> In the decades since, versions of this story have played out many times, most recently with America’s sanctions against Russia and its measures against China. Adversaries in both cold and hot wars have tried to deprive each other of a strategic commodity, only to succeed in one sense (access to that commodity was reduced) and fail in another (the crunch did not bring about economic collapse or military capitulation). In a book to be published next year, Mark Harrison and Stephen Broadberry, two British scholars, use a theory first set out in the 1960s by Mancur Olson, an economist, to explain this paradox. The concept of a strategic commodity, they argue, is an illusion.
> A good is often described as “strategic”, “vital” or “critical” when it is thought to have few substitutes. America and China have strategic reserves of petroleum, because their leaders think oil cannot easily be replaced, at least in the short run. Some minerals are deemed critical because you cannot build a viable electric car without them. But Olson reckoned very few goods, if any, are truly strategic. Instead, there are only strategic needs: feeding a population, moving supplies, producing weapons. And no amount of pounding, literal or figurative, seems able to alter the target countries’ ability to meet those needs, one way or another.
> To understand why that is, return to the classic definition of what, supposedly, constitutes a strategic good. The starting premise is that a class of goods exists for which there are no substitutes. But substitutes nearly always exist; and if a good really cannot be replaced in the short term, in the longer run it almost always can be. Make a commodity scarce or dear enough, a microeconomist might infer, and the mix of inputs needed to produce output start shifting naturally.
> The lesson Olson took from all this is that the cost imposed on those losing access to a resource, however key, is not the sudden collapse of every industry that depends on it but the more affordable cost of finding workarounds. Over time such costs usually accrue, slowing growth, but they are hardly ever enough to capsize an economy. This suggests that another commonly used economic concept—that of the “supply chain”—is too narrow at best. Modern economies look more like webs, where the severing of one link is rarely sufficient to compromise the entire structure.
> Olson could not have foreseen that economic warfare would develop into the sophisticated tit-for-tat of trade and financial sanctions that has been on full display since Russia’s full-scale invasion of Ukraine in 2022. The commodities those target come in many forms, from credit and energy to “dual-use” goods and software. Their aim, not always explicit, is generally to change the behaviour of their targets and deter others from mimicking them. Export restrictions work directly, by blocking shipments of certain goods to the problematic party, while other sanctions seek to limit access to hard currency by making it harder for their targets to export lucrative goods. Often a combination is used.
> Despite its growing complexity, however, this economic arsenal—largely controlled by America—has mostly misfired. Early attempts were already disappointing. A study in 2007 by researchers at the Peterson Institute for International Economics looked at 174 sanctions campaigns waged worldwide between 1915 and 2000, of which 162 took place after 1945. It found that such sanctions achieved their goals in part or in whole in only one-third of all cases. Success was more likely when goals were narrowly defined, the target state was already economically weak and there was no history of previous antagonism with the enforcing party.
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> In the decades since, versions of this story have played out many times, most recently with America’s sanctions against Russia and its measures against China. Adversaries in both cold and hot wars have tried to deprive each other of a strategic commodity, only to succeed in one sense (access to that commodity was reduced) and fail in another (the crunch did not bring about economic collapse or military capitulation). In a book to be published next year, Mark Harrison and Stephen Broadberry, two British scholars, use a theory first set out in the 1960s by Mancur Olson, an economist, to explain this paradox. The concept of a strategic commodity, they argue, is an illusion.
> A good is often described as “strategic”, “vital” or “critical” when it is thought to have few substitutes. America and China have strategic reserves of petroleum, because their leaders think oil cannot easily be replaced, at least in the short run. Some minerals are deemed critical because you cannot build a viable electric car without them. But Olson reckoned very few goods, if any, are truly strategic. Instead, there are only strategic needs: feeding a population, moving supplies, producing weapons. And no amount of pounding, literal or figurative, seems able to alter the target countries’ ability to meet those needs, one way or another.
> To understand why that is, return to the classic definition of what, supposedly, constitutes a strategic good. The starting premise is that a class of goods exists for which there are no substitutes. But substitutes nearly always exist; and if a good really cannot be replaced in the short term, in the longer run it almost always can be. Make a commodity scarce or dear enough, a microeconomist might infer, and the mix of inputs needed to produce output start shifting naturally.
> The lesson Olson took from all this is that the cost imposed on those losing access to a resource, however key, is not the sudden collapse of every industry that depends on it but the more affordable cost of finding workarounds. Over time such costs usually accrue, slowing growth, but they are hardly ever enough to capsize an economy. This suggests that another commonly used economic concept—that of the “supply chain”—is too narrow at best. Modern economies look more like webs, where the severing of one link is rarely sufficient to compromise the entire structure.
> Olson could not have foreseen that economic warfare would develop into the sophisticated tit-for-tat of trade and financial sanctions that has been on full display since Russia’s full-scale invasion of Ukraine in 2022. The commodities those target come in many forms, from credit and energy to “dual-use” goods and software. Their aim, not always explicit, is generally to change the behaviour of their targets and deter others from mimicking them. Export restrictions work directly, by blocking shipments of certain goods to the problematic party, while other sanctions seek to limit access to hard currency by making it harder for their targets to export lucrative goods. Often a combination is used.
> Despite its growing complexity, however, this economic arsenal—largely controlled by America—has mostly misfired. Early attempts were already disappointing. A study in 2007 by researchers at the Peterson Institute for International Economics looked at 174 sanctions campaigns waged worldwide between 1915 and 2000, of which 162 took place after 1945. It found that such sanctions achieved their goals in part or in whole in only one-third of all cases. Success was more likely when goals were narrowly defined, the target state was already economically weak and there was no history of previous antagonism with the enforcing party.
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