Symposium | Les Gelb, in Memoriam

How to Use Economic Power

By Michael Froman Jonathan Hillman

Tagged Foreign PolicyLes Gelb

See the other tributes to Les Gelb here.

Think of economic power as the tide and military power as the storm,” Les Gelb advised in Power Rules. Having spent a lifetime navigating storms, from Vietnam to Afghanistan and Iraq, Les came to believe that the tide was becoming more decisive in global affairs. Always a realist and pragmatist, he put forward guidelines for using economic power that if followed today would steer the United States out of increasingly choppy waters.

Like the tide, economic power works slowly, and Les recommended using it primarily for long-term goals. When the United States helped rebuild Western Europe and Japan after World War II, for example, it was willing to give much more than it initially received. American leaders recognized that the benefits would accrue over a longer timeline, but at even greater magnitude. Their willingness to invest diplomatic and financial resources also made possible the Bretton Woods institutions that helped establish an open, rules-based trade and financial system.

These examples reflect another Gelbian guideline: Economic power should be used primarily for economic ends. Using economic benefits to incentivize security cooperation can be effective in exceptional cases, such as the aid the United States provided Egypt that helped solidify its peace deal with Israel in 1979. But trading off economic interests for security priorities presents practical difficulties that can prove counterproductive. Done too frequently, it risks undermining the rules-based order and U.S. influence within it. Using economic power for economic ends is more likely to be effective and has the benefit of growing that power over the long term.

Given the risks of weaponizing economics, Les cautioned that sanctions should meet a relatively high bar to have a good chance of success. Sanctions should be multilateral and include countries the target country depends upon, so alternative suppliers are hard to find. Sanctioning countries must have the will and patience to maintain the sanctions, and they cannot make demands they know the target will never accept. Effectively using economic power, like its kinetic counterpart, requires acknowledging its limits.

These commonsense guidelines deserve our attention more than ever. Too often, American economic power is used in a reactionary manner, in fits and starts, rather than applied steadily toward long-term goals. The line between economics and security is increasingly blurred. U.S. sanctions have exploded, encouraging China, Russia, and others to develop alternative systems and institutions that could undercut American prosperity at home and influence abroad.

Turning the tide begins with forging the political consensus to sustain a long-term international economic strategy. The roots of today’s domestic discord are complex, stemming especially from technology, globalization, and the failure of domestic policy to keep pace with these changes. Resolving this will not be easy. What is clear, however, is that rather than pursuing growth for the sake of growth, the United States must craft policies with greater attention to the quality of growth: in other words, inclusive growth.

To better harness its economic power and to continue to take the lead in writing the rules of the international economic system, the United States needs to offer the world a positive economic vision, one in which trade, investment, and other forms of economic cooperation advance international interests and values. Wielding economic power through sanctions, tariffs, and investment restrictions hinges on the United States maintaining its centrality in the global economy, which their overuse erodes. In fashioning its vision, the United States still has exceptional strengths upon which to draw: a large market, the world’s leading reserve currency, rule of law, abundant and affordable energy sources, the world’s most talent-rich universities, an innovative ecosystem and more.

Above all, Les counseled that the U.S. economy is the foundation of American power. It sustains our military, diplomacy, and domestic vitality. Keeping that foundation strong requires not only prudent use of economic power abroad, but also a continual reinvestment at home, particularly in education and research, health care, and infrastructure. Because the tide works gradually but powerfully, there’s no time to waste.

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Michael Froman is Vice Chairman and President, Strategic Growth at Mastercard and former U.S. Trade Representative and Deputy National Security Advisor for International Economic Affairs.

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Jonathan Hillman is a senior fellow at the Center for Strategic and International Studies and former research associate for Dr. Gelb at the Council on Foreign Relations.

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