Economic warfare, in its modern incarnation, has come to be something of a misnomer. More than anything, those tools that currently compose the body of economic warfare are those of political maneuvering in the context of international relations. The tools of economic warfare today come primarily in the form of fiscal policies, which change the amount that a government spends and earns, but also include monetary policies, which alter the quantity and value of a nationās currency . These economic policies are most frequently used for the purposes of appealing to pressure on domestic issues and are, for the most part, entirely ineffective or even self-destructive when applied for the purposes of protectionist foreign economic policy. In order to make the distinction between the topics of this book, which are intended to be applied to military operations in a direct and strategic manner, and those political concerns described above, the phrase economic combat will be used. Economic combat is the use of applied economics for combat purposes.
Protectionism consists of any economic policies that restrict international trade for a nation. Such policies can be generally applied, where trade is restricted indiscriminately, but for modern economic warfare, these policies are typically narrowly applied to trade with a single nation. One might stop exports to a particular nation, or imports from, or they might try to stop that nation from trading with anyone globally. For less invasive methods, one might attempt to increase taxes on imports from that nation or else pay domestic companies to ship their goods to a nation so that those exports appear cheaper to foreign consumers. If the targeted nation is a recipient of international aid, one might consider eliminating future plans to continue providing that assistance. These policies are considered protectionist because their purpose is to keep the domestic economy from being intruded upon by foreign trade. A nation that has been importing a lot of low-cost manufactured goods might attempt to put a tax on those goods, or stop them from entering the country at all, because domestic companies who produce the same things canāt compete.
This has become the nature of economic warfare, where all nations attempt to politically position themselves in order to appease domestic concerns about economic issues by developing policies against each other in an ultimately futile game that harms all participating nations. Even during those rare times where oneās intentions are truly to attempt to circumvent violent engagements, resorting to such political strategies that are meant to withhold economic benefits rather than exerting economic force will not yield the desired results.
1.1 Embargoes
Among the longest running economic attacks that the world has ever seen is that set in place by the USA against the Republic of Cuba . First established in March 1958 and gradually increased in severity over the course of decades until at least 2012, it grew into a full embargo that excluded only a narrow range of humanitarian aid. The USA first began enforcing economic penalties against Cuba in response to the overthrow of the Cuban government (which was then led by President Fulgencio Batista who was supported with arms by both the USA and Britain) by the communist rebel group led by Fidel Castro called The 26th of July Movement. One of the first acts of the Communist Party of Cuba (which was the political party formed out of The 26th of July Movement) was to seize all properties of the USA and Britain for supporting the previous administration in their suppression of the rebels attempt to overthrow them. This pushed the US government to turn what had previously started as a minor ban on arms trade with Cuba into a much more comprehensive ban on nearly all trade. These economic penalties are intended to remain in place until Cuba achieves a series of subjective political and economic reforms meant to develop free elections and private ownership of businesses and other economic activity.
These penalties placed on Cuba fall into a specific type of economic warfare tools called embargoes. Embargoes include attempts to stop transactions of a particular type from occurring between two nations. When the USA stopped all transactions of weapons between the USA and Cuba , for instance, this was an arms embargo because the trade of any arms was banned. As the ban came to include all other goods, as well as bans on travel, it became an extreme type called a full embargo , which was established in the Trading with the Enemy Act after Cuba agreed to host a number of Soviet nuclear weapons intended to threaten the USA . A full embargo does not allow for any type of transaction to take place between nations and does not allow for travel, or for ownership in either nation by citizens of the other. In the case of the US embargo on Cuba , the restrictions were eased somewhat during the 1970s after the retirement of Fidel Castro as the Prime Minister of Cuba and then again during the 1990s. This transition to something less than a full embargo allowed for humanitarian aid to be distributed, and some forms of restricted travel were also once again permitted with federal permission.
Despite Cuba ās largest trading partner at the time (the USA ) enforcing the most extreme type of embargo available (and even threatening to stop providing economic aid to some other nations who traded with Cuba under the Democracy for Cuba Act of 1992) for such an extended length of time, the USA completely failed to accomplish any of their intended objectives when they established the embargo . The results of the embargo were not harming the administration of the Communist Party of Cuba through economic and social pressures as intended, but instead were to create public backlash against the USA as well as cost inefficiencies in those products that the USA had imported from Cuba prior to the embargo .
