there is one economist whose work is very relevant in this moment: Albert Hirschman, author of a striking book published in 1945, National Power and the Structure of Foreign Trade.In recent decades, this work has gone largely ignored,
.... The economist Orris Herfindahl later used Hirschman’s ideas to create an index measuring corporate concentration, which was adopted by the US Department of Justice, among others.
... Neoliberal thinkers often see politics as a derivative of economics. But Hirschman viewed this in reverse, arguing that “so long as a sovereign nation can interrupt trade with any country at its own will, the contest for more national power permeates trade relations”.And he viewed “commerce as . . . a model of imperialism which did not require ‘conquest’ to subordinate weaker trading partners”, as Adelman says. This is close to how the Trump advisers parse economics. But it is very different from how Adam Smith or David Ricardo saw trade flows (which they assumed involved comparably powerful players).Some economists are leaning into this shift.
Just after Trump spoke, a trio of American economists — Christopher Clayton, Matteo Maggiori and Jesse Schreger — released a paper outlining the growing field of “geoeconomics”, inspired by Hirschman.
... three themes that investors should pay attention to.
First, and most obviously, the trio’s analysis shows that it is dangerous for small countries to become too dependent on any large trading partner, and they offer tools to measure such vulnerability.
Second, they argue that the source of America’s hegemonic power today is not manufacturing (since China controls key supply chains) but is instead financial and structured around the dollar-based system.Trump’s tariffs, therefore, are essentially an attempt to challenge another hegemon (China), but his policies around finance are an effort to defend existing dominance. (The hegemony in technological power, I would argue, is still contested.) This distinction matters for other countries trying to respond.
Third, the trio argue that hegemonic power does not work in a symmetrical manner. If a bully has an 80 per cent market share, say, it usually has 100 per cent control; but if market share slips to 70 per cent, hegemonic power crumbles faster, since weaklings can see alternatives.
This explains why the US has failed to control Russia via financial sanctions. And the pattern may play out more widely if other countries react to Trump’s aggressive tariffs by imagining and developing alternatives to the dollar-based financial system. Bullies seem impregnable — until they are not.
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