A deeply researched investigation that reveals how the United States is like a spider at the heart of an international web of surveillance and control, which it weaves in the form of globe-spanning networks such as fiber optic cables and obscure payment systems
America’s security state first started to weaponize these channels after 9/11, when they seemed like necessities to combat terrorism―but now they’re a matter of course. Multinational companies like AT&T and Citicorp build hubs, which they use to make money, but which the government can also deploy as choke points. Today’s headlines about trade wars, sanctions, and technology disputes are merely tremors hinting at far greater seismic shifts beneath the surface.
Slowly but surely, Washington has turned the most vital pathways of the world economy into tools of domination over foreign businesses and countries, whether they are rivals or allies, allowing the U.S. to maintain global supremacy. In the process, we have sleepwalked into a new struggle for empire. Using true stories, field-defining findings, and original reporting, Henry Farrell and Abraham Newman show how the most ordinary aspects of the post–Cold War economy have become realms of subterfuge and coercion, and what we must do to ensure that this new arms race doesn’t spiral out of control.
'Underground Empire' argues that because America installed the plumbing of the world's financial system, it must show restraint – that is unlikely, writes Neil Shearing.
Underground Empire: How America Weaponized the World Economy Henry Farrell and Abraham Newman, Allen Lane, £25
The war in Ukraine is being fought on several fronts. One is on the frontline, where both sides appear to have dug in and a bloody stalemate looms. Another lies deep underground in the tangle of technological and financial networks that connect the global economy. On this front, United States backing means the scales are tilted overwhelmingly in Ukraine’s favour.
--- The authors argue that America did not seek to create a global system that it could control
The story of how the US came to dominate the financial and technological networks that connect the world – and how they are now being weaponized – is told in an important new book by Henry Farrell and Abraham Newman, two US academics. There are several reasons to read their book: it is accessible, it is engaging and it is refreshingly concise. But most of all, they get to the heart of how power really works in a globalized economy.
The core of Farell and Newman’s argument is that US influence stems from its control over the plumbing for the global economy, the ‘underground empire’ of the book’s title. This is part financial and part technological. Almost 90 per cent of transactions in the foreign exchange market take place in dollars. At the same time, American tech supremacy means that communication flows between countries tend to be routed through infrastructure that sits on US soil.
Farrell and Newman argue, correctly in my view, that America did not intentionally seek to create a global system that it could control. Rather, it just happened that the US was the world’s dominant economy in the 1990s and 2000s when globalization and technology combined to fuel an explosion in cross-border flows of trade, capital and information. Nonetheless, it is a position that is being increasingly exploited by policymakers in Washington.
--- Some argue that the days of US financial hegemony are over. There are several reasons to doubt this
The response to Russia’s war in Ukraine illustrates this point. Of all the measures imposed by the US on Russia, the most painful have been the sanctions on its banks. These have restricted the ability of US banks to transact with Russian banks, and by extension Russian companies. And since all US dollar settlements touch the US financial system at some point, this has made it much harder for Russian companies to deal in dollars. That’s a problem for them given the dominance of the dollar in the global economic system.
In response, adversaries of the US are increasingly promoting the use of their own currencies to settle cross-border transactions. The most important has been China’s push to expand the use of renminbi in bilateral trade. These efforts have led some commentators to argue that the days of US financial hegemony are over. But as I have written for Chatham House, there are several reasons to doubt this.
One is that any currency that replaces the dollar would need to share similar attributes: it would have to be backed by strong and stable institutions, and be issued by a central bank that operated an open capital account. This will prevent the use of the renminbi on a scale sufficient to rival the dollar.
But another is that the strong network effects outlined in the book will make it hard for other currencies to dislodge the dollar. Accordingly, while a growing share of bilateral trade with China will be settled in renminbi, the vast majority of cross-border transactions will continue to be settled in dollars – and the US will continue to provide the plumbing for the global financial system. Similarly, it is difficult to envisage a world in which the US does not play a major role in facilitating most communication flows.
