📈 economics

The Political Mobilization of Geoeconomic Leverage: Insights from Public Choice

Drawing on public choice theory, this paper argues that domestic political incentives often drive states to overuse geoeconomic leverage for short-term gains, thereby eroding their long-term strategic power unless restrained by domestic opposition from firms bearing the costs.

Original authors: Loïc Sauce

Published 2026-09-08

📖 7 min read🧠 Deep dive

CC BY 4.0

Original authors: Loïc Sauce

Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). ✨ This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer

In the modern world, nations are deeply connected by a vast web of trade, finance, and technology. For decades, economists viewed these connections primarily as a source of mutual benefit, where countries exchange goods to make everyone richer. However, a growing field of study known as geoeconomics has shifted this perspective. It recognizes that these same economic ties can be turned into weapons. When one country relies heavily on another for a critical resource, such as a specific type of computer chip or a unique energy supply, the provider holds a form of leverage. They can threaten to cut off that supply to force political change, a tactic often called coercion. But this power is not static. Just as a person might learn to walk without a crutch after a leg injury, countries targeted by such threats often work hard to find new suppliers, build their own technology, or change their supply chains. This process, called adaptation, means that using economic power today can actually weaken the ability to use it tomorrow.

This dynamic creates a complex puzzle for political leaders. They must decide how aggressively to use their economic leverage right now. Do they squeeze a rival country as hard as possible to win an immediate advantage, even if it means that rival will eventually break free and the leverage will disappear? Or do they hold back to preserve the relationship for the future? A new study by Loïc Sauce, a researcher at Istec Business School in Paris, explores this question by looking at the internal political pressures that drive these decisions. The paper argues that the leaders making these choices are not always thinking about the long-term health of their nation's strategic power. Instead, they are often reacting to immediate political needs, such as satisfying powerful domestic industries or securing votes. The research suggests that these short-term political incentives can lead a country to overuse its economic weapons, damaging its own long-term strategic position in the process.

The study builds a simple model to understand this tension. Imagine a powerful country that has a strong economic grip on a neighboring nation. This grip exists because the neighbor depends on the powerful country for something vital. The powerful country's government can choose to apply pressure, perhaps by banning exports or imposing strict rules. This action brings an immediate benefit, such as a diplomatic concession or a political victory. However, the model shows that this pressure also triggers a reaction. The targeted country, facing the threat, begins to invest in alternatives. They might build their own factories, find new trading partners, or develop new technologies. As a result, the original dependence weakens. The more pressure is applied today, the less leverage the powerful country will have tomorrow.

To understand the best possible outcome for the nation as a whole, the researcher first establishes a "national benchmark." This is a theoretical scenario where a leader acts with perfect foresight, caring equally about the country's success today and its power in the distant future. In this ideal scenario, the leader would apply just enough pressure to gain a benefit without destroying the very source of their power. They would balance the immediate gain against the future loss, preserving the economic relationship for as long as it remains useful. This represents a rational, long-term strategy for maintaining national strength.

However, the paper then introduces the reality of politics. Real-world leaders often face different incentives than the idealized national benchmark. First, political leaders often have shorter time horizons than the nation itself. An elected official might be focused on the next election cycle, while the consequences of losing leverage might not be felt for a decade. If a leader cares much less about the future than the nation does, they are more likely to exploit their leverage aggressively today, ignoring the fact that it will vanish tomorrow. Second, coercion often creates winners and losers within the country applying the pressure. While the nation might suffer some economic costs, specific groups might gain. For example, a protected domestic industry might benefit from a ban on foreign goods, or a government agency might gain more power and budget by managing a new security policy. If these groups are well-organized and can offer strong political support to the leader, the leader may feel a strong urge to use coercion, even if it hurts the country's long-term strategic interests.

The study finds that when these political incentives are strong, the result is often "geoeconomic overuse." The country applies more pressure than is wise for its own long-term security. It burns through its strategic asset too quickly, accelerating the target's ability to adapt and escape. The leader gets a short-term political win, but the nation loses its future power. This is not a guaranteed outcome, however. The model also shows that the opposite can happen. If the groups that suffer from the coercion—such as exporters who lose foreign markets or companies that rely on global supply chains—are strong enough to organize and oppose the policy, they can force the government to hold back. In this case, domestic political opposition can act as a brake, preventing the government from using leverage too aggressively and inadvertently preserving the nation's long-term power.

The research highlights a crucial distinction between having economic power and knowing how to use it. A country might have a dominant position in a critical industry, giving it the potential to coerce others. But whether it actually uses that power, and how hard it pushes, depends entirely on the internal political landscape. The structure of the economy determines where the leverage exists, but the political system determines how it is mobilized. The study suggests that the same economic situation can lead to very different policies depending on who holds power, how long they expect to stay in office, and which domestic groups are most vocal.

This insight changes how we should view international conflicts. It is not enough to simply look at the economic data to predict what a country will do. We must also look at the political machinery driving those decisions. A country might have the economic capacity to crush a rival's supply chain, but if its own domestic industries are too dependent on that rival, or if the political leaders are too focused on the next election, they may choose restraint. Conversely, a country might have a modest economic advantage but a political system that rewards aggressive action, leading it to overuse its leverage and weaken itself in the long run.

The paper also points to the importance of institutions. Rules and organizations can help align short-term political actions with long-term national interests. For instance, international agreements or strong domestic laws can make it harder for leaders to exploit leverage for quick political gains, effectively forcing them to think about the future. This suggests that the preservation of a nation's power is not just a matter of economic strength, but of political design. The ability to resist the temptation of immediate gain is a strategic asset in itself.

