In 2024, at a G20 session during Brazil's presidency, a senior Brazilian financial official asked Atlantic Council's Josh Lipsky to explain what "geoeconomics" meant. Lipsky described it as the combination of finance and national security. The Brazilian official paused and replied: "Oh. Here in Brazil, we just call that policy."
That exchange, recounted in the IMF's Finance & Development magazine, June edition, may be the most honest sentence in the entire issue. Today, the word geoeconomics has resurfaced in such forums as if it is a new phenomenon. In reality, powerful nations have always used it in disguise. Now, they are doing it openly as the fault lines of the old order crack. However, the hegemons - the US and China - are choosing disruption over repair, making the world volatile.
Chokepoint Politics
One of the most pragmatic pieces in the IMF issue was written by Christopher Clayton, Matteo Maggiori, and Jesse Schreger. Their central argument is simple: geoeconomic power comes from controlling "choke points". If countries depend too much on one country, for example, then it is easy for that country to leverage its position. That's called a hegemon. In the post-war period, the US assumed this status.
But they also caution that overusing this power is self-defeating. It drives other nations to seek alternatives. In recent times, we have seen this play multiple times. Russia started preparing itself for reducing its dollar dependence after it annexed Crimea in 2014. That helped sway the sanctions after the attack on Ukraine. Similarly, after the Hormuz crisis, countries like India have started diversifying crude oil suppliers.
The hegemonic shield is intact until alternatives exist. But once other countries start building them, that becomes a threat to its throne. For instance, China's success in new technologies and yuan-based international payment settlement has threatened US autonomy in these fields.
Now, someone may say that China is still not that powerful. It accounts for a fraction of global payments, for instance. But that's wrong. Market share alone doesn't matter for power. There is a difference between macroeconomic relevance and geoeconomic relevance. A modest alternative can still weaken a choke point. They add, "When one country reduces its reliance on the global system, the system itself becomes less attractive to others..."
Despite its contradictions, the US benefited from the ideological appeal of democracy, openness, and the rule of law, which gave its dominance legitimacy even among critics. China lacks that advantage. Countries may rely on Chinese manufacturing and welcome its investment, but they are likely to scrutinise its influence more closely going ahead. The old saying, "With great power comes great responsibility", applies to the hegemonic power too because trust is a main factor in international relations.
Different Ways of Seeing World
The IMF repeatedly argues that geoeconomics has returned. That's true only for the US and Europe. For the Global South, it never left.
The Bretton Woods institutions, such as the IMF and the World Bank, the dollar's role as the world's reserve currency, and the financial architecture built around it were not merely economic arrangements. That was geoeconomics.
In the 1980s and 1990s, these institutions pushed liberalisation, privatisation, and globalisation across much of the developing world. Many countries, including India, gained faster growth, lower poverty, and a more dynamic private sector. But the process was not politically neutral: advanced economies often kept their own subsidies and protections while preaching openness abroad, and these institutions rarely challenged them as forcefully.
Former Foreign Secretary Vijay Gokhale offers an interesting perspective on the Puliyabaazi podcast. He argued that Western thinking around war and peace is often binary. That philosophy is embedded in their economic, foreign, and security policies. For most Asian countries, it works differently. The absence of war does not necessarily imply peace. For example, India and China continue to experience border tensions, but the trade remains substantial and diplomatic engagement also continues.
This ability to see and separate components helps explain why many countries in Asia, Africa, and Latin America approach today's geopolitical crisis differently. Economic ties are not necessarily viewed as endorsements of another country's political behaviour.
Final Take
As former MP N.K. Singh argues in another article in the same IMF issue that flexible and issue-based coalitions may benefit middle powers in a more fragmented world.
However, they still depend on Western capital markets, Gulf crude oil and Chinese manufacturing ecosystems, leaving them vulnerable to capital flight, supply disruptions, and external shocks. The more honest response to structural vulnerability, at least for India, is to deepen domestic capabilities in manufacturing, education, institutional trust, and long-term thinking.
Stepping back, a world that puts national security ahead of efficiency will likely be more inflationary. As countries reshore production, duplicate supply chains, and prioritise resilience over cost, prices will rise, and nationalisation will also increase.
Let's brace for the impact.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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