larger human settlements on this planet result from considerations relating to natural resources and economic interests, which boil down to the search for competitive advantage, or simply the struggle to survive.

The location of Silicon Valley can be seen as a function of the sum of two great universities (Berkeley and Stanford) on the edge of a large urban community (San Francisco). The IT industry is a natural spin-off from an earlier centre of arms manufacture which was located in the same area (spin-off theory). Its success also results from the advantage of having being the first of its kind {first-mover advantage) within what has been among the most-developed meritocratic societies in the world. Thus it quickly grew into "the biggest game in town", attracting people from all over the world.

It has been suggested that even if many companies wanted to move out of Silicon Valley now, say because they received a better offer from somewhere else, perhaps Taiwan, it would not really be an option for them to move, because Silicon Valley companies have become so interdependent that tens of thousands of people would need to make the same decision at the same time for anyone to risk moving. No major company would want to be the first to move out (first-leaver disadvantage). The key people in Silicon Valley today may number between one and two hundred thousand. To move them you would need to move their families too, so several hundred thousand people in total. Thus we can speak of a social critical-mass theory. Once you have a certain mass you have a lasting advantage; when you start up with something new you establish yourself as a key player. It is more difficult to be number two or three. These theories are worked out through evolutionary thinking, by comparing social life to organic systems. These same ideas, if not the exact terminology and examples, can be found in writings on entrepreneurship by the Austrian economists Schumpeter and Drucker.

Quality of life is another important factor when companies relocate their headquarters or national offices. This means that developing science parks in itself is not enough. You need to develop an entire social infrastructure around them, including kindergartens, schools, a well-functioning health sector, entertainment, and so on, to attract the right people. These are what we sometimes call third-generation science parks. Many smaller cities and regions seriously overreach themselves by looking at the idea of establishing a science park from too narrow a point of view. Success is also very much a question of the type of competence you attract, which will set the standard for the organizational culture.

The value of social-science competence has been exaggerated in the Western world over the past decades. Other than the financial industry which we find concentrated in places like New York and London, there are not many economically-successful centers which are not founded on a local concentration of people with natural-science backgrounds. What is important is to export and to create export surpluses, preferably in high-value products. This is a lesson we used to understand in Europe, but which much of Europe has largely forgotten (though countries like Germany, Switzerland, the Netherlands, and Sweden are exceptions).

For a nation to guarantee its citizens a competitive education there are two pure strategies: either we educate them ourselves, by investing in universities and so forth, or we buy them in (persuade them to immigrate) from other places to teach our own citizens. Europe is a good example of an area that has followed the first strategy for generations, the USA is an example of the second. America has not only shown itself to be the best drainer of brains in world history, but it has even created the world's best universities through this practice. It is both a pull and a push approach. American institutions are on one hand actively searching abroad (push). At the same time ambitious individuals all over the world find their way to the US on their own, driven by the promise of wealth and happiness (pull). Their great universities are the result of two factors: large financial donations (money), and foreign students and researchers (brains). With money you buy the best brains. With a system of competitive entrance exams you attract the best students, who have the greatest potential to earn the most money, and so they give large donations in turn. Most of the foreign students come from Asia. In the near future Asian countries, especially China, will seek to build their own Harvards, Berkeleys, and Stanfords. According to the World Intellectual Property Organization, the number of Chinese patent filings increased by 33 per cent in 2007, almost four times the increase for the USA. The next thing will be that China will wish to keep its best brains and their money at home, so as to invest more in their own society. When that happens, as we are starting to see now, it will signal the onset of a sharp decline in American competitive advantage, since the USA has been particularly dependent on scientists coming in from abroad. American high-school students are already among the weakest in the Western world in the natural sciences. The standard of mathematics among high-school students in the state of California is the third lowest in America.

Questions related to what we might call "regional knowledge management" are crucial for any State or city hoping to create a science or industrial park, but the same techniques can also be applied to smaller projects, for instance to the development of a new shopping area. There is no guarantee that a good shopping precinct will succeed just because it lies within a populated area. It must also match the tastes and needs of those who live there. The main difference is that this latter issue can be treated as a segmentation problem within the discipline of marketing (that is, at the micro level), whereas the former is an issue at the macro level, hence more relevant to the discipline of geoeconomics.

Perhaps because of its close association with matters of location, geoeconomics - often spelled "geo-economics"- is taken by some, particularly in the USA, to mean area development. Area development is about everything from the development of research complexes and research/science parks to location of airports (Conway 1994: 5). In this book, however, we use geoeconomics in its macro or broader meaning as a discipline which has developed as an offshoot of geopolitics. This is what the word means in Continental Europe.

