How the US weaponised fibre-optic cables, data centres and the financial system

Globalisation has for a generation been a catch-all term to describe the strengthening economic connections and interdependencies between different world regions and trading states. It was for a time regarded as a positive political force, leading to potentially greater peaceful interaction and a liberalisation of values.

Such assumptions have been upended in recent years, as international events became more conflicted and contested. The power structures lying behind globalisation were revealed through the response of the United States to the 9/11 attacks, the invasion of Iraq, the containment of Iran, the emergence of China as a geopolitical competitor and the war in Ukraine.

How this happened is analysed in a valuable new book by Henry Farrell and Abraham Newman entitled Underground Empire, How America Weaponised the World Economy. It focuses on how this “modern empire has turned the subterranean machineries that enable global markets and information flows – fibre-optic cables, server farms, financial payment systems, and the manufacturing systems that produce complex products such as semi-conductors – into tools of coercion”.

That this is imperial behaviour is taken for granted by the authors. They compare underground US power to previous empires’ roads, seaways and highways, and insist its chokepoints, hubs and networks confer power to those at its centre. That puts them at odds with liberal theorists such as Joseph Nye and Robert Keohane who argue interdependence makes for pluralism and complexity rather than a new hegemony, or journalists like Thomas Friedman who argue globalisation flattens world power.

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They are also at odds with outsiders who say this power system is a relentless machine of domination and the product of decades of careful engineering. Rather, seen from inside, it is “a haphazard construction lashed together from ad hoc bureaucratic decisions and repurposed legal authorities”, imposed on a system built up by private firms, not the state. But they immediately add: “It still holds, somehow. The United States understands the world economy far better, and can manipulate it more easily, than its allies and adversaries.” Yet as its contradictions mount, “the risk of catastrophic failure grows”.

In retrospect, one can see how the neoliberal politics of the 1980s were consolidated in the two decades after the end of the Cold War by an expansive globalisation associated with unipolar US power. A stronger and larger European Union based on a large single market, and an emerging China open to US investment and outsourced manufacturing, were favourable settings for the major companies that drove globalisation and achieved oligopolistic market power through it.

Intensifying competition between the US and China increases the risk of catastrophic failure to control outcomes in decisions on de-risking and decoupling

US state power was reasserted after 9/11 to capture and use the new fibre optic-communications links. The extraordinary extent of state surveillance created in those years was revealed in the leak of US intelligence files by Edward Snowden in 2013, which this book fully acknowledges. The ruthless US willingness to weaponise the networks with sanctions against individuals, companies and states has become increasingly apparent since then – notably the SWIFT international payments system based on dollar convertibility.

Farrell and Newman explore the contradictions in the loss of trust and legitimacy, and the growth of resentment and feedback arising from unilateral use of US power over these systems. That was most marked under Trump’s presidency, but it has continued under Biden.

In their different ways, the EU, China and a growing number of states in the Global South are trying to insulate themselves from this US power. In doing so, they have made the international system more dangerously unpredictable. They have also diminished the utility of existing multilateral institutions based on the United Nations, particularly since the war in Ukraine.

[ Martin Wolf: Globalisation is not dying, it is changing ]

Intensifying competition between the US and China increases the risk of catastrophic failure to control outcomes in decisions on de-risking and decoupling. It was exemplified by the decision to extend export controls from a single Chinese firm like Huawei to prevent it monopolising the new 5G communications technology to China as a whole, with the block on high-end semi-conductors.

The return of great power politics opens up the need to create a forum capable of discussing the risks of weaponising the world economy similar to those put in place between the US and the Soviet Union during and after the Sputnik and Cuban missile crises from 1957 to 1962. Farrell and Newman suggest a common purpose could be found in the search for a post-carbon future. That could turn competitive into co-operative energy capable of building “a commonwealth, in which power and legitimacy reinforce one another”.

It is a worthwhile thought. It should be turned in the direction of how to draw these competing forces thrown up by deeper interdependence into a project to renew the UN system.