Seismic populist and protectionist shifts the world is witnessing threaten to pave the way for an era of pre-world War I and World War II. Many countries are seeking national identities and to set free from globalisation and liberal internationalism, a prelude to undercut collective security edifices and to awaken new formulas of ultra-nationalism through economic warfare.
Economic warfare is one of the oldest types of wars known to mankind. Such war is a conflict over economic resources, possessing international markets, sources of energy and water. World wars have become non-military in many ways. Instead of militarization, harsh economic wars are waged against certain countries which are known as target states. These economic measures include sanctions, embargoes, and boycotts of commodities, financial fines and penalties against banks to pave the way for collapse of such countries for their policies.
Economic wars are more painful than military, nuclear and chemical wars because they aim to cause chaos internally through rescinding economies and abating purchase power of local currencies; thus, attaining the best result against opponents without the country that wages such a war losing any soldier.
Economic wars are imposed by powerful states on other countries to change their internal and external policies. Some of wars have a mere purpose: to destroy and disunite other countries. This requires economic espionage and artificial intelligence to disseminate economic and political rumors to effect sudden collapse of the economies and markets of countries.
Economic warfare mechanisms
First, economic boycott refers to freezing all trade activities with the target country. Economic boycotts are one of the most important weapons of economic warfare as powerful countries stop dealing with the target state. Second, economic and military blockade could be involved together to effect more influence on the target country. The economic boycott could entail a wider scope of procedures starting from economic blockade to preventing flow of goods to the state by imposing sea, air and land cordon, as was the case with Iraq, Libya and Cuba.
The economic blockade is the most lethal weapons of economic wars because this causes a shortage of medicines and food, resulting in long-term economic and social consequences such as famine and diseases. One of the most prominent types of economic wars are related to energy which includes oil and gas, and the war of currencies to effect exchange rates, which would cause unrest in many countries. The other famous wars which the world had witnessed since World War II were those on technology. This includes industrial and economic espionage.
If one imagine that war between Turkey and the United States has erupted militarily, the loss will be great in terms of human and financial resources; however, the sanctions imposed on Turkey would force the Turkish government to relinquish many of its offensive policies. If such countries do not give up such policies, economic penalties would result in downfall of local currencies and lack of confidence in their economies. For example, if the US continues to impose tariffs and penalties on Turkey, this will deteriorate the exchange rate of the Turkish lira and people will lose confidence in their currency. This is the easiest way to destroy any economy from within.
Local industries would be destroyed as hard currency will be drained by businessmen and bankers who seek to secure their money abroad. Besides, investors' confidence in the local market will be lost. Thus, trade and production will decrease remarkably; inflation and unemployment will hike accordingly. All this causes social, economic and political anarchy that cannot later on be controlled by the government.
Economic wars instigate pressure on people who in their turn exert pressure on governments. This would lead to overthrowing governments or changing regimes. This is the case now between Washington and Tehran as the former strives to create a major political and economic rift between the Iranian leadership and the people in a bid to cause pandemonium that could pave the way for political coups if supported externallyShehab Al Makahleh
Economic wars instigate pressure on people who in their turn exert pressure on governments. This would lead to overthrowing governments or changing regimes. This is the case now between Washington and Tehran as the former strives to create a major political and economic rift between the Iranian leadership and the people in a bid to cause pandemonium that could pave the way for political coups if supported externally.
In other words, modern economic warfare seeks to paralyze the opponent's abilities to proceed further with their political agendas.
Components of economic wars
Any country involved in an economic war must enjoy a number of advantages: First, the strength of balance of payments and the ability not to be affected by external economic and financial shocks or turbulences.
Second, the strength of the national currency against foreign currencies.
Third, the status of productive apparatus within the state, its capability to meet internal needs and the ability to create a surplus of commodities and services. Fourth, the flexibility of the state to produce a wide variety of commodities and extend services.
To cite as an example, there are some companies that can be used to produce vehicles and at the same time they can change their production lines to produce tanks.
Fifth, the size and diversity of the internal market of the powerful country.
Examples from history
The first effective exercise of economic warfare was the United States against the Soviet Union in 1956 under President Dwight Eisenhower and after the Soviet intervention in Hungary. Eisenhower also sought to pressure Britain after London had seized control of the Suez Canal. The US had emerged from WWII as an international superpower. Furthermore, the spread of communism nurtured by the Soviet Union was regarded by Washington as an intimidation to western democracy.
In 1956, the British government was under heavy debts due to the losses resulting from WWII. Thus, the UK has been considering approaching the International Monetary Fund (IMF) for a loan of $561 million and $739 million later on. The Americans prevented the IMF from giving the loan until Britain agreed to withdraw its forces from Egypt. Washington has imposed two measures to force Britain to withdraw from the Suez Canal. The first was to exercise pressure on the IMF not to lend to the UK, and the second was giving up the sterling bonds against the US dollar. Since 1918, the US has resorted to economic warfare more tha n120 times with countries that refuse to implement American policies.
As the world now is heading towards protectionism and populism, the Third World War will be a financial and economic warfare that destroys antagonistic inimical companies first before the collapse of the countries per se in preparation for a political and military change in the target states.
Shehab Al-Makahleh is Director of Geostrategic Media Center, senior media and political analyst in the Middle East, adviser to many international consultancies. He can be reached at: @shehabmakahleh and @Geostrat_ME