Geopolitics is traditionally linked to variables of ethnicity, country, religion, and language : slowly-changing variables. Geoeconomics is more linked to rapidly-changing variables, particularly technological change and developments in commerce. These different relationships to the notion of change can lead the two disciplines to contrasting conclusions. As an example, let us look at some of the arguments used in the current debate about Turkish membership of the European Union.

Geopoliticians often suggest that the Turks cannot belong to the EU because they are a Seljuk tribe of Mongol origin, thus very unlike us Europeans in many respects (historical premise no. 1, P1).

They are Muslims (P2), and have been at war or in confrontation with Europe and European interests for most of the time since they first invaded Anatolia some thousand years ago, until the fall of Constantinople in 1453, and then much later, the decline of the Ottoman Empire (P3).

Therefore they cannot possibly join the EU (conclusion, C).

Furthermore, Roman Catholics (especially in Bavaria) and Greeks would not accept their joining (P4). Nor would the French (P5). Leftist groups would not accept it either, since they argue that Turkey systematically violates human rights, and suppresses its Kurdish minority- to say nothing of women's rights (P6).

The logic of geoeconomics however tends to follow a different line of reasoning, less focused on ethnic origin or political ideology. From a geoeconomic perspective what matters is first of all economic performance. If Turkey is now in a position to negotiate for EU membership, officially this is because of certain political changes in the region, which has achieved greater stability, development,72 and fairness;73 so that the important considerations are economic. Arguments about ethnicity, religion, or historical conflicts are really secondary. With a population of 71 million, Turkey will constitute the second largest market in the EU after Germany. With a GDP of about 800 billion dollars in 2008, the Turkish economy is already as strong as that of the Netherlands. They are the thirtieth largest exporter in the world (behind India, Switzerland, Austria, and the Czech Republic at ranks 26 to 29 respectively). Also, Turkey has a young population, which might help improve Europe's low birth-rate statistics. And the Turks are an energetic people, not afraid of work. In short, and since the country does not insist on large agricultural subsidies a la France or Poland, from an economic point of view there are strong arguments to suggest that Turkey will make a positive contribution to the economic strength of the EU. Therefore, given that they are capable of implementing EU directives, it makes sense to include them in the Union (conclusion, C2).

Turkey has also made considerable advances on the political level, introducing free elections and giving greater freedom to its citizens, despite a number of military coups and a strong and nervous military establishment which is always ready to seize power and defend the secular tradition of Ataturk. If Turkey can comply with the social and political criteria set by the EU, it seems likely that it may become an EU member eventually. The controversy over Cyprus is solvable. (Greece is not particular popular now in any case.) Besides, having Turkey safely within our camp would make aggressive moves by a new Russian superpower less likely. But the Turks would need to give up their close military co-operation with the USA, and demonstrate that they can keep religion separate from politics. If these conditions can be satisfied, though, time will work in favour of Turkish membership. Globalization will take care of the rest. Already it is difficult to see a difference between the youth of Turkey and, say, Italy. They listen to the same music, laugh at the same sitcoms, and eat the same junk food. It will only take one generation for them to be sitting opposite one another at the negotiating table and discovering how much they have in common.

What we are seeing in Turkey and elsewhere is that economics is bringing about the change which politics and political ideologies in the twentieth century failed to accomplish: it is bringing together people with different backgrounds, raising their standard of living and, in turn and over time, ensuring them a minimum of human rights. Thus the market economy has shown itself to be an accelerator not only of human evolution, but also of social justice and continuing technological progress. New technology is in turn changing our human condition and our behaviour. In the forefront of these new developments lie discoveries in nanotechnology, the neurosciences, and biology in general (Kurzweil 2005).

Never before in history have the forces which make us human beings resemble one another been as strong as they are today. The main causes for this are mass distribution of popular culture and the implementation of new technology. For better or worse, much of the youth of today are growing up with a common frame of reference, composed of bits and pieces from films, music, and sports - culture as represented by Walt Disney, Britney Spears, or David Beckham. The Greek tragedies, Shakespeare's sonnets, Byron's plays, the poems of Alfred de Musset, the novels of Goethe are no longer essential reading for the new economic elites, whose sole virtue is that they have demonstrated that they can make money, for others and for themselves. If this is what it takes to bring about sustainable peace, then so be it. We shall have to comfort ourselves with the hope that the tradition of Bildung will somehow survive, even if confined to a smaller circle.

More people from different cultures are forming families, too. Thanks to faster and cheaper transport and telecommunications, young couples from all over the world are finding each other and falling in love in numbers that would have been unimaginable to the flower-power generation only four-five decades ago. Over time, provided we can maintain our standards of living, this will lead to a more mixed and possibly to a more tolerant world population. The growing incidence of terrorist attacks might set this development back in the immediate future, but unless something goes drastically wrong it is not likely to alter the general direction of our social evolution.

