Has economic power replaced military might?
June 6th, 2011
10:19 AM ET

Has economic power replaced military might?

Editor's Note: Dr. Joseph S. Nye is a professor at Harvard and author of The Future of Power.  For more from Nye, visit Project Syndicate's website, or check it out on Facebook and Twitter.

By Joseph S. Nye

At the Cold War’s end, some pundits proclaimed that “geo-economics” had replaced geopolitics. Economic power would become the key to success in world politics, a change that many people thought would usher in a world dominated by Japan and Germany.

Today, some interpret the rise in China’s share of world output as signifying a fundamental shift in the balance of global power, but without considering military power. They argue that a dominant economic power soon becomes a dominant military power, forgetting that the United States was the world’s largest economy for 70 years before it became a military superpower.

Political observers have long debated whether economic or military power is more fundamental.  The Marxist tradition casts economics as the underlying structure of power, and political institutions as a mere superstructure, an assumption shared by nineteenth-century liberals who believed that growing interdependence in trade and finance would make war obsolete. But, while Britain and Germany were each other’s most significant trading partners in 1914, that did not prevent a conflagration that set back global economic integration for a half-century.

Military power, which some call the ultimate form of power in world politics, requires a thriving economy. But whether economic or military resources produce more power in today’s world depends on the context. A carrot is more effective than a stick if you wish to lead a mule to water, but a gun may be more useful if your aim is to deprive an opponent of his mule. Many crucial issues, such as financial stability or climate change, simply are not amenable to military force.

Today, China and the U.S. are highly interdependent economically, but many analysts misunderstand the implications of this for power politics. True, China could bring the U.S. to its knees by threatening to sell its dollar holdings. But doing so would not only reduce the value of its reserves as the dollar weakened; it would also jeopardize U.S. demand for Chinese imports, leading to job losses and instability in China. In other words, bringing the U.S. to it knees might well mean that China would bring itself to its ankles.

Judging whether economic interdependence produces power requires looking at the balance of asymmetries. In this case, it resembles a “balance of financial terror,” analogous to the Cold War military interdependence in which the U.S. and the Soviet Union each had the potential to destroy the other in a nuclear exchange. In February 2010, a group of senior Chinese military officers, angered over U.S. arms sales to Taiwan, called for China’s government to sell off U.S. government bonds in retaliation. Their suggestion was not heeded.

Economic resources can produce soft-power behavior as well as hard military power. A successful economic model not only finances the military resources needed for the exercise of hard power, but it can also attract others to emulate its example. The European Union’s soft power at the end of the Cold War, and that of China today, owes much to the success of the EU and Chinese economic models.

Economic resources are increasingly important in this century, but it would be a mistake to write off the role of military power. As U.S. President Barack Obama said when accepting the Nobel Peace Prize in 2009, “We must begin by acknowledging the hard truth that we will not eradicate violent conflict in our lifetimes. There will be times when nations – acting individually or in concert – will find the use of force not only necessary but morally justified.”

Even if the probability of the use of force among states, or of threats of its use, is lower now than in earlier eras, the high impact of war leads rational actors to purchase expensive military insurance. If China’s hard power frightens its neighbors, they are likely to seek such insurance policies, and the U.S. is likely to be the major provider.

This leads to a larger point about the role of military force. Some analysts argue that military power is of such restricted utility that it is no longer the ultimate measuring rod. But the fact that military power is not always sufficient to decide particular situations does not mean that it has lost all utility. While there are more situations and contexts in which military force is difficult to use, it remains a vital source of power.

Markets and economic power rest upon political frameworks, which in turn depend not only upon norms, institutions, and relationships, but also upon the management of coercive power. A well-ordered modern state is one that holds a monopoly on the legitimate use of force, and that allows domestic markets to operate. Internationally, where order is more tenuous, residual concerns about the coercive use of force, even if a low probability, can have important effects – including a stabilizing effect.