The USA , prior to the embargo , was Cuba ās biggest trading partner, importing a majority percentage of Cuba ās total exports in both sugar and tobacco. While itās in the nature of a fully communist nation that all economic decisions are made by the government, since federal entities produce nothing on their own, they are not greatly influenced, if at all, by economic penalties such as an embargo . The people who were harmed by the embargo , then, were those who worked in the industries that produced products for export. The damage caused to the general populace causing widespread resentment of the USA , giving the Cuban government the opportunity to use the embargo (which they call el bloque, meaning āthe blockade ā) as a scapegoat for the natural market unresponsiveness that results from a fully controlled economy (a topic that will be discussed later in this chapter). For some time, the lost business that resulted from the US embargo was purchased by the USSR , thereby strengthening the relationship between the two nations as many Cubans now saw the Soviets creating jobs and stimulating production where the USA had left them with huge inventories left unsold. Rather than the public revolting against the new government as a result of the economic troubles created by the embargo as intended, then, they instead shunned the USA to a great degree.
The USA was purchasing many products from Cuba prior to the embargo rather than producing it themselves for a reason: They could get high-quality sugar, tobacco, and many other products for much cheaper than if they purchased comparable products from some US manufacturer. As a result, the embargo caused prices within the USA to increase. In addition to raw sugar, anything that used sugar also increased in price, causing a wide variety of foods to become more expensive. Tobacco products also increased in price which, at the time, was a rather large concern given that tobacco was still widely used (despite having greatly fallen out of favor in the USA since then).
The fact that the Cuban government did not significantly change over the period of time that the US embargo was implemented is proof enough of its complete ineffectiveness. The only damage created by these economic penalties was to the USA , as the issuing institution. This is the same result that occurs from any policy that broadly prohibits the trade of goods between nations.
Note: The differences between a market economy and a planned economy are not particularly important to the subject matter of this book, but since the terminology is being used, the exact nature of each will be discussed briefly.
Planned: A planned economy is one wherein all economic decisions are made by the government. Since market forces are always at work, properly managing a planned economy would take incredible amount of data received instantly and calculations being made continuously on an astronomical scale. In other words, planned economies are not responsive to market forces which results in resource inefficiencies and shortages . Without competition between companies attempting to take market share from each other, innovation also stagnates. On the other hand, planned economies do tend to avoid many of the problems associated with market economies (discussed below).
Market: A market economy is one in which the government has no involvement in transactions decisions at all. By its very nature, then, a government can only be funded through the profits made by charging for services they provide in direct competition with other companies providing the same service. While market economies allow for maximum responsiveness to demand for products creating optimal resource efficiency, they are also subject to market failures. Without getting into a great degree of detail, some of the most prominent market failures include price distortions, the lack of accounting for externalities, cyclical and speculative volatility, and the creation of natural monopolies. Basically, it would be impossible to have a military, police force, road system, or many other services we rely heavily on available without a system of government taxes and spending.
Mixed: A mixed economy is one that is somewhere in the middle; one in which a nation attempts to benefit from the best traits of both a planned and market economy . Mixed economies can range greatly in the amount of control exerted and also the exact types of control exerted, so it is difficult to classify them. The most successful examples in history have been those that attempt to limit the degree of control exerted to that which is necessary to avoid known and measurable market failures.
1.2 Blockades
The Cuban Democracy Act of 1992 established policy that attempted to threaten any nation that traded with Cuba with retaliation in the form of the elimination of any foreign economic aid distributed by the USA . This attempt to stop all nations from trading with Cuba fell short of being considered a blockade because it lacked the ability to stop trade between Cuba and nations that did not receive US economic aid, and it was not well enforced even for those nations that did receive aid. This policy simply became an empty threat known politically as āsword rattlingā (a term that refers to the act of making noisy threats but with no intent to actually follow through on them). Still, blockades have been attempted quite frequently throughout history and with an equal degree of failure as the US embargo on Cuba . A blockade is an attempt by a nation to stop trade between the entirety of a targeted nation and anyone else on earth. Given that nations are not prone to accommodating written requests to stop trading, enforcement of such a policy typically requires the issuing nation to physically deploy military forces to physically block any shipments entering or exiting the nation, giving way to the name blockade .
Full blockades require that the enforcing nation stops shipments in and out of a nation by patrolling and guarding by force at least the primary shipping routes used by a target nation. By their very nature, blockades have all the same problems associated with embargoes. They create cost inefficiencies for the enforcing nation in those goods that the enforcing nation would have otherwise imported from the target nation. Should the nation enforcing the blockade (or the embargo , although it didnāt quite matter in the case of Cuba ) export goods to the target nation, then the companies of the enforcing nation will lose business equal to the value of the exports to the target nation. Also comparable to embargoes, full blockades lack the ability to specifically target groups leading to generalized economic hardships that will harm workers and companies more than any organization relevant to the conflict. This, as history has shown, creates a great deal of negative public backlash against the enforcing nation. Even more than these problems associated with embargoes, although blockades are a more extreme strategy that utilizes a greater degree of direct control, unless done properly full blockades have the additional problem of being nearly impossible to enforce. Nations are simply too large and the methods...