We might see counter-reactions. Thus, some ethnic groups are beginning to feel threatened, or even fearing that they could be in danger of disappearing. Consequently there is a debate about the value of ethnic diversity. It is also uncertain whether the large-scale experiments in multiculturalism which we are seeing unfold in major cities of the Western world today, such as London, Amsterdam, and Paris, will succeed economically. Immigrants are still over-represented in statistics of unemployment, social welfare, and crime. It may be that the majority of these outsiders will be better integrated and assimilated into our societies tomorrow, so that what we eventually end up with will be not a mixed and segregated society but a new and more vital society. Such processes of assimilation have already succeeded many times throughout history. Thus, the original Swedish culture was very different from what we see in Stockholm today, which is also a mix of predominantly German and French people and cultures. Traces of the original Swedish culture can still be found in the deepest parts of Dalarna, where they speak a dialect closer to Icelandic. But to say that it would have been better for Stockholm and Sweden if the old culture had been preserved makes little sense today. Sweden has turned into something else, something new. It makes little sense biologically either, as the mix of ethnicities has produced a more diverse and thus a stronger gene pool.

The world is continually changing, and Man is the major player in this process. He knows now that he himself is the evolutionary motor of his own creation. Our advances in the natural sciences are increasing this awareness.

To get an idea of the speed with which culture is changing, look at mural painting in the Mediterranean basin between 30,000 and 5000 BC. Notice how little this art changed over all that time. Then look at the development in the arts over the past 500 years since the Renaissance. It is like an explosion. Archaeological museums are another excellent source of support for same point, if we compare artifacts made before the time of the Ancient Greeks with what came after the Indo-Europeans flooded into the European peninsula some 20,000 years ago. When we learned to smelt iron, there was a great leap forward in manufacture of novel objects, setting off a chain reaction of new discoveries and inventions. It is only about a decade since we discovered how to map Man's DNA, and the consequences of this promise to be at least as important as the discovery of iron. With this technology we will be able to identify potential diseases and create cures tailored to the individual. This suggests that the changes to come will be even greater than the ones we have seen.

On the other hand, it is increasingly clear that progress in the natural sciences has become a solution and a problem at the same time. Left uncontrolled, science will lead to a countdown for Mankind's very survival, as the current environmental situation on our planet reminds us. We can also foresee people creating and spreading devastating biological weapons. Controlled, science may help to bring us closer together, if not always peacefully. Peace will have to be fought for every day, and there will be no end to conflict. Progress in the sciences will not lead to a utopian state where competition and the struggle for power will fade away. Instead we must continue to look for ways to manage these factors. What we need is a well-balanced, stable political system under which politics and business go hand in hand.

In this evolutionary race the businessman can be compared to a horse, and the elected politician to a rider. Society is the cart, and it is built on our values and virtues. In the cart are placed inventions that will make our lives better. If there is one thing that history has taught us, it is that the horse must be placed in front of the cart for it to move forward. That is, private, selfish initiatives should be welcomed, but must be controlled. Of all men, the businessman shows greatest initiative. He is the one in the most vulnerable, challenging situation on the top of the heap. He cannot get off. He cannot stop moving: he must advance, or he will fail. That is his destiny. In return for this hardship, he must be allowed certain favours, which nowadays chiefly take the form of material wealth. This seems to be the content of our new social contract.

Ever since Watt invented the steam engine in 1769 the curve of human technical evolution has grown ever steeper, and nothing at present is set to stop it or slow it down. As Gregory (1967: 5) puts it:

The slope is ever steeper but has no crest

The climb is ever harder but has no end

The view is ever widening but not quite enough

Man is forever doomed to achieving but not arriving

As human beings we have to take part in this race, or we will risk feeling disillusioned and isolated. But we also need to understand what is happening. We need a more pragmatic framework for the social sciences, allowing them to better explain to us what is happening. We need a broader understanding of human behaviour, which can incorporate change as an explanatory variable, and can reintroduce the power dimension into the equation.

What I have suggested in this book is that we should start to look for answers by using simple observations, bold syntheses, practical logic, and the study of biology, in place of today's combination of physics, mathematics, and equilibrium theory. To see where things went wrong it is not enough to study the rise of empiricism under John Locke and the subsequent spread and dominance of mathematical analytic methods in the social sciences in the twentieth century. We also need to understand how and why post modernism and French theory have imposed themselves on the current social-science paradigm. In the post modernists' own words, we need to deconstruct deconstructionism.

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