Indeed, metaphorically, military power provides a degree of security that is to order as oxygen is to breathing: little noticed until it becomes scarce, at which point its absence dominates all else. In the twenty-first century, military power will not have the same utility for states that it had in the nineteenth and twentieth centuries, but it will remain a crucial component of power in world politics.

The views expressed in this article are solely those of Joe Nye. Copyright: Project Syndicate, 2011. For a podcast of this commentary in English, click here.

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Topics: China • Economy • Military • Strategy • United States

soundoff (39 Responses)
  1. Ai

    Economy versus military seems just as controversial as the chicken versus the egg. I do not see how either could be considered obsolete. Money is clearly one source of power that could keep national and international power flowing well, but we cannot rule out the possibility that new terrorist criminals could reappear just as rapidly as when the World Trade Center was assaulted. If there is something to be recognized in the way of economy and military is that they are both controlled by politics. Assuming that there is still a near-perfect balance of the GOP and Democrats in congress, could it be possible that economics are America's pride as of now and the future?

    June 6, 2011 at 10:56 am | Reply
    • j. von hettlingen

      I partially agree with you! Joseph Nye has missed a point: "Political observers have long debated whether economic or military power is more fundamental. The Marxist tradition casts economics as the underlying structure of power". Pakistan is a contradictory case. It's a poor and grief-stricken country, yet it has nuclear capabilities.
      Again Nye said, "an assumption shared by nineteenth-century liberals who believed that growing interdependence in trade and finance would make war obsolete". There was an exception, Saddam invaded its close neighbour Kuwait 1991.
      Later Nye said, "This leads to a larger point about the role of military force. Some analysts argue that military power is of such restricted utility that it is no longer the ultimate measuring rod. But the fact that military power is not always sufficient to decide particular situations does not mean that it has lost all utility".
      Quite right! We are seeing NATO shelling Tripoli night after night. Cameron and Sarkozy want to terrorise the population there, which ultimately would lead to an implosion and the downfall of Gaddafi's regime. Jet fighters and drones didn't seem to have worked. Now attack helicopters are used in order to achieve their goal. We will see whether they are useful.

      June 6, 2011 at 6:17 pm | Reply
      • MC in TX

        Pakistan is not a military power. Having a few doomsday weapons which theoretically allow you to play a little brinkmanship is not the same as being a military power.

        But you are right that trade is not guaranteed to stop wars (though you are oversimplifying).

        June 7, 2011 at 1:45 pm |
  2. MiT

    Lets see if this all holds water and which country will be willing to forsake Dollars or Yuan, once China goes from being a regional millitary power to a global super power. When China improves its abilities to deploy its military might, stand the F**K by.

    June 6, 2011 at 11:50 am | Reply
    • Common Sense

      Okay they become a military super power, just who in the hell will they attack? Even the Mafia found out that shooting your debtors get old real fast, it's bad for business so China attacking the U.S. is out plus they would have just as much to lose if not more for attacking us. Russia forget it the land mass is just as big as China. So who's left, India don't make me laugh, Pakistan, another joke. Military is only as good as the money is there to run it.

      June 6, 2011 at 5:23 pm | Reply
      • Tomtom

        they will begin by attacking numbskulls such as yourself..then they will take manhattan. After that, instead of taking berlin, they will take the world instead.

        June 7, 2011 at 5:17 am |
      • john/kc

        People will support more military spending as long as there is money left over for things like education, roads, bridges, health care for the elderly and poor. When these items start to being cut for billion dollar jets, and all the other pet military projects that are in the pipeline, then you have resistance from the electorate like you are getting now. Really, do we need to spend more on the military than all the countries of the world combined, I think not. Do we need all these bells and whistles? Do we need a new military rifle ever 7 or 8 years when the old design works very well at killing people. How long has the AK-47 been killing people, and it has not been changed. We waste much money, different uniforms, just throw the old ones away, replace the army 45 design with an import. Really.

