Technology is the new economy

Geoeconomics replaced geopolitics very briefly, if ever. The only turn in the way that competing powers established their hold on a targeted asset was by dominating and then exploiting a nation with the needed resource — India and Africa, and some would say Afghanistan today fit the bill.

But where polities and societies found their roots firmly and were not easy to conquer because of complexities of size and scale of effort predator nations changed tack to economic dependence to gain influence or to appropriate benefit from a targeted nation. Great Britain and other European powers of the sixteenth century exhibited this policy with significant effect at a global scale.

The advent of USA on the international stage however replaced colonialism with an institutionalized and structured control of regions and their riches. Bretton Woods and international financial organisations flowing out of it made that possible. The Cold War only helped reinforce those geographical divisions around security concerns but with an added benefit of economic and trade which inalienably were between nations in the same bloc.

This created a security and an economic leverage of the US in dependent nations. Three separate events of unparalleled import changed the world and how it did business, literally. The dissolution of the USSR in 1989 absolved the world of its geographical bounds politically and socially.

Ten years before, in 1979, another prophet of change — in China — Deng Xiao Peng announced the need to open the economy even as it retained its political architecture. It marked the beginning of integrating China in the global economy. Almost ten years after 1989, in 2000, the internet became openly available to the public at large graduating from being a source of instant communication to a means of doing business — goods, capital, labour and services included.

Investments and capital moved on a click. London, touted as ‘the city that never sleeps’, soon had to confront another reality: the market never sleeps and neither did the investor and the businessman. Revolution in information technology made that possible. Consequently, the prosperity the world accrued in the last thirty years is more than the cumulative worth of the previous three hundred years.

It is instructive to go back to 1973 to note how trade became a weapon and economic pain a strategy. Middle Eastern oil producing nations imposed an embargo over exports and production and caused the first economic storm in the geopolitics of the world. Oil wasn’t only a commodity; it became a weapon that changed the way the world looked at the middle east shaping attitudes and policies of dependent nations and markets.

Geopolitics, and hence physical force alone, weren’t the only means to affect a nation’s policy, economics too could shape effects and impose choices. It defined interdependence as nations intertwined and exchanged goods, people, capital and services. International travel became pervasive. Contact and communication became instant. Interdependence almost straitjacketed nations into coexistence even if conventional choices desired otherwise.

The world tied into one whole restrained freedom to independent adventurism in pursuit of narrow geopolitical interests. Instead, coexistence forced cohabitation and accommodation despite geopolitical differences. Economics indeed was a weapon as well as a force of good in an interdependent world.

A few years before the internet became a universal enabler of pervasive communication between traders, suppliers, producers, investors and markets, George Soros — an accomplished icon in economics and a Nobel Laureate, and an investor of note — withdrew his heavy investment in the south-east Asian markets known in 1998 as the ‘economic tigers’.

Why he did so is moot — perhaps his sense informed him of lurking trouble in overheated markets of Thailand, Malaysia etc or he simply quit when on top. But this one act triggered the famous crash of currencies, markets and economies which set into motion the first ever recession in modern times.

Soros was a marked man for risking the economic fate of a set of nations and many saw a design in it. What was however evident was the power of economic leverage that either trade or capital or both held in this new age of increased economic interdependence. The advent of information technology only multiplied such interdependence and hence vulnerability.

The on-going war between Russia and Ukraine once again brought to fore the economic consequences of war on a global scale in an interdependent world when a huge chunk of supplies is taken out of the chain. Gas shortages will hurt economies all over even if the war is geographically restricted.

Wheat and fertilizer shortages mean the world will produce less and will have less to go by. Disadvantaged nations will suffer even more. Interdependencies create such vulnerabilities. On the other hand, Russia is forcing the world to accept its geopolitical assertion using economic shock as a weapon.

It also aims to force the West to relent from its support of Ukraine with money and weapons if they want to ease their economic pain. When recently OPEC in a partial redux of 1973 decided to cap oil and gas production it was adding to the cost of war for those who hope to keep it alive.

Between the West, principally the US, and Russia the aim is to inflict a heavier economic cost forcing a retrenchment of aggressive purpose on each other. Economic leverage thus acts as a convenient tool. But how it ties in the entire world is because of how the world is transformed into one big marketplace around technology. Interdependence, technology and prosperity are all interlinked as means and consequence and that is how the world is structured.

Another fall-out of mankind’s recent experience with Covid informed humanity of the desperate need for architecture of connectivity. Automation, tele-medicine, research in biotechnology, applications for food kitchens and supplies and so much more only means that technology which was a significant enabler as infrastructure was now graduated to enter homes to alter lifestyles and sustain it.

Jobs, production, innovation, research, robotics, artificial intelligence, all mean that mankind will now be even more dependent on it as a quintessential for both work and life. Wars are now being fought perennially in the cyberspace.

Hence if competitive control of regions and geopolitics was earlier the cause of conflict and contention it had now transformed to economics and denial of prosperity as the intended purpose and tools of war. If one economy went down, it implicitly ceded advantage to the other if the other was still relatively buoyant. As technology enabled unmatched prosperity it also laid open a shared vulnerability which earned the world its longest period of uninterrupted global peace and prosperity.

Conflict though still pervades in the cyberspace with the newer tools. Mankind in the new era stands at the threshold of another revolution in technology where technology is both a product and a means to economic prowess. More than geoeconomics we are now in the age of geo-tech. The new age contenders if they wish to dominate will need to be equipped rightly to be net gainers of the next phase of human existence.