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Add Economic Policy to Deterrence Planning

As crisis brews overseas, U.S. leaders often turn first to sanctions and the like. But the Pentagon acts as if economic coercion doesn’t matter.

American defense leaders have adapted over the years to shifts in technology and conflict — for example, accepting space and cyber as principal warfighting domains and integrating them into planning and thinking about deterrence and escalation. But national security policymakers are overdue to incorporate economic instruments, such as sanctions and trade controls, into planning for conflicts and crises.

From Russia and North Korea to Iran and Venezuela, U.S. presidents and lawmakers have long employed varying levels of economic pressure to alter the policies of foreign governments. Some of these tools – for instance, severing links between a country and the international financial system – can impose greater costs than some uses of military force. Yet policymakers have given too little thought to how different types of economic pressure intersect with different forms of military coercion.

One way to do better would be to develop a whole-of-government framework for conflict escalation, as we recommend in a new Center for a New American Security report. The National Security Council should coordinate an interagency effort to formalize this framework, working with independent experts and international allies, and then adopt it in the planning process. Equally important, U.S. government officials should publicly discuss the finalized framework so that partners and competitors do not misunderstand what it means when the United States uses powerful economic tools. 

This idea constitutes a rethinking of the “escalation ladder” developed by Herman Kahn in the 1960s to conceptualize different stages of conflict. Of the 44 rungs on Kahn’s ladder, only two include economic measures: the second rung refers vaguely to “political, economic and diplomatic gestures,” while the twentieth rung refers to the much more sweeping step of a “worldwide embargo or blockade.” Almost all of the other rungs concern the threat or use of military force. 

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Some defense thinkers have suggested updates to Kahn’s ladder to incorporate the cyber and space domains. Yet no one has made a similar effort to bring economic coercion into play. 

One cause (and effect) is that national security analysts and experts are woefully unequipped to understand and shape how economic tools—that are often a first resort of U.S. policymakers—should be used against adversaries and competitors. This is especially urgent as great power competition between the United States and China takes on a heavily economic character, as Defense Secretary Mark Esper has noted.

Developing and publicizing an escalation ladder that incorporates both military and economic forms of coercion would improve deterrence and reduce the chances of unintentional conflict escalation. 

Clearly laying out the costs the United States will impose in a given scenario allows an adversary or competitor to more clearly understand their incentive to refrain from provocative actions. This increases the chance that U.S. officials can induce the desired behavior with a threat rather than the actual use of sanctions, military force, or other coercive instruments. Also, this may help avoid the scenario where the targets of sanctions are backed up against a wall and find it politically difficult to make concessions to the United States, a situation in which they are more likely to retaliate and escalate. This problem is particularly acute amid surging anti-Americanism and nationalism, which can lead governments to spurn, rather than accommodate or engage, the United States.

An updated escalation ladder would also clarify what U.S. policymakers mean with each particular step, reducing the risk that an adversary would perceive an action as more, or less, damaging than intended. This would both increase the potency of threats and reduce the risk of accidental escalation.

Finally, this new framework would facilitate efforts to de-escalate conflicts by climbing down the ladder – for instance, by lifting trade controls or withdrawing military forces. Although national security planners tend not to give de-escalation as much attention as escalation, it is a critical part of preventing conflict and moving from conflict to cooperation. 

What might a new whole-of-government escalation framework look like? In brief, it would rank coercive actions based on their anticipated effects – from threats alone to actions causing catastrophic consequences. Developing this ranking would itself be a major endeavor, as it would require the U.S. government interagency process to undertake sophisticated analyses that weigh the severity of various military and non-military actions based on the full range of their typical or expected effects. Given variation in the effects of different coercive actions in different scenarios, a fully developed escalation framework would be best represented not by a ladder but by a model that allows for greater complexity in more dimensions, such as a lattice or grid. But using the ladder analogy to illustrate the concept is a good, and intuitive, place to start. 

In a simple rendering, a whole-of-government escalation ladder that incorporates both military and non-military actions could have seven steps: 

7. Catastrophic actions: Kinetic attack with high-yield nuclear weapons.

6. Devastating actions: Large-scale kinetic attack with conventional weapons, comprehensive trade embargo and blockade, cyber-attacks that incapacitate entire critical infrastructure sectors.

5. Highly damaging actions: Sustained air strikes on military targets, sanctions that restrict financial flows between target and other countries, destruction of satellites used for societal or military functions 

4. Damaging actions: Provision of arms to groups rebelling against government, trade measures that restrict export or import of sophisticated technology, jamming of satellites used for societal or military functions.

3. Harassing actions: Show of military power short of using force, targeted sanctions on government officials or institutions, trade restrictions that disrupt supply chains involving sophisticated technology, cyber attacks that disrupt a government network.

2. Public threats: Public threats to impose military, economic, cyber or other costs.

1. Private threats: Private threats to impose military, economic, cyber or other costs.

The incorporation of tools of economic coercion into a conflict escalation framework need not entail the further militarization of U.S. foreign policy or weaponization of economic interdependence. The broad field of economics need not be considered a new warfighting domain, and economic policymaking should certainly not be transferred from civilian agencies to the Defense Department. Instead, the notion of considering economic measures alongside other policy measures that are seen as accepted areas of security contestation and conflict is designed to help the U.S. government catch up with the character of contemporary global affairs. Fundamentally, international competition no longer recognizes a clear divide between military and non-military instruments of foreign policy. 

For the sake of effective foreign policy and defense planning, U.S. security leaders should pursue a transparent effort to bring thinking about deterrence and escalation in line with realities about the uses of economic coercion in conflict. Expanding, maturing, and formalizing the way that U.S. leaders view, and communicate about, economic coercion in situations of conflict may have an even more important outcome in minimizing a march into aggression. It will help policymakers be clearer in their messaging, protect security and international norms more effectively, and reduce the risk of our future conflicts spiraling out of control.

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