        June 7, 2011 at 12:40 pm |
      • solarenergy

        Hi, I donot think China likes wars even it becomes Super power they had seen too much wars in their past. Remember they invented the fire works for celebrations in their Cinese New Year not for wars but others used iit n negative ways. By the way I am not Chinese. But I support non-violence resolution.

        June 8, 2011 at 3:06 am |
  3. GOPisGreedOverPeople

    GOP solution = Turn the Old, Sick, Homeless, and Poor people into slaves. Then whip them until they are Young, Healty, Sheltered, and Rich. Or until they are dead. Then turn them into Soylent Green to feed the military.

    June 6, 2011 at 12:10 pm | Reply
    • Onesmallvoice

      Very well said,GOPisGreedOverPeople. Thank you.

      June 6, 2011 at 7:08 pm | Reply
    • Nelba

      Wrong forum!

      June 7, 2011 at 12:10 pm | Reply
  4. Nadim

    U can't strengthen military without money

    June 6, 2011 at 1:29 pm | Reply
    • john/kc

      Are we to defend the world in this day and age? Defending the world with hundreds of military bases overseas is just sending all of us to the poor farm. Can we really afford to defend Korea or Japan when they have the means to defend themselves? How much money do we spend just on bases, soldiers, navy, ect. for those two countries? Korea and Japan are putting our auto industry and television industries 6 feet under because instead of spending their lower amount of tax money on defense they rely on the ally, the USA to be there for them. All that takes money, and lots of it. Does it benefit the US citizen, I say NO. Our defense should be to defend this country and our borders here and not 10,000 miles away. If anyone were to attack us we can destroy them many times over with the weapons we already have.

      June 7, 2011 at 12:49 pm | Reply
  5. J

    'Economic power or military might?' is a superbly flawed and is mindless in logic that shouldn't even have been considered to entertain a discussion.

    Without economic power, there cannot be military might. We can look at the past history from the fall of the Iron curtain to the bankrupt Nazi.

    Intelligent World Discussions OR thinking CNN employee? Choose.

    Who sanctioned this article?

    June 6, 2011 at 2:09 pm | Reply
  6. Ben

    Don't forget technological prowess! Many Arab countries have tried to acquire their way to military might. But they lack the requisite technological skills to train, maintain, and improve upon what they've got.

    Any country that must buy cutting-edge weaponry instead of developing their own - or rely on foreign consultants and trainers - can only pretend to be a superpower. To be a true superpower, you need both economic might and technological prowess - both cutting-edge hardware and cutting-edge tactics / training.

    June 6, 2011 at 3:37 pm | Reply
  7. GsySgtHartman

    The US dollar has been backed by nothing but violence and the threat of more violence since Nixon ended the last shadow of the gold standard. We lie to get into wars in an effort to reinforce our global hegemony at gunpoint. The only people who are unaware of this are Americans themselves.

    June 6, 2011 at 3:54 pm | Reply
    • Onesmallvoice

      Thank you,GsySgtHartman. That was well stated.

      June 6, 2011 at 7:11 pm | Reply
  8. John

    The simple answer to Military Vs Economic power is to look at those countries that have one or the other but not both. They are not regarded as major players and do not project a global image. When faced with a choice for dealing with other countries of using a carrot or a stick it is nice to have both available.

    June 6, 2011 at 5:18 pm | Reply
    • Muhammad Ali Farooq

      Thanks to wgb... you lost first option, second on the line. i think the answer is history... powers emerge and diminish. it is part of cycle. anyway thanks again to wgb

      June 6, 2011 at 6:41 pm | Reply
  9. Mike

    Economic power can lead to a military power, it doesn't work the other way around ( a strong military presence needs tons of money to be sustained).

