Book Review: The Global Economy Between Economic Interdependence And Economic Coercion

Reviewed book: Underground Empire: How America Weaponized the World Economy, 1st edition, 2023 – by Henry Farrell and Abraham Newman

Book review by Edoardo Grimaldi

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The modern global economy rests on an intricate web of underground networks, hidden routes through which money, goods and data flow seamlessly, binding nations into a tight system of interdependence. For decades, Western governments, businesses and academics championed globalisation, convinced that deepening these global networks would foster prosperity and peace by making conflict prohibitively costly. Financial systems, global value chains and the fibre-optic cables of the internet were celebrated as the threads weaving nations into a cooperative global tapestry.

In their groundbreaking work Underground Empire: How America Weaponized the World Economy Henry Farrell and Abraham Newman dismantle this optimistic narrative by offering a timely exploration of the hidden networks shaping the global economy and how the United States (US) as transformed them into instruments of domination. Professor at Johns Hopkins School Henry Farrell is renowned for his work on democracy, the politics of the internet and international political economy, while Professor at Georgetown University Abraham Newman focuses his research on how economic interdependence and globalisation have reshaped international politics.

The authors present a thought-provoking analysis of the intricate networks underpinning the modern global economy and their use as tools of economic statecraft. They demonstrate that the centralised structure of these systems emerged as an unanticipated consequence of globalisation, shaped not by deliberate design but by the actions of American corporations pursuing efficiency and profit, alongside uncoordinated efforts by the US government, ultimately transforming these systems into a complex machine of coercion. Over time, these vast networks, through which goods, data and capital flow, have converged on US institutions and territory, enabling Washington to exert political authority over the crucial hubs of these global systems. What sets Underground Empire apart is its incisive examination of how these networks, initially lauded for fostering security and efficiency, have been transformed into instruments of political influence. Since 9/11, the US has leveraged its control over critical economic chokepoints, such as dollar-clearing systems, SWIFT (Society for Worldwide Interbank Financial Telecommunication) and fibre-optic cables, as tools of coercion - enabling it to monitor (and disrupt) financial transactions and data flows worldwide for geostrategic objectives.

In the introduction, Farrell and Newman clearly articulate their central argument, which they then develop by examining the past, present and future dynamics of these global networks in the next six chapters. The opening chapters examine the historical development of global financial and information networks, and how the US learned to exploit these chokepoints for surveillance and coercion in the name of national security - particularly against terrorist organisations post-9/11. As tensions with China escalated, this economic coercion took on new dimensions, with Washington seeking to weaponise its underground empire to curb companies like Huawei, fearing that Beijing might construct a parallel surveillance empire through its 5G infrastructure.

The book then highlights the far-reaching consequences of these coercive practices, particularly for US allies. The ever-free-market-oriented European Union (EU) was jolted awake by US secondary sanctions on Iran, which harmed European businesses and pushed the EU to attempt to bypass US-dominated financial systems by building its own infrastructure, such as INSTEX. Additionally, the authors underscore the repercussions for other actors, particularly the private sector. Once operating with relative autonomy in the free-market landscape, multinational companies now face mounting political scrutiny, often being forced to choose sides in an era where economic networks are no longer neutral pathways but strategic battlegrounds.

The final chapter provides a forward-looking analysis of global economic networks and the implications of their weaponisation. The authors warn that the US’s reliance on coercive measures risks alienating other nations, potentially prompting them to dismantle or bypass these systems - thereby fragmenting the open global economy. These unilateral actions could drive China to establish rival networks and retaliate against Washington, gradually eroding US dominance and the structural advantages it has long relied upon as the underground empire loses its appeal. Examples of this include China’s attempt to create a digital yuan to compete with the US dollar-dominated financial system or its strategy of self-reliance in the semiconductor industry. Furthermore, the escalating economic and technological confrontation between China and the US risks deepening mistrust, with unpredictable consequences, including the potential for war.

The book's strengths lie in its innovative perspective on economic interdependence, reframing it not as a stabilizing force and a long-standing assumption in international relations, but rather as a tool of coercion in an era of strategic competition. Their network-based perspective offers a compelling framework for examining globalisation, shedding light on the structure of global networks and the structural power that a select group of nations (the US, China and the EU) can exert through control of economic chokepoints. Despite its valuable insights, Underground Empire has some limitations. The authors adopt a predominantly Western perspective, as they offer only a partial account of China’s viewpoint and responses and do not sufficiently investigate the effects of these coercive economic measures on the Global South, where nations are often caught in the crossfire of geopolitical tensions between major powers.

Through their approach, Farrell and Newman provide crucial insights into some of today’s most pressing challenges. First, US-China strategic competition, caught in a spiral of mutual fear, could be mitigated if Washington adopts a more strategic approach to economic coercion, avoiding unintended consequences. However, the current Trump 2.0 presidency seems inclined toward a more erratic and unpredictable use of economic coercion, which risks alienating allies, further encouraging competitors like China to build their own networks and fragmenting the global economy. Second, the book underscores the need for institutional reform, particularly within the WTO, to facilitate open discussions on the risks of weaponising the global economy and to establish necessary safeguards. Third, while the US has primarily used economic networks as weapons against adversaries, pressing global challenges such as climate change demand a fundamental reorientation of these tools.

To conclude, Underground Empire offers a groundbreaking perspective on the global economy and its dynamics, providing a fresh lens through which to examine the intersections of power, networks and globalisation. The book lays the foundation for a multidisciplinary study of contemporary international phenomena, seeking to bridge the long-neglected dialogue between international political economy and international security studies thereby opening new avenues for research and insights.