Geopolitics

Geopolitics examines how geography influences national and international relations. Analysts in this field examