25 April 2018

The Geopolitical Importance of a Strong Economy

ISA (International Strategic Analysis) is continuing with its work analyzing the global balance of power, measuring as accurately as possible the relative power of all of the world’s countries and political entities.  Last year, ISA published its Country Power Rankings, something that will be updated and released again later this year.  In the meantime, ISA will also be publishing new reports and forecasts covering the global balance of power in the months ahead.

As ISA measures and assesses the global balance of power in the 21st century, it is clear that no aspect of a country’s power is more important than its economic power.  In fact, by all of our measures of a state’s power, the economy comprises a larger share of a country’s overall power than any of the other factors that we include to measure the overall power of a country.  These other factors include:

  • Demographic power
  • Military power
  • Political power
  • Environmental and natural resource power
  • Technological power
  • Cultural power

As we know, there is a strong relationship between a country’s economic situation and these other factors that contribute to the overall level of power possessed by that country.  In fact, there are many ways in which these other six factors contribute to (or detract from) a state’s economic power.  Here are some examples: 

  • Demographic: A young and expanding working-age population can increase a country’s capacity for economic output and growth, whereas a shrinking and aging population reduces a country’s ability to generate growth and places great strains on its public finances.
  • Military: A strong military with high defensive capabilities allows a country to protect itself from external threats that could disrupt its economy, while a country that can project military power further afield can protect its lanes of trade and investment, while seizing potential assets that benefit that country’s economy.
  • Political: A country with a high degree of political power and stability can use these factors to develop tight alliances with other economic powers, facilitating trade and investment and raising the country’s economic growth and sophistication.
  • Environmental and Natural Resources: A country that possesses abundant natural resources can achieve high degrees of self-sufficiency and sustainability, while boosting economic growth by exporting natural resources to countries that lack them.
  • Technological: A country that develops a strong presence in high-tech and high-growth industries and services places itself in a favorable position vis-à-vis its economic rivals and gives it the opportunity to attract investment and talent from around the world.
  • Cultural: Countries that have influential cultures can use this factor to enhance their economic power by attracting talent and investment to their countries, and they can use aspects of their cultures to establish international norms in fields such as language, religious and the arts.

While each of these six other aspects of a country’s power has an impact on that country’s economic power, the same is true in the other direction.  Without question, a country’s economic power has a massive influence on each of these other aspects of power. 

  • Demographic: A country with an economy that can generate growth, wealth and jobs will be better able to sustain growing working-age and dependency-age populations than a country with an economy that is producing little or no growth, wealth or jobs.
  • Military: Wealthier countries with large economies are able to afford to pay for large-scale and modern armed forces, whereas countries with low levels of economic power must make great sacrifices in order to afford higher levels of military power.
  • Political: Countries with economies that provide for growth, wealth and jobs are much more likely to enjoy a higher degree of political stability than those without these factors.
  • Environmental and Natural Resource: A high degree of economic power allows a country to effectively (and sometimes sustainably) exploit its environmental and natural resource wealth, while countries with weaker economies often require outside assistance to utilize their natural resources.
  • Technology: Countries that can afford to invest heavily in research and development, while at the same time creating diversified economies, are those that generally enjoy the highest levels of technological power.
  • Cultural: A strong economy often allows a country to invest and focus more on the development and the promotion of its culture, enabling aspects of its culture to become influential outside of the country’s borders.

There are many examples today of how economic power interacts with the other factors that comprise the overall power of a modern country.  For example, the United States first emerged as an economic power in the 19th century, and eventually, this economic power allowed the US to emerge as the world’s dominant military, political, technological and cultural power in the 20th century.  Likewise, China has been building up its economic power well ahead of most other aspects of its power, but already, we are seeing the impact that China’s rapidly-expanding economy is having on that country’s military, political, technological and cultural power and influence. 

In contrast, the Soviet Union, while considered a superpower during the decades after the Second World War, was never a great economic power, and this lack of economic power undermined its power in other fields, including its military power.  Today, many larger emerging markets wish to be viewed as rising powers, but without a much greater degree of economic growth and development, their relative power levels will remain insufficient.  As such, the first lesson that should be learned by any country wishing to become a major power on the global stage is that it must first develop its economic power, as that is the foundation of a country’s overall power and influence.