Adam Smith was the father of modern economics. As laid out in his book “The Nature and Causes of the Wealth of Nations,” the invisible hand was an argument for limitations on the role of government in economic life. Often overlooked is that while he advocated limited government involvement, he saw the government as essential to the wealth of nations, insofar as it could protect the nation from the greed of other nations and therefore buttress the free market.
He also wrote that the essential role of government for economics was the existence of a standing and powerful military force, without which the economy could not survive. He understood, therefore, the fundamental relationships between the economic and military power, and therefore of the intimate relationship between geopolitics and economics, the region of thought in which geoeconomics is the methodology of understanding the whole of the human condition.
The economic and the military are different in nature but are inextricable, each depending on and supporting the other. To have military power is to have enough economic success to build a military. To have economic power is to have a strong enough military that can fend off those that covet its wealth. A nation that is wealthy but weak is the most vulnerable to predatory nations. A nation that is strong but poor is vulnerable to internal strife.
That we live in a world beset by fear and greed means weakness in either dimension of national power can be catastrophic. A nation’s internal political system must balance economic and military power, based on the relative strengths and weaknesses of other nations. There are other dimensions of power, of course, but this is the fundamental nature of geopolitics.
Geoeconomics is different from geopolitics. Rather than being a study of geopolitical power, geoeconomics uses geopolitics as a lens to observe the effects of geopolitics on national economies. For example, the United States and China are in the throes of a military and economic confrontation, and together they define each other’s power relative to each other. That confrontation can affect the other’s economy and, with it, its power.
There is a paradox here. An army can function only if its soldiers are ready to die to protect the nation and its wealth and no nation could be wealthy without a strong military force. The invisible hand leads to wealth, but the preservation of wealth depends on those being willing to forego life and its pleasures. Smith understood the complexity and tension of the human condition.
Where geopolitics looks at the entirety of a nation’s power and interest, geoeconomics views the economy through the lens of geopolitics to get a detailed view not only the wealth of nations but the geopolitical forces around the nation that ultimately protects the wealth of nations.