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Economic Statecraft
A nuclear world desperately in need of alternatives to military force demands better understanding of all techniques of statecraft. In this book David Baldwin draws on social power analyses to develop an analytic framework for evaluating such techniques, and uses it to challenge the conventional view that economic tools of foreign policy do not work.
Integrating insights from economics, political science, psychology, philosophy, history, law, and sociology, this comprehensive work discusses not only the utility of economic statecraft but also its morality, legality, and role in the history of international thought. It will help statesmen, scholars, and citizens to evaluate crucial foreign policy choices.
Integrating insights from economics, political science, psychology, philosophy, history, law, and sociology, this comprehensive work discusses not only the utility of economic statecraft but also its morality, legality, and role in the history of international thought. It will help statesmen, scholars, and citizens to evaluate crucial foreign policy choices.
424 pages, Paperback
First published January 1, 1985
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Displaying 1 - 6 of 6 reviews
February 1, 2025
Published in 1985, "Economic Statecraft" attempts to answer what is perhaps the most important question for strategists in the federal government: how should we evaluate the effectiveness of economic statecraft (i.e. tariffs) in comparison to military, diplomatic, or informational actions?
Offering a first step to evaluate the effectiveness of various economic measures, this book aims to provide an analytical framework for evaluation, with the goal of helping policy makers to better understand economic policy decisions in foreign affairs.
Although some of Baldwin's conclusions seem basic (there are often multiple goals associated with an economic policy, rather than just one), I appreciate the difficulty of comparing apples with oranges (how does one compare the costs/benefits or a military invasion vs an economic sanction?).
I am also very interested in taking Baldwin's framework and applying his analysis of economic statecraft in the context of the defense industrial base and military mobilization. Although the author strives to differentiate these various forms of statecraft, they also blend and overlap in important ways that warrant more analysis.
Offering a first step to evaluate the effectiveness of various economic measures, this book aims to provide an analytical framework for evaluation, with the goal of helping policy makers to better understand economic policy decisions in foreign affairs.
Although some of Baldwin's conclusions seem basic (there are often multiple goals associated with an economic policy, rather than just one), I appreciate the difficulty of comparing apples with oranges (how does one compare the costs/benefits or a military invasion vs an economic sanction?).
I am also very interested in taking Baldwin's framework and applying his analysis of economic statecraft in the context of the defense industrial base and military mobilization. Although the author strives to differentiate these various forms of statecraft, they also blend and overlap in important ways that warrant more analysis.
December 5, 2008
David Baldwin cleverly addresses the issue of determining whether economic statecraft is working in his book Economic Statecraft. His chapter on ‘National Power and Economic Statecraft’ suggests a more nuanced and sophisticated metric for judging whether economic statecraft works. Instead of examining only whether the target acquiesced to the demands of the coercer, Baldwin suggests that the costs of the chosen policy should also play a role in deciding on a course of action. In effect, Baldwin argues that leaders, when considering imposing sanctions, should weigh their own utility as opposed to the objective effectiveness of the economic statecraft (Baldwin, p.119). For example, as Baldwin notes, it might be the case that military force is more effective in coercing a target than economic sanctions but that the costs are also prohibitively high. In such a circumstance, the utility of imposing sanctions is higher than the alternative (Baldwin, p.121-3). Indeed, such a comparison is crucial because every policy adopted (or not adopted) by a decision maker has opportunity costs and the policy maker aims to maximize his utility. This metric for judgment is quite different from the one considered by Pape and Elliot, which only looks at whether target states acquiesce to coercers. This new conceptualization of how to judge the efficacy of economic statecraft does add value to prescribing how policymakers should act when considering its use, however, it is problematic in a variety of ways.
First, Baldwin takes his argument too far when arguing that the effects of economic statecraft can be gradual and hard to discern. He is certainly correct when he claims that, ‘The “low politics” of economic exchange may not be very noticeable on any given day; but over the long haul, it is one of the most important influence mechanisms in the world,’ (Baldwin, p.118). However, he takes this difficulty in discernment into the territory of non-falsifiability when discussing the effects of economic statecraft on target states. He claims that, ‘Increased costs are political effects. Not all influence is manifest in terms of changes in policy; changes in the costs of noncompliance also constitute influence,’ (Baldwin, p.133). First, by asserting that economic statecraft is having an effect even when one cannot see the effects makes it impossible to disprove and therefore poor social science. Second, even if it were the case that the costs were having political effects and one could not see them, it does not follow that these costs are important in evaluating how a target state will respond to economic coercion. For example, say that the United States decides to embargo almond imports from North Korea in order to coerce the North Koreans to give up their nuclear program. Though Baldwin might be right that there are some costs to the North Koreans, because almond production is so trivial in North Korea, discussing it in terms of tangible costs that might play any role in coercing the North seems immaterial. Rather, when discussing whether or not economic coercion has political effects, it is necessary to actually see those political effects occurring. Anything short of that is either non-falsifiable, unimportant, or both.
