Geoeconomics Shifts the Focus from Prosperity to Power

Economists have long maintained that global economics is a positive-sum game, where one nation's success doesn't necessarily come at another's expense. However, this view has been challenged by recent geopolitical developments.

The Pax Americana, which dominated the world order for about 70 years after World War II, created a rules-based system where direct international power plays were discouraged. Nations focused on raising living standards, as Deng Xiaoping famously declared 'to get rich is glorious.'

This era has given way to a more confrontational world, where governments are using economic strength to pursue geopolitical objectives. The European Central Bank's Annual Research Conference next month will focus on this emerging field of study.

In this new landscape, the question of who holds the world's leading economic power is no longer straightforward. China, the United States, and the European Union are the three major economic superpowers. Yet, different measures of economic size yield different results, with some indicating that the US still leads, while others show China far ahead.

The relationship between economic size and geopolitical power is complex. A nation's economy may not directly translate to its influence on world affairs, as seen in the conflict between the US and Iran or the EU's aid to Ukraine against Russia.