National Power and the Structure of Foreign Trade and the New Geoeconomics

Geoeconomists combine economics and political science to study how governments use their countries’ economic strength to exert influence (power) on foreign entities over which they tend not to have direct control, to induce those entities to take actions that they would not otherwise take. In the rapidly shifting geopolitical environment of the first quarter of the 21st century, geoeconomics offers a new way to think about US trade policy. The theory and empirics in Albert Hirschman’s 1945 classic, National Power and the Structure of Foreign Trade, were foundational for the discipline. This note offers an overview of Hirschman’s views on trade as an instrument of national power, then touches on some more recent developments in the field. At the University of Virginia Darden School of Business, this note is taught in the “Managing International Trade and Investment” MBA elective, together with a related case: Peter Debaere, “Is Donald Trump Winning the Trade War?” (UVA-GEM-0252).