The second critique is that Baldwin’s conceptualization refocuses the debate away from arguably the most crucial issue at hand – determining the circumstances under which states will respond to coercive economic statecraft. When estimating the utility of a sanctioning action, one needs to know whether the targeted state is likely to acquiesce or not. For example, if one is deciding on how to stop the Iranians from acquiring nuclear weapons, it is necessary to estimate whether a particular action has any chance of causing them to stop the development. It is possible that an action has low cost but no chance of success whereas another action has a moderate chance of success while a very high cost. In such a situation, the policymaker’s highest utility would be the second option. However, Baldwin’s discussion does not help us in determining when the target country would be more or less likely to acquiesce and therefore cannot get us very far in terms of prescription.
First, Baldwin takes his argument too far when arguing that the effects of economic statecraft can be gradual and hard to discern. He is certainly correct when he claims that, ‘The “low politics” of economic exchange may not be very noticeable on any given day; but over the long haul, it is one of the most important influence mechanisms in the world,’ (Baldwin, p.118). However, he takes this difficulty in discernment into the territory of non-falsifiability when discussing the effects of economic statecraft on target states. He claims that, ‘Increased costs are political effects. Not all influence is manifest in terms of changes in policy; changes in the costs of noncompliance also constitute influence,’ (Baldwin, p.133). First, by asserting that economic statecraft is having an effect even when one cannot see the effects makes it impossible to disprove and therefore poor social science. Second, even if it were the case that the costs were having political effects and one could not see them, it does not follow that these costs are important in evaluating how a target state will respond to economic coercion. For example, say that the United States decides to embargo almond imports from North Korea in order to coerce the North Koreans to give up their nuclear program. Though Baldwin might be right that there are some costs to the North Koreans, because almond production is so trivial in North Korea, discussing it in terms of tangible costs that might play any role in coercing the North seems immaterial. Rather, when discussing whether or not economic coercion has political effects, it is necessary to actually see those political effects occurring. Anything short of that is either non-falsifiable, unimportant, or both.
The second critique is that Baldwin’s conceptualization refocuses the debate away from arguably the most crucial issue at hand – determining the circumstances under which states will respond to coercive economic statecraft. When estimating the utility of a sanctioning action, one needs to know whether the targeted state is likely to acquiesce or not. For example, if one is deciding on how to stop the Iranians from acquiring nuclear weapons, it is necessary to estimate whether a particular action has any chance of causing them to stop the development. It is possible that an action has low cost but no chance of success whereas another action has a moderate chance of success while a very high cost. In such a situation, the policymaker’s highest utility would be the second option. However, Baldwin’s discussion does not help us in determining when the target country would be more or less likely to acquiesce and therefore cannot get us very far in terms of prescription.
October 28, 2012
Baldwin provides a different insight into the role of economic power in the conduct of foreign policy. By differentiating between ends and means, Baldwin argues that "economic statecraft" refers to the type of policy instrument used, not the effect that it is intended to have. Put differently, it is the use of a nation's economic power to influence the decision making, not the economics, of another state. This is an important distinction.
Moreover, the effectiveness of the employment of power (economic or otherwise) should not be assessed solely on whether a rival adopted a particular policy; rather, it is how the policy adopted affected the cost-benefit calculus of the rival that is most relevant.
Finally, in assessing the costs involved in pursuing a particular policy you must look to more than simply the financial impost. Cost refers to "value forgone". Of course this includes a financial dimension, but it must also account for lives, moral authority and reputation, factors that are not easily quantifiable. It is therefore difficult to make an objective assessment of the costs of different policy. What this means is that assessments of the failure of economic foreign policy initiatives cannot simply be assessed as successes or failures, rather they must be assessed against measures of utility and effectiveness.
Overall, this book provides some food for thought when assessing foreign policy alternatives, not only economic but covering all the instruments of power.
Moreover, the effectiveness of the employment of power (economic or otherwise) should not be assessed solely on whether a rival adopted a particular policy; rather, it is how the policy adopted affected the cost-benefit calculus of the rival that is most relevant.
Finally, in assessing the costs involved in pursuing a particular policy you must look to more than simply the financial impost. Cost refers to "value forgone". Of course this includes a financial dimension, but it must also account for lives, moral authority and reputation, factors that are not easily quantifiable. It is therefore difficult to make an objective assessment of the costs of different policy. What this means is that assessments of the failure of economic foreign policy initiatives cannot simply be assessed as successes or failures, rather they must be assessed against measures of utility and effectiveness.
Overall, this book provides some food for thought when assessing foreign policy alternatives, not only economic but covering all the instruments of power.
November 1, 2012
I very much enjoyed the author's insights regarding the conventional wisdom of economic statecraft (which includes more than sanctions!). Bottom line, traditional analysis seems to do a poor job of measuring its impact. The real value of economic statecraft is its cost/benefit in relation to alternative courses of action. Measuring the dollar-impact of a given action on another state ignores that a) it may still have given the decision maker the best bang for the buck or greatest value, and b) economic impact, even if it were sought in a given scenario, is merely the intermediate aim. The final, or ultimate aim of any given policy or statecraft is influencing another state, which in many cases, may be hard to measure.
April 23, 2015
A must read! Provides an excellent evaluation criteria and lots of food for the brain. Fails to provide a sound alternative, though, rather only a critical framework.
Displaying 1 - 6 of 6 reviews