Recommendations:
This proposal is written by the Global Stability Network (GSN). We are a start-up network researching key neglected questions, engaging in dialogue to explore effective foreign policy strategies to strengthen global stability, and communicating our findings with policymakers and citizens. We are a mix of economists, data-scientists, deterrence experts and political scientists with experience in policy-making.
We welcome individuals and organisations who share a similar vision to join our network. For those interested in contributing to this work, please let us know in the comments or reach out to [email protected] or [email protected].
The world faces an unprecedented amalgamation of security challenges that are fundamentally different from those that shaped traditional deterrence thinking during the Cold War. Rising great power competition, technological disruption, climate change, and the erosion of international institutions are creating new risks that existing security frameworks struggle to address.
The limitations of traditional military deterrence have become increasingly apparent:
This research, conducted by the Global Stability Network (GSN), examines alternative deterrence strategies with a particular focus on economic mechanisms. We aim to:
Through building a transnational network of collaborators across the United States, Europe, and China, GSN seeks to contribute fresh perspectives while emphasizing implementable solutions that can help reverse rising conflict risks.
We hope that this post will spark thoughtful engagement here on the forum. We welcome critical evaluation, complementary insights, and constructive challenges from experts across diverse disciplines -- so please don’t hesitate to share your thoughts on our analysis in the comments below (or in private correspondence, if preferred)! Your perspectives will strengthen our analytical framework and help develop more robust policy recommendations for enhancing global security through economic pathways, so please consider writing a response.
This post will refer to economic deterrence as an “alternative” means of securing global stability. By that, we mean to suggest that economic deterrence should be considered as another option in the foreign policy toolkit. We are not saying that economic deterrence should completely replace other foreign policy tools, including different types of military deterrence. We think economic deterrence would be a valuable component of an effective integrated deterrence strategy. But we leave open the question of how economic deterrence can and needs to be combined with other types of threats, incentives, as well as trust-building and reassurance measures – while highly important, this question probably cannot be answered in general terms but instead depends on contextual conditions and different value tradeoffs.
Traditional military deterrence operates on a fundamental premise: that one can prevent aggression (or other undesirable actions) by threatening unacceptable costs in physically destructive retaliation by military means. This approach gained prominence during the Cold War, particularly with the emergence of nuclear weapons, leading to a doctrine of "peace through strength." The theory assumes rational actors will calculate potential costs and benefits before taking aggressive actions, choosing instead to refrain when costs appear prohibitively high.
Military deterrence has historically relied on three elements (see pp. 8-11 of this RAND report):
The traditional approach relying principally upon military deterrence is believed to have helped prevent direct conflict between major powers during the Cold War (for discussions of the so-called “nuclear peace” hypothesis, see Rauchhaus 2009, Istomin 2023, Wilson 2008, Schlesinger 1993, and Mueller 1988). However, the system demonstrates increasing vulnerabilities in today's complex multipolar security environment, where actors appear more willing to test the boundaries.
The combination of these challenges suggests an urgent need to explore complementary approaches to preventing conflict. While military capabilities remain relevant, sole reliance on traditional deterrence appears increasingly risky in our interconnected world.
Economic deterrence represents a sophisticated alternative to traditional military threats in today's interconnected world. While maintaining the fundamental goal of preventing aggressive actions, this approach leverages economic interdependencies and targeted measures to shape leadership decisions through a combination of incentives and potential consequences. Unlike conventional military deterrence, economic measures can offer more nuanced and potentially more effective tools while reducing the risk of catastrophic escalation.
Economic deterrence operates through explicit signaling of potential economic consequences that would arise from particular behaviours to influence state behavior. This approach emphasizes clear advance communication directed at both leadership and public audiences, distinguishing it from traditional sanctions, which are applied as punishment after the fact. The strategy requires articulating concrete economic consequences for transgression over boundaries while simultaneously maintaining pathways for positive engagement and de-escalation.
For economic deterrence to function effectively, several crucial conditions must be met:
The 1973 OPEC oil embargo provides a compelling demonstration of the potential power of economic measures in international relations. The embargo led to a quadrupling of oil prices within a year, triggered the largest post-WWII recession, and created significant political pressure on leaders in the US and other Western nations (pressure that was significant even if it didn’t fulfill the initial objectives associated with the embargo). This case illustrates how economic tools can achieve strategic impacts usually associated primarily with military capabilities.
