Welcome to the New Age of Geoeconomics

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Your guide on what Trump’s second term for Washington, Business and the World means

Last weekend in Washington, near the White House, dozens of economists from universities and institutions like the IMF met to discuss the state of “Geoeconomics”.

Geo-What? Some readers may ask them. It is not strange: until recently, this word was poorly used, as it appeared in disagreement with modern rules.

This is because the phrase describes how governments can use economic and financial policies to play power games. But in the free market intellectual framework of the 20th century, which is what most western professionals built their career, it was generally assumed that the rational economic interest has governed politics, not politics. Politics seemed to be derived from the economy, not the other way around.

No longer. The trade war triggered by the President of the United States, Donald Trump, has shocked many investors, as it seems so irrational to the standards of the neoliberal economy. But “rational” or not, it reflects a change to a world where the economy has taken second place in political games, not only in America, but in many other places.

So universities like John Hopkins, Dartmouth, As And Stanford seeks to expand their “geoeconomics” programs (with the latter using Automatic learning For this goal), along with entities Like the IMFthe Milken Institute and Atlantic Institute. And Dane Alivarius, a former United States Treasury Officer, so is Now instant companies To create a new role of “CGO” – or officer of geopolitics – “to browse the increasingly blurred lines between trade and statistical driving” where “the referees (that is, the governments) have changed the rules”.

It is not clear if companies will really adopt this idea. Meanwhile, investors and business leaders would do well to notice five key points about this geoeconomics debate.

First of all, this phenomenon is not simply a man (Trump), but rather marks a much greater turmoil in intellectual Zeitgeist, a kind we have seen a few times earlier.

One of these changes took place just over a century ago, when the globalist and imperialist view of capitalism, which reigned before the First World War, was displaced by nationalist policies and protectionists. Another arrived after World War II, when the Keynesian economy took place. Then, in the 1980’s, free -market neoliberal ideas displaced Keynesianism.

The fact that the intellectual pendulum will again swing to the more nationalist protectionism (with a dose of military Keynesianism), thus conforms to a historical pattern, although few predicted that the swing would take this form.

Secondly, an important facet of this Zeitgeist change is that governments are no longer “fair” focused on the absolute well -being of their country, but on their relative positions. This distinction may seem subtle. But it matters deep, as A document co -authored by Aaditya Maddoo, A World Bank economist, along with Michele Route and Robert Staige, explains.

This is because a mentality of “absolute well -being” supports commercial cooperation, but reveals “if rivalry eclipse some consideration of the well -being of the country itself,” say the authors. Trump’s angry rhetoric over “torn” competitors in America, that is, reflects a greater mental change.

Third, a (obvious) factor behind this rivalry is that China now challenges the current United States rule. This pattern has often been seen before, such as Ray Dalio, the Hedge’s background, notes in a Provocative next book. Investors also need to keep in mind that Dalio suggests that this conflict is rarely resolved or, except when there is a debt cycle involved.

Fourth, as the United States and China resort to geoeconomic strategies, other countries follow demand in response. Just look like The European Central Bank is competing to develop a digital euroSaudi Arabia is developing its own pile of technology, or Japan uses its treasury farms As a “card” in commercial conversations. This means that technology, trade, finance and military policies are mixed so that they are not seen during the neoliberal period.

The fifth and finally, industrial policy has returned. This started in America with President Joe Biden. But Trump is duplicating, with rates. To understand -look at a Calling new book convene Industrial Policy for the United States By Marc Fasteau and Ian Fletcher, two economists estimated by the multitude of magic. They champion the rates, but also emphasize the need for other industrial policies, citing South Korea, Japan, China and Germany as examples for emulating.

It is unclear if Trump will follow his advice. But what is clear is that there is increasing acceptance in the United States that the government should form trade in the national interest. This invariably produces regions like Europe to follow the same.

All this will horrify many observers, particularly those proposed at that neoliberal age. But do not wait for the intellectual pendulum to become soon, even if the US reduces some commercial offers, such as Dan Ivascyn de Pimco Notes, Trump’s love for the rates is used. For better or for worse, we must all learn to navigate through geoeconomics. We cannot just want it.

gillian.tett@ft.com