Today’s geopolitical world is more like the turbulent and bloody 19th to mid-20th centuries than the Cold War long period of (nuclear stand-off) peace after the second world war, or the dominant US-ordered world of the recent past after the end of Soviet communism.
Since at least the 1950s, most Westerners have experienced a time of ‘near perfect combination of freedom, peace, and prosperity’. Perhaps they were tempted to see this as ‘the final and permanent stage of human progress … the latest waystation on the path to civilisational nirvana’. So wrote Gerard Baker in The Times of London late last year.
Like all of us, he had the good fortune to live through times ‘of thriving democracy, international peace, and widening economic abundance’.
Baker laments that those times ‘seem to be closing’. Increasingly, there is an ‘unpredictable interplay’ of raw power global politics abroad, and cultural polarisation and restrictions on freedoms in one way or another at home.
How do we map the wider, turbulent geopolitical world of today? How is it different from the Cold War period when the challenge was Soviet communism and nuclear weapons?
The post second world war settlement
After the second world war, the world divided into two rival military and economic blocs. The United States, Europe/Nato, Japan, Australia, New Zealand, and others formed the Western bloc of democracies with largely market economies, with significant government sectors focused on national development and defence.
The US gave preferential trade arrangements to its Western allies. Trade with the US was like a global conveyor belt pouring goods and raw materials into the largest economy on earth and generating the greatest world economic growth in history. This system helped revive the war-devastated economies of Europe, Japan, and others.
The Western bloc was challenged by totalitarian communist governments in the Soviet Union and, to a lesser extent, China and Cuba. The communist bloc economies had limited interaction with the rest of the world.
The European Union and Nato kept the peace in Europe for the first time in centuries. The balance of nuclear weapons between East and West kept the world from another global war.
The US and its allies built domestic and global structures to strengthen alliances and to provide a more stable global economy with institutions like the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade (GATT), now the World Trade Organisation (WTO).
Conflicts between these rival blocs were confined to proxy ‘periphery’ wars – Indochina, southern Africa and Central America.
Eventually, the brutal Soviet system, with its huge network of Gulag concentration camps, collapsed under its own weight.
The Chinese people suffered terribly under Mao Zedong’s Great Leap Forward (1958-62) and the Cultural Revolution (1966-76), devastating and stagnating its economy as the rest of the world prospered.
Then, in the 1990s, the world changed again.
Globalisation post communism
In 1989, Soviet communism collapsed. Around the same time, after Mao, China radically changed direction. It looked to expand its economy by embracing Western companies and technology. Simultaneously, starting with Walmart, Western companies wanted to source great volumes of cheap products from China’s vast, low-wage but increasingly educated workforce.
Enter the age of economic globalisation.
Accompanying globalisation was a misplaced belief that, by integrating China and Russia into the global economic order, they would abide by the rules-based system and evolve into democratic states with market economies.
Businesses built an interdependent global economy on top of US-centred infrastructure. In his book, The World is Flat, journalist Thomas Friedman popularised the view that globalisation’s economic networks would bring all peoples together and allow everyone to compete on an equal footing.
Instead, Beijing used heavy state subsidies to create a capitalist economy on steroids, taking China from the eleventh to the second largest economy between 1990 and 2025. It used the Belt and Road project to extend its influence across Eurasia, Africa, and Latin America, building networks of influence against the West.
Beijing and Moscow began huge military expansions. Xi Jinping is now destabilising the South China Sea region and threatening to take over Taiwan, while Putin has invaded Ukraine, unleashing the biggest war in Europe since the second world war.
Weaponised interdependence
Whereas the Cold War world was composed of two largely separate economic blocs, an unintended consequence of the grand economic globalisation experiment is a world of ‘weaponised interdependence’, as described by Henry Farrell, from Johns Hopkins University, and Abraham Newman, from Georgetown University, in their seminal work, Underground Empire: How America Weaponised the World Economy. It greatly influenced the first Trump administration.
They describe three key aspects of the globalised interdependent world, which developed with the US at its centre:
The US wove the world’s communications systems together with the internet, e-commerce and social media.
The global financial systems came together using the US dollar for international transactions, which are carried out under the SWIFT financial messaging network, the main network through which international payments are initiated. It is based in Belgium but is greatly under US influence.
The design and intellectual ownership of the most sophisticated semiconductors are in the hands of just a few US, Taiwanese, Japanese, and South Korean companies, although the manufacturing of these chips involves a myriad of specialised processes across Europe and Asia.
As Farrell and Newman explain in Foreign Affairs: ‘Each of these systems could be understood as its own ‘stack’, interconnected complexes of related technologies and services that came to reinforce one another, so that, for example, buying into the open internet increasingly meant buying into US platforms and e-commerce systems, too.’
Each of these systems, and their related industries like rare earths for critical magnets, electronics and defence equipment, are capable of being used as ‘weaponised choke points’ by governments for wielding strategic advantage.
For example, in 2025 China threatened to use its virtual monopoly over the processing of rare earths to impose crippling restrictions on supplies to the US and EU countries. This not only threatened US defence industries, but BMW and Mercedes feared their production lines would be forced to shut down. This forced US President Donald Trump into a compromise – in exchange for continued access to China’s rare earths, the US lifted restrictions on selling high-end computer chips to China, including those for advanced AI.
In the heyday of economic globalisation, few policymakers and business leaders were concerned about becoming dependent on critical materials, technologies and products from other countries. That changed after the 9/11 al-Qaeda attack in 2001. The US led the way. Steadily, an array of government agencies began to tap US-centred systems to gather intelligence to track terrorist leaders, their finances and weapons.