The use of economic pressure as a strategic tool has evolved significantly over time:
Modern economic deterrence offers precision and flexibility in application. Decision-makers can calibrate pressure through targeted measures affecting specific individuals, sectors, or broader economic relationships. This scalability, combined with integration into existing commercial frameworks, provides powerful tools for influencing behavior while maintaining pathways for de-escalation.
The growing technological sophistication also offers new strength for economic deterrence:
These technological advances, combined with enhanced targeting capabilities, create opportunities for more sophisticated and effective deterrence strategies.
Despite its promise, economic deterrence faces challenges that require careful consideration. Success demands significant economic integration between relevant parties and careful calibration to avoid unintended humanitarian impacts (these impacts can be devastating, as evidenced, for instance, by the UN’s sanctions on Iraq in the 1990s). Economic sanctions can also be viewed by some as just as aggressive and provocative as military action.
The effectiveness of economic deterrence requires candid confrontation with several empirical and conceptual challenges:
Military and economic deterrence present fundamentally different risk profiles in today's interconnected world. Traditional military deterrence, especially when nuclear weapons are involved, carries an irreducible risk of catastrophic escalation (evidenced by close calls of nuclear weapons) that could threaten human civilization. Any chance of accidents, miscalculations, or deterrence failure is concerning, given these extreme consequences, but the problem is exacerbated as risks compound over time (see Hellman's analysis in "Risk Analysis of Nuclear Deterrence” (2021), pp. 17-18). Economic deterrence, while not without risks, generally allows for more controlled escalation and de-escalation pathways, reducing the likelihood of catastrophic outcomes.
Key risk differentials include:
The effectiveness of deterrence strategies must be evaluated against their ability to influence leadership decision-making while maintaining global stability. Historical evidence suggests that economic instability often poses a threat to regime survival (e.g., the weakening of the Chinese Nationalist Party-led regime due to fiscal problems and hyperinflation; the economic troubles that led up to and facilitated the Romanian revolution of 1989). When economies falter, leaders face eroding domestic support and legitimacy challenges; the prospect of such negative consequences from economic measures can be more compelling than external military threats, which may simply unite a country against the external threat.
Military deterrence effectiveness often suffers from credibility problems, particularly in nuclear contexts where threats may appear disproportionate or inherently incredible. Economic deterrence, by contrast, can demonstrate credibility through limited initial actions while maintaining options for escalation. However, economic deterrence is not without its own credibility challenges. Sanctions and other economic threats may sometimes lack immediate coercive power, face enforcement difficulties, or be undermined by alternative financial and trade networks. They can also be seen as illegitimate coercion by target populations. Yet, compared to military interventions, economic threats will probably be perceived as more credible and sustainable, as they allow for incremental and controlled escalation and can be precisely targeted while maintaining channels for negotiation.
Both approaches face distinct implementation hurdles, though economic deterrence generally offers more flexibility. Military deterrence requires maintaining expensive capabilities, perfect communication in crises, and careful calibration to avoid unintended escalation. Economic deterrence demands sophisticated coordination among multiple actors, robust institutional frameworks, and careful consideration of global market dynamics.
Principal implementation considerations for economic deterrence include:
Economic deterrence demonstrates several advantageous characteristics in cost-benefit comparisons. While military deterrence requires massive ongoing investments in capabilities with no other purpose than war fighting, economic deterrence capabilities build upon existing commercial relationships and regulatory frameworks that bring prosperity. The positive externalities arising from a system of mutual economic deterrence through economic integration - including trade benefits and institutional cooperation across boundaries - will likely offset the ecological, social, and economic costs to those sections of society that lose out from open markets. Recent political developments clearly demonstrate that governments need to pay attention to and better manage these redistribution effects or better manage the industrial and economic impacts in other ways (see discussions in Pavnik 2019 and Ballard-Rosa et al. 2021).
