What gives a country real power? Is it the strength of its military, its alliances, or its control over financial systems?
“I think of geoeconomics as essentially that middle ground between really expensive threats — like the threat to invade a country or to start a war — and purely soft arguments,” says Matteo Maggiori, the Moghadam Family Professor of Finance at Stanford Graduate School of Business.
A form of economic statecraft, geoeconomic activity has driven global political dynamics for centuries. Today, it’s the United States that plays a dominant role.
“If you think about the world financial system, it’s very U.S.-centric,” Maggiori says. “Particularly when it comes to infrastructure, like payment systems or the clearing of transactions and payments, there isn’t really a viable alternative that the U.S. doesn’t either own or indirectly control.”
Developing alternatives to U.S.-controlled systems isn’t straightforward.
“Countries like China… would like to build their own infrastructure,” Maggiori says. “But it’s a very slow process.”
In an increasingly multipolar world, the United States and China aren’t the only powers competing in this global game. Geoeconomics is a lens through which we can analyze how nations wield financial influence broadly, as well as understand the impact of their jostling on business, society, and international stability.
“These things have real consequences for the welfare of countries and the people who live in them,” Maggiori says.
How is economic power shaping our present — and future?
