The Pentagon conducted a large-scale economic warfare simulation earlier this month at Ft. Meade. As reported by Politico, this
“first-of-its-kind war game … focused not on bullets and bombs — but on how hostile nations might seek to cripple the U.S. economy, a scenario made all the more real by the global financial crisis.The two-day event near Ft. Meade, Maryland, had all the earmarks of a regular war game. Participants sat along a V-shaped set of desks beneath an enormous wall of video monitors displaying economic data, according to the accounts of three participants. …But instead of military brass plotting America’s defense, it was hedge-fund managers, professors and executives from at least one investment bank, UBS – all invited by the Pentagon to play out global scenarios that could shift the balance of power between the world’s leading economies.”
According to the Politico piece, we got clobbered by the Chinese and taken down a peg by the Russians:
“At the end of the two days, the Chinese team emerged as the victors of the overall game – largely because the Russian and American teams had made so many moves against each other that they damaged their own standing to the benefit of the Chinese. …[t[he event left [participant Paul Bracken] questioning one prevailing assumption about economic warfare, that the Chinese would never dump dollars on the global market to attack the US economy because it would harm their own holdings at the same time. Bracken said the Chinese have a middle option between dumping and holding US dollars – they could sell dollars in increments, ratcheting up economic uncertainty in the United States without wiping out their own savings. ‘There’s a graduated spectrum of options here,’ Bracken said.”
It’s encouraging to see nontraditional threats such as economic warfare being seriously considered, although there has been a marketed lack of attention to economic warfare concepts except within the context of Chinese “Unrestricted Warfare” theory. Most important, though, is Bracken’s own point about China’s middle option. It challenges conventional wisdom about the risks to China inherent in an economic warfare approach. It also underscores the asymmetric nature of Chinese strategy against the United States, a strategy that probes for weak points with irregular weapons instead of engaging in a futile effort to match US conventional power. Economic warfare can be considered a financial counterpoint to the “anti-access” strategy China is developing in the Taiwan Strait.
Of course, the existence of a capability is different from evidence of intent. So far, there has been little observed evidence challenging the consensus view of China as a power rising within the constraints of the current international system.