Heterodox Economics Newsletter

Issue 348 September 15, 2025 web pdf Heterodox Economics Directory

It is quite evident that increasing geopolitical tensions and fragility are more and more reflected in economic policy and, relatedly, also within economics. With the rise of such security concerns, practical economic considerations become much more Macchievellian in nature and I am not sure, whether it is fully reflected in the discipline* how much this impacts on applied problems.

A key notion from Macchiavelli is that you should not be dependent on anyone when trying to secure our even expand your position in a contested environment. European economies have in the past enshrined this principle when — contra all free trade convictions — subsidizing their agricultural sectors to sustain independency when it comes to basic necessities. While security has long been treated as more ornamental by most European states, upgrading “security“ to a necessity reveals existing dependencies and, hence, comes with some far-reaching implications for the development of global value chains.

One way to capture the underlying shift is to focus on how the meaning and practical implications of the concept of a „capacity constraint“ evolves under such conditions: while conventionally seen as a potential driver of inflation, in security terms a capacity constraint is a potential military weakness, if it affects your ability to re-supply your lines in case of a conflict. In addition, in times of global values chains capacity constraints easily become an endogenous variable, that is, your constraints will move in parallel to shifts in international relations. This pattern is already evident in some primary sectors (rare earths) as well as within sectors relevant for military equipment for some time (see here or here for related news).

This constellation can be stressful, for instance, if you are an orange-haired guy sitting in a White House deliberating on the medium-term capacities of your „War Department” in a country that nowadays, in many contexts, lacks access to the world technology frontier in industrial deployment. Similarly, the tradition of trading dollars for goods – once was conceived as an „exorbitant privilege“ – might seem as a potential strategic weakness, when delving into the vision that the future of humanity lies in the creation of multipolar imperial blocks (a la Dugin or the Monroe Doctrine).

In comparison, more old-school imperialist European countries seem comparatively modest, but are still stressed out to increase military spending — fueled by Russia’s invasion of Ukraine and increased uncertainty induced by US politics — and thereby override existing debt-breaks and other long cherished austerity-safeguard mechanisms. And although such spending might contribute to employment as well as industrial upgrading, it will do little to increase living standards as long as it does not also push up exports, which obviously comes with the risk of fueling violent escalations elsewhere. In mere terms of economic welfare, it remains somewhat of a tragedy to waste resources and efforts on the production of stuff that is, optimally, never used at all.** In cultural and political terms the associated militarization may easily carry additional adverse effects like reduced social spending, narrowed public deliberations or a stronger neglect of climate change and environmental protection. To what extent Europe will manage to withstand such adverse effects, while living up to its aim to support Ukraine in the current conflict remains to be seen…

While liberal globalization of the past decades had many contradictions and defects, which surely contributed to the emergence of current constellations, in times of imminent global collective challenges the 18th-century-style alternative of imperial blocks, that is prefigurated by these trends, seems straightforward dystopian to me.

Eventually, all this raises the question, which alternatives for envisioning global cooperation economists have to offer. In my view a smart answer was given more than 250 years ago, when John Stuart Mill noted that the greatest challenge of humanity seemingly is „how to unite the greatest individual liberty of action, with a common ownership in the raw material of the globe, and an equal participation of all in the benefits of combined labour.”***

Had we used that as a guiding principle of global economic integration instead of Ricardo’s theorem and neoliberal shock strategies, we would have probably had a better chance to avoid the somewhat polarized state of affairs we observe today. It would at least have been a modest, inclusive and realistic starting point.

In contrast, all warfare is eventually leading to death and loss; it will aggravate current challenges and constrain today’s and tomorrow’s capacities for beneficial cooperation. It is for these reasons that so many (heterodox) economists stand for peace, whereever possible and feasible. In this vein, we also included a petition in this issue, that calls for an end of the despicable killing and genocidal endangering of tens of thousands civilians in Gaza by Israeli authorities, which can be supported here.

Stay strong and all the best,

Jakob

* Note that standard economic models typically presuppose that the question of peaceful coexistence is already resolved at the micro level (rule of law) as well as the macro level (peaceful international collaboration).

** It was the latter contradiction that led Simon Kuznet’s to suggest subtracting military spending from GDP to better account for its ambivalent relation to overall welfare (see here).

*** Any better suggestions for a guiding principle? Let us know here, we are eager to hear your views.

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