--- America could deploy its empire to build a commonwealth, in which power and legitimacy reinforce each other, By Henry Farrell and Abraham Newman
What does all this mean? Farrell and Newman argue that as China and Russia seek to untether themselves from the US-dominated system, the world will become more disconnected and increasingly hostile. Accordingly, they argue that US policymakers must step back and, in their words, recognize that ‘with great power comes great responsibility’. ‘The United States could deploy its empire to build a commonwealth, in which power and legitimacy reinforce each other,’ they write.
But it is not clear what this amounts to in practice, other than a laudable pitch for multilateralism and for America to use its influence in more positive ways, such as tackling global tax evasion.
More fundamentally, I think this misreads the situation. While US policymakers may not have set out to create a global system over which they exert such control, the fact that luck and circumstance combined to give it to them has not been unwelcome in Washington.
The era of globalization that defined the 1990s and 2000s has been consigned to history’s dustbin. Rather than integrating, the global economy is now fracturing into two blocs – one that aligns with the US and another that aligns with China, which includes Russia but also large parts of Africa and Latin America.
In this new world, the dominance of the dollar has become the source of huge power and influence that policymakers in Washington will find increasingly difficult to resist exploiting.
亚伯拉罕·纽曼教授 Abraham L. Newman 是乔治城大学埃德蒙·A·沃尔什外交学院政府学和埃德蒙·A·沃尔什外交学院教授。 他是莫塔拉国际研究中心主任。 他的研究重点是全球化产生的政治，是《隐私与权力：跨大西洋自由与安全斗争》2019，《自愿中断：国际软法、金融和权力》2018，《隐私保护者：全球经济中的个人数据监管》2008 ，《数字革命如何革命性》2006。 作品发表在一系列期刊《比较政治研究》、《国际组织》、《国际安全》、《科学》和《世界政治》。
Professor Henry Farrell Henry Farrell is SNF Agora Institute Professor at Johns Hopkins School of Advanced International Studies, 2019 winner of the Friedrich Schiedel Prize for Politics and Technology, and Editor in Chief of the Monkey Cage blog at the Washington Post. He has previously been a professor at George Washington University and the University of Toronto, a fellow at the Woodrow Wilson Center for International Scholars, and a senior research fellow at the Max-Planck Project Group in Bonn, Germany. He works on a variety of topics, including democracy, the politics of the Internet and international and comparative political economy. His first book, The Political Economy of Trust: Interests, Institutions and Inter-Firm Cooperation, was published in 2009 by Cambridge University Press. His second (with Abraham Newman) Of Privacy and Power: The Transatlantic Fight over Freedom and Security, was published in 2019 by Princeton University Press, and has been awarded the 2019 Chicago-Kent College of Law / Roy C. Palmer Civil Liberties Prize and the ISA-ICOMM Best Book Award. In addition he has authored or co-authored 34 academic articles, as well as several book chapters and numerous non-academic publications. He is a member of the Council on Foreign Relations.
Abraham Newman Abraham L. Newman is professor of Government and the Edmund A. Walsh School of Foreign Service at Georgetown University. He is the Director of the Mortara Center for International Studies. His research focuses on the politics generated by globalization and is the co-author Of Privacy and Power: The Transatlantic Struggle over Freedom and Security (Princeton University Press 2019), which was the winner of the 2019 Chicago-Kent College of Law / Roy C. Palmer Civil Liberties Prize, the 2020 International Studies Association ICOMM Best Book Award, and one of Foreign Affairs’ Best Books of 2019, co-author of Voluntary Disruptions: International Soft Law, Finance and Power (Oxford University Press 2018), author of Protectors of Privacy: Regulating Personal Data in the Global Economy (Cornell University Press 2008) and the co-editor of How Revolutionary was the Digital Revolution (Stanford University Press 2006). His work has appeared in a range of journals including Comparative Political Studies, International Organization, International Security, Science, and World Politics.
