|Clark, Wesley K.
|Henry Farrell and Abraham Newman's "Underground Empire: How America Weaponized the World Economy"
Underground Empire: How America Weaponized the World Economy
by Henry Farrell and Abraham Newman
Henry Holt and Co., 288 pp.
The global financial system runs on a network of undersea fiber optic cables built and operated by the United States. Control of this data stream gives America incredible--and insufficiently discussed--power.
There is nothing new about economic warfare; it's as old as warfare itself. In 404 B.C., Sparta ended the Peloponnesian War by strangling Athens with a land and sea blockade. Allied blockades drove World War I Germany toward starvation, and decades later similar sanctions helped spur Adolf Hitler's attack eastward for Lebensraum and oil. Today, Russian sanctions are above ground, openly announced. Their effectiveness is open to question, even as they are regularly strengthened. But now, like an iceberg, most of the power and almost all the mechanisms of economic coercion are below the surface, in the very infrastructure that undergirds international commerce.
Most international trade is conducted in dollars, and the movement of dollars through the SWIFT system that coordinates worldwide banking is overseen and controlled, covertly, by the U.S. Treasury Department and the Federal Reserve. The data to do this comes through undersea cables that mostly land in the United States and that are monitored by the U.S. government, as authorized by various laws, policies, and secret court rulings since 9/11. The U.S. works zealously to maintain its access to these cables and data flows, including by acting against Chinese efforts to lay competitive networks. American companies lead in the chip designs required to analyze this financial data, and even though most chips are now manufactured overseas, this advantage is protected by patent law. The Office of Foreign Asset Control in the Treasury secretly uses the data to sanction individuals, companies, and countries that fail to follow U.S. policy dictates, or associate with those already sanctioned.
The writers Henry Farrell and Abraham Newman call this the "underground empire"--the title of their new book--because it is not only hidden from view but also has no real borders. The trail of data leads ever deeper into other governments, businesses, and individual lives worldwide. The fear of these sanctions drives second-order effects, with banks preemptively avoiding associations and businesses they judge potentially at risk of being sanctioned, and governments treading warily...
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