In the process, the US built a comprehensive suite of agencies working together and coordinating on different aspects of the critical stack of technologies. These valuable institutional frameworks allowed the US to weaponise critical choke points in the West’s war on terror.
Consider how most of the world’s internet traffic passes through the town of Ashburn, Virginia, a major hub for data centres. It is known as the cloud capital of the world. This gave the US, with the cooperation of major tech companies, the unprecedented ability to conduct intelligence surveillance.
These vast US operations were exposed in 2013 when intelligence files from the US, UK, and Australia were leaked.
Also consider how the US has used the SWIFT payments system as a means for the CIA to gather financial transaction intelligence and to impose payments restrictions on adversaries. Iranian banks were first banned from the SWIFT global payments system in 2012 and again in 2018.
In other words, say Farrell and Newman, the world that economic globalisation created was not flat, peaceful and operating according to market rules set down in the World Trade Organisation and other global agencies. Instead, it has become a place ‘riddled with hierarchy, power relations, and strategic vulnerabilities’ around key economic and technological choke points.
Further, they say, it is:
‘…fundamentally unstable. American actions would invite reactions by targets and counteractions by the United States.
‘The biggest powers could play offence, looking for vulnerabilities that they, too, could exploit. Smaller powers might seek to use less accountable or transparent channels of exchange, effectively building dark spaces into the global economy. The more the United States turned interconnections against its adversaries, the more likely it was that these adversaries – and even allies – would disconnect, hide, or retaliate.
‘As others weaponised interdependence, the connecting fabric of the global economy would be rewoven according to a new logic, creating a world based more on offence and defence than on common commercial interest.’
China retaliates
While the leaked-file revelations informed China of the US power over critical choke points, Beijing’s real awakening came during the first Trump administration. It threatened to deny US technology to a major Chinese telecommunications company, then imposed export controls against Huawei over cybersecurity concerns and later in an attempt to stop it doing business with Iran.
Beijing’s response was to develop a ‘whole-of-nation system’ to secure China’s technological independence. It called for a ‘breakthrough in major ‘choke-point’ technologies and products’. It also began to exploit its advantages in the processing and supply of rare earths to other countries.
Mao used to say that ‘power comes out of the barrel of a gun’, but today, as Farrell and Newman say, China realises that ‘power comes … from controlling the technological stack’.
China has copied pages out of America’s playbook on choke points. It has introduced complex regulatory systems that not only give Beijing greater control over things like critical minerals, but also vital information about who is buying what.
This allows Beijing to pressure vulnerable points of other countries with greater finesse.
Europe
The EU is the world’s second largest economy, with the potential to be a ‘geoeconomic superpower’ but lacks the institutional machinery to make itself one.
It covers many choke points in technology stacks – the SWIFT system in Belgium, vital semiconductor companies, high-level software firms, and Sweden’s 5G provider.
However, repeatedly, ‘Europe’s response to the threat of Chinese economic coercion has been kneecapped by European companies desperate to maintain their access to Chinese markets,’ say Farrell and Newman. ‘At the same time, measures to increase economic security are repeatedly watered down by EU member states or qualified by trade missions to Beijing, which are full of senior officials eager to make deals.’
BRICS alternative?
Weaponised interdependence undermines the credibility of the rules-based international order that the US and its allies created following the second world war and contributes to disenchantment in Global South nations. They have not supported US-led efforts to help defend Ukraine against the Russian invasion.
There have been proposals from Russia and China that the BRICS nations – the major emerging economies of Brazil, Russia, India, China, South Africa, and others – develop alternative global structures to circumvent US-centred choke points. While, for example, they have proposed an alternative to the SWIFT payment system, there is a major problem. Payment systems are built on trust and there is less trust in dominant BRICS nations like Russia and China than in nations in the SWIFT system.
However, China diversifying its sources of important raw-material and energy imports, and its exports, is a viable strategy to circumvent US choke points.
US: time to rebuild
Just as in post second world war period, when the US invested heavily in institutions and strategic doctrines to avoid an apocalyptic nuclear war, major investments are now required to negotiate the new age of weaponised interdependence.
Paradoxically, the United States is in a powerful position to wisely use its powers over critical choke points, but is also deeply vulnerable. As Farrell and Newman argue: ‘Governments have to deal with excruciatingly complex phenomena that are not under their control: global supply chains, international financial flows, and emerging technological systems.’
In the nuclear age, the US only had to worry about the response of the Soviet Union. Today, ‘Governments must navigate a terrain with many more players, figuring out how to redirect private-sector supply chains in directions that do not hurt themselves while anticipating the responses of a multitude of governmental and nongovernmental actors’ in a world where ‘adversaries now hold many of the cards.’
It will be essential for the United States to embrace a wide range of allies, engage in détente and arms control with rival global powers, and aid rebuilding an interdependent global economy on more robust foundations.
Australia’s great vulnerabilities
In this geoeconomic weaponised world, Australia is highly vulnerable, having become dependent on exports of minerals and energy to pay for a vast array of imported manufactured goods, given the emasculation of the nation’s manufacturing sectors.
Australia got a taste of economic coercion when it supported a global inquiry into the origins of the Covid virus. China imposed import restrictions and placed higher tariffs on wine and barley; it established biosecurity measures against some beef and timber; and placed unannounced bans (often known as non-tariff barriers) on coal, cotton, and lobsters.
At the same time, Australia is a major source for rare earths minerals. Having some of the richest deposits in the world places Australia in a strong position to work with its Western allies.
If Australia is to navigate this complex new age, it must rebuild its manufacturing and industrial base focused on the strategic industries that will mitigate against economic blackmail and coercion.
Patrick J. Byrne is the immediate past national president of the National Civic Council.