Ultimately, the study offers a clear warning about the nature of power in an interconnected world. Economic leverage is a renewable resource only if it is managed carefully. Using it too hard today can exhaust the supply for tomorrow. The political choices made in the present shape the strategic reality of the future. When leaders prioritize immediate political returns over the long-term preservation of their nation's leverage, they risk a self-defeating cycle where the very tools they use to secure their power end up destroying it. The research does not claim that this always happens, but it shows that the conditions for such a mistake are common in modern political systems. It reminds us that in the game of global power, the most dangerous enemy of a nation's future strength is often its own short-term political appetite.

Technical Summary: The Political Mobilization of Geoeconomic Leverage

Problem Statement
Contemporary geoeconomics has established how states derive strategic power from economic dependencies, network structures, and the inability of targets to substitute critical inputs. However, this literature largely treats the intensity of coercion as a given or focuses on the economic sources of leverage, paying insufficient attention to the domestic political incentives that determine how aggressively existing leverage is utilized. A critical gap exists in understanding the intertemporal trade-off: while coercion yields immediate strategic returns, it induces adaptation by the target (e.g., diversification, R&D), thereby eroding the stock of dependence and future leverage. This paper asks how domestic political incentives influence the political choice of coercion intensity when today's use alters tomorrow's economic structure.

Methodology
The paper employs a parsimonious two-period model integrating insights from public choice theory with a dynamic framework of geoeconomic leverage.

Environment: A hegemon ( $H$ ) and a target ( $T$ ) interact over two periods ( $t=1, 2$ ). The state of the world is defined by the target's degree of economic dependence ( $d_t \in (0,1]$ ) on a relationship $H$ can mobilize.
Coercion and Payoffs: In each period, $H$ chooses an intensity of coercion $x_t \in [0,1]$ . The immediate national payoff is $g(d_t, x_t) = a d_t x_t - \frac{c}{2}x_t^2$ , where $a$ is the productivity of dependence and $c$ represents increasing domestic costs (e.g., lost trade, disruption).
Adaptation Mechanism: The core dynamic feature is that coercion induces adaptation. Dependence in period 2 is determined by $d_2 = d_1(1 - \phi x_1)$ , where $\phi$ captures the target's responsiveness in developing substitutes. Thus, higher $x_1$ reduces the stock of leverage available in period 2.
Political vs. National Benchmarks: The model contrasts two decision-makers:
1. The Long-Run National Benchmark ( $S$ ): Maximizes the sum of current and discounted future national payoffs, fully internalizing the erosion of future leverage.
2. The Political Decision-Maker ( $P$ ): Maximizes an objective function that includes an additional current political return ( $q x_1$ ) and may discount future leverage more heavily ( $\delta_P \leq \delta_S$ ). The parameter $q$ represents the net political return from organized interests (e.g., protected industries vs. exporters).

Key Results
The analysis yields a formal proposition regarding "geoeconomic overuse":

Proposition 1 (Political Overuse): Under standard assumptions (interior solutions, positive costs), the politically chosen intensity of coercion ( $x_P$ ) is greater than or equal to the long-run national benchmark ( $x_S$ ). The inequality is strict if either the political horizon is shorter than the national horizon ( $\delta_P < \delta_S$ ) or if current political returns favor coercion ( $q > 0$ ).
Endogenous Erosion: Because $x_P \geq x_S$ , the resulting dependence in period 2 is lower under political optimization ( $d_2^P \leq d_2^S$ ). Politically rational incentives can lead the state to exploit a strategic asset more aggressively than is optimal for its own long-run strategic interests, accelerating the erosion of its future coercive capacity.
Condition for Restraint: The model does not predict a systematic bias toward aggression. If the domestic firms bearing the costs of coercion are sufficiently organized such that the net political return is negative ( $q < 0$ ), and this opposition outweighs the short-horizon effect, the political choice can result in restraint ( $x_P < x_S$ ).
Non-Uniformity of Policy: Identical structural opportunities for coercion (same network positions, substitutability) do not guarantee identical policies. The intensity and form of coercion depend on the domestic institutional and distributional environment.

Key Contributions

Bridging Geoeconomics and Public Choice: The paper connects the economic analysis of leverage (networks, choke points, adaptation) with public choice insights (heterogeneous interests, collective action, political horizons). It treats leverage not just as an input to policy but as an endogenous state variable affected by political choices.
Intertemporal Political Choice: It isolates a specific mechanism where the political choice of current coercion intensity determines the future stock of leverage, a dynamic often absent in static geoeconomic models.
Refining the Concept of Strategic Assets: It demonstrates that the "strategic value" of a sector is not static; it is dynamically altered by the political mobilization of that value. The paper distinguishes between the existence of leverage (structural) and its mobilization (political).
Institutional Interpretation: It offers a public choice interpretation of hegemonic self-restraint, suggesting that preserving long-run leverage requires institutions capable of aligning current political incentives with future strategic value, potentially through international commitments that raise the cost of short-run exploitation.

Significance and Claims
The paper claims to provide a "deliberately focused" and "parsimonious bridge" between two literatures. It does not seek to replace existing geoeconomic frameworks regarding the sources of leverage but rather to explain the political production of geoeconomic policy.

The primary significance lies in showing that the political production of geoeconomic policy can diverge from the state's long-run strategic interest.
It argues that economic structure determines the opportunity for coercion, while political institutions and interests determine the intensity and persistence of its use.
The paper concludes that because current policy modifies future dependence, economic and political structures evolve together, suggesting that future research should examine which political arrangements encourage the exploitation, restraint, or preservation of geoeconomic leverage over time.

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