    June 6, 2011 at 9:51 pm | Reply
  10. nate

    As some people may call me as a naive american, i still believe that perhaps military is spawned out of necessity to economic growth. Look at the foundation of our revolution, we fought because of moral and ethical differences sure. Yet the major spur of conflict was the fact that our people were not receiving the full benefit and profit of our own labor and work. So we fought, scrapped and clawed. Built a military to protect such. The interesting thing about society to me is this, that our military protects our economy, our ethics dictate how we run our economy and the military places that ethical/economical guideline down as a playing field for everyone. I say good for China, their growth is just another step in a direction that leads to better lives for "humans", but what people are forgetting is that they too will go through what the united states have. As people begin to become wealthier, they will demand more rights, better working conditions and better lives....all of china's growth in economy doesn't meet ethical standards all ready in place, when they go to meet those they will hit a bump. Yet, it is still good for people.

    June 6, 2011 at 10:50 pm | Reply
  11. nate

    STOP BEING SO SCARED OF CHINA, AMERICANS....they have never given me a reason to be scared. Every country has the right to strive for a better life for their citizens.

    June 6, 2011 at 10:53 pm | Reply
    • johnj

      But not at our expense. Stealing our jobs our technology.

      June 7, 2011 at 11:59 am | Reply
      • john/kc

        China doesn't steal our jobs and technology. Our leaders let them. We will gladly put a factory or call center in China or India regardless if it is good for the country or not. It is the greed of the businesses that want to save a buck, even at the expense of their own country. They show no loyalty, only loyalty to their bottom line. No sacrifice for the good of the country. As far as technology, China demands the knowhow and technology if you want your factory there, so we give it to them. Then we allow this same company to re import the product back into this country with no tariff because it is good for corporate business. This gets done with no resistance because the politician also gets greased by the corporation in the process.

        June 7, 2011 at 1:00 pm |
      • Thatsnotrue:[

        Blame the corporations for moving the jobs to get cheap labour, besides there are more educated people there, thus the high paying job goes also. Can you compete with Chinese and Indian international students? If you can't, get a higher education. There are your problems, greed and lack of higher educated people.
        Now, the US in recent years have nothing worth stealing other then weapons, guess what? They're developing remote controled war planes, great huh? Notice my sarcasm, now they can kill more people without ground or air soldiers. All their investment is in either war or....wall street, what tech do they have that will benefit people's lives instead of killing them?
        If they have something worth stealing, then other countries might, or develope their own, and it's the US who came up "it's mine you can't copy it".........when such as gun powder which was discovered by the Chinese, and paper by the Egyptians were among many of the basis that the US "putted together."
        Until there are other war mongers like the US which is just as bad or worse than a dictator..............there's nothing worth stealing, get off your high horse and invent something useful!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

        June 7, 2011 at 5:37 pm |
  12. Felipe

    Economical Power is the Clean Power it alows you to do war with elegance, meanwhile Millitary power you only can hold with an economic power.

    So as strong your economical power = possibel Millitary Power. I would advise for more Economic Power.

    In sense of having power, choose the power that does less collateral demage.

    June 7, 2011 at 1:05 am | Reply
  13. ChicagoRich

    One cannot control resources without economic power and one can not have a first rate military without resources. The World is a bit pluralistic in that no country holds a trump card for military power, so economic power is somewhat developed instead of just taken, but in a World which is still very much ruled by the sword, the safest route is to continue to have both.

    June 7, 2011 at 1:13 am | Reply
  14. emil oprisa

    In the simplest form i always consider relations between states just as those between individuals and at the end of the day you might be richer than someone else but it does you no good if that guy is determined to beat you up and has the ability to do so. Just my reasoning. I think military power will always reign supreme.

    June 7, 2011 at 9:10 am | Reply
  15. Jack Frost

    We must maintain both military and economic supremacy. Without strong, continuous economic development we cannot sustain our military supremacy. Without our military we cannot defend our selves least of all project power when required both for economic and geo-political needs. There will always be new threats to our security. Meeting those threats and sustaining our way of life, requires a dual commitment. If we parked our carriers tomorrow who would fill the vacuum? If we stand down in North Korea, Europe, Asia, the Mediterranean and the Middle East, who will step in? Pax Americana is far better than any alternative. We must continue to be a great military power and a great economic power. The alternative is to risk not just our future but to risk our relationships around the world.