Military deterrence and associated damage to trust and arms racing carry substantial additional costs by harming international cooperation and diverting resources from other global challenges. Strong military deterrence postures tend to drive a wedge between states, deepening suspicion and harming trust, with a significant danger of a vicious circle as lower trust leads to greater chances of arms racing. Conversely, developing the capacity for economic deterrence through greater economic integration and higher levels of diplomacy can deepen trust and understanding and strengthen the mechanisms needed for addressing shared threats like climate change and pandemic response. This alignment with broader global governance needs represents a significant advantage in long-term cost-benefit calculations.
Looking ahead, the relative efficiency of economic deterrence is likely to increase as technological advances (e.g., AI, blockchain, and big data, as mentioned above) improve targeting capabilities and enforcement mechanisms, as well as holding great promise in furthering the integration of economies. While both approaches will remain relevant to global security, a shift towards a heavier use of economic deterrence offers a promising pathway for strengthening stability with lower risks and potentially greater effectiveness than a sole reliance on traditional military alternatives.
A successful economic deterrence strategy must be built on foundations that emphasize cooperation and integration for mutual benefit and restraint, alongside credible threats to discourage aggressive behaviour. This requires shifting from reactive sanction-based approaches to proactive frameworks that clearly communicate both consequences and benefits prior to any conflict. The framework should recognize that economic deterrence works best when perceived as legitimate by the international community, when applied between states or blocs of similar economic size, when there is clear transparency and public understanding, and when integrated into broader diplomatic efforts to maintain global stability.
International institutions need to establish clear protocols for:
The implementation of economic deterrence requires careful sequencing and coordination across multiple domains. The first priority is deepening (or maintaining) economic integration between potential adversaries, creating stakes in stability that transcend immediate political tensions. This must be accompanied by the development of clear protocols for imposing and lifting economic measures, ensuring that deterrent threats remain credible while maintaining pathways for de-escalation. Critical attention must be paid to domestic impact within both implementing and target states. If executed well, economic deterrence offers the potential for more precise targeting of pressure points that affect decision-makers while minimizing civilian humanitarian costs compared to military deterrence, which inherently risks physical destruction and loss of life. This precision capability represents a significant potential advantage, though its full realization depends on careful implementation and institutional coordination.
Success in implementing economic deterrence will require a sustained commitment to building necessary institutional frameworks while remaining flexible to adapt to changing circumstances. As global challenges become increasingly complex, pursuing a system based upon integration and effective economic deterrence measures is crucial for developing international stability without risking catastrophic conflict and improving the capacity to develop essential global governance of the catastrophic risks faced by the global community. This demands continued research, policy innovation, and international dialogue to refine and enhance economic deterrence capabilities.
The Global Stability Network invites thoughtful engagement with our analysis on economic deterrence as an alternative approach to reducing global catastrophic risks. We welcome critical evaluation, complementary insights, and constructive challenges from experts across diverse disciplines.
Your perspectives will strengthen our analytical framework and help develop more robust policy recommendations for enhancing global security through economic pathways.
This report represents a collaborative effort drawing on diverse expertise across international security, economics, and strategic studies. We are deeply grateful to all the contributors who helped shape this analysis of alternative approaches to deterrence and global stability.
Echo Huang and Sarah Weiler served as the primary architects of this writing. Much of the content and analysis in the post was developed in cooperation with the rest of the GSN team, Paul Ingram, Sahil Shah, and Ward Wilson, who bring decades of combined experience in nuclear policy, international security, economic analysis, and deterrence theory to the research effort.
We are particularly grateful to our extended research team, whose thorough investigation, analytical rigor, and creative insights significantly enhanced this report:
Jordan Mansfield, Tai Zhang, Minwen Li, Shiyu Bai, Chenxin He, Jiayue Xu, Yuran Liu, Tedd Pan, Zekai Song, Xiaotong Fu, Dantong Xie, Rui Zhang, Yixin Zhao, Kathy Chong, Xiaoxiao Lv, Sixia Liao
Their diverse backgrounds across economics, international relations, and security studies brought invaluable interdisciplinary perspectives to this work.
(evidenced not just by the current administration’s open challenge to many central institutions of the order, but also by behaviour and statements of the previous government and of U.S. senators, see for instance reactions to the International Criminal Court’s issuing an arrest warrant for Israeli leaders Benjamin Netanyahu and Yoav Gallant in November 2024).