Review
"A revelatory book." ―Paul Krugman, The New York Times
"The U.S. has made use of a novel, often mysterious set of tools for rewarding those who help it and punishing those who cross it. That set of tools is now a bit less mysterious, thanks to Henry Farrell and Abraham Newman. Their book Underground Empire reveals how the U.S. benefits from a set of institutions built up late last century as neutral means of streamlining global markets." ―Christopher Caldwell, The New York Times
“Farrell and Newman’s book is like an MRI or CT scan of recent world history, giving us a new and startling image of the global body politic, as clear as an X-ray. Cognitive mapping takes on a new aspect with their analysis, as they shift from the technological to the historical, showing both how this new nervous system of world power came to be, and how it could be put to better use than it is now. Given the intertwined complexities of our very dangerous polycrisis, we need their insights.” ―Kim Stanley Robinson, author of The Ministry for the Future
“Underground Empire is an astonishing explanation of how power really works. From fiber optic cables to the financial system, Farrell and Newman show how the networks that knit us together are also powerful coercive tools, providing a subtle and revelatory account of how the United States learned to weaponize its dominance of the world order’s plumbing. A riveting read, essential for understanding how economic and technological power is wielded today.” ―Chris Miller, author of Chip War
“An eye-opening journey into the hidden networks that power the high-tech world, where all roads lead not to Silicon Valley but to suburban Washington DC, bankers and spies matter as much as tech entrepreneurs, and an industry built by the Cold War has become a geopolitical battleground once again. A truly important book to explain―and move beyond―our tumultuous times.” ―Margaret O’Mara, author of The Code
“The sharpest and most striking analysis I’ve seen in years of the state the world’s in, cunningly disguised as a user-friendly business book.” ―Francis Spufford, author of Golden Hill
“Underground Empire tells a riveting story about the deep forces that have shaped our present moment. The book is a portrait not of a single protagonist or event, but rather a system that shapes much of the world today: a web of dollars and data that has, half accidentally, given the United States a new kind of geopolitical control over both its enemies and allies. It is history written in its most powerful form: a view of the recent past that gives us a new lens to better discern our future.” ―Steven Johnson, author of How We Got to Now
If you want to understand where the world economy has been and where it may be headed, you need to read this book. ―Dani Rodrik, author of The Globalization Paradox
"Like an iceberg, most of the power and almost all the mechanisms of economic coercion are below the surface, in the very infrastructure that undergirds international commerce. . . . Underground Empire should rightly stimulate much discussion." ―Wesley K. Clark, The Washington Monthly
"The publication of Underground Empire could not be more timely. Henry Farrell and Abraham Newman offer an important corrective to a dominant narrative in US foreign policy circles that positions the US and other Western governments as innocent by-standers, caught off-guard by their main rivals." ―Times Literary Supplement
"Farrell and Newman set out a compelling thesis, defend it well, and tell a fascinating tale. And when they finish, they leave you with a way to make sense of things that seem senseless and terrible. This may not make those things less terrible, but at least they're comprehensible." ―Cory Doctorow, author of Little Brother
"Farrell and Newman write fluidly and grippingly. . . . As the book jumps from nondescript Northern Virginia office parks housing America’s intelligence establishment, to the boardrooms of mid-20th-century New York banks, to sanctions-dodging tankers traversing the Indian Ocean, it’s not hard to detect the influence of techno-thriller writers such as Neal Stephenson." ―The Washington Post
"Farrell and Newman describe the rise over the past 50 years of what they call America’s 'network imperialism.' In an era where markets were supposedly becoming ever-more disembedded from states, the authors show that the opposite was the case.... The vision one leaves their book with is one of great-power conflict where, as usual, those at the bottom of the world’s hierarchy of wealth continue to suffer the most, with no refuge in sight." ―Quinn Slobodian,The New Statesman
"Captivating. . . . A gripping account." ―Financial Times