    June 7, 2011 at 10:30 am | Reply
    • Thatsnotrue:[

      Uhhhhhhhhhhh............................here's the problem.......your government starts most of the problems, and then put on a show to try and fix it. Did yoou know that Bin Latin was a former CIA member, talk about home grown terrorist right? Although he wasn't born there, the US educated him on his ideals and even employed him.
      If you said this maybe fifteen years ago, it would've been right, but wait until your government pull out of those wars and stop killing people and then declare it, okay? ^.^

      June 7, 2011 at 5:20 pm | Reply
  16. lena

    Climate Change and the saving of the planet. Ve vegan to save the planet and be healthy, phisically and mentally.

    June 7, 2011 at 11:25 am | Reply
    • solarenergy

      that is – people should look into well beings as there are enough to solve in this world from polution( made that cause since 1970's the rich nations then India and China get rich nations) to cancer as we eat all rabbish such as injected hormones into chickens, coloured red meats, high ferterlised the vegetables even now GEO products nothing near to nature I am afraid so. All these greedy actions give us the nature disasters – floodings. earthquakes, draughts and severe cold weathers that we never experienced before- GLOBAL CHANGE ICE MELTED FURTHER etc the list goes on

      June 8, 2011 at 2:57 am | Reply
  17. Mike

    It's not even a debate. Any fool knows the following...

    ...You can't become a military powerhouse without money. Military equipment doesn't buy itself. Research and development projects don't spawn from community volunteer projects. Resources for troops aren't donated.

    Not only that, but...

    ...Other countries clamor to be your buddy when your pockets are fat. When your wallet gets thin and you try to inflict your will you are promptly labeled as a "nuisance".

    Money. Period.

    The moral implications of such a revelation are fuel for another topic, so I won't even jump into that frying pan.

    June 7, 2011 at 11:47 am | Reply
  18. MC in TX

    Economic prosperity does not directly correlate with military power but it is true that the two are strongly related. Particularly in the modern technological era it is impossible to be a military power for very long without an economy to support it (some may point to the old Soviet Union or even modern North Korea, but the Soviet Union ultimately crumbled because it was unsustainable and North Korea has only survived this long because of foreign aid).

    The thing that gets missed, though, is that the reason much of the world has become relatively peaceful. Take for example Europe. Most of the European nations finally recognized that in the modern era war between major trading partners rarely produces anything positive. But it took a good century or so for that to finally sink in. There are still many developing countries around the world (even China) where those lessons are still being learned. Until those lessons really sink in (it will take time) thinking that military power is no longer a major issue is dangerous thinking.

    June 7, 2011 at 1:57 pm | Reply
  19. guest

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    June 7, 2011 at 3:30 pm | Reply
  20. Thatsnotrue:[

    Yeah........doubt that if China dumps the US debt that will majorly affect the country at all, a point the author fails to mention is the globalized world. Although China is an exporting country, it's also a major market for a lot of companies. And as many, many Americans pointed out, China only owns 7% of US debt and the number is decreasing, not increasing since the American government at present times have no intention of paying any of it back.
    When you put it into perspective, military might should mean nothing since we live in a more educated society where war is one of many things that are condemed. Economic growth however have nothing to do with war, it is bettering the financial situation of the people of the country which should be focused on since well.......there is a recession in north America.
    &&&&&&&&& I said this before and I'll say it again WAR IS AN EMPTY INVESTMENT

    June 7, 2011 at 5:15 pm | Reply
  21. Matt

    Do you think the PLA make their own decisions of course not, they need the EU to buy their export products, the amount of disposable domestic income spent on food in the PRC prevent a domestic consumer market from developing. Increasing wages for that purpose increases inflation and thus food inflation which defeats the purpose as it eats into the level of disposable income spent on food.. The PLA have to buy EU debt and prevent the EU from collapsing to sustain their export market. Now the PLA are acting as a hedge for the EU, "I am here for confidence".
    I say what is the difference.

    June 30, 2011 at 5:39 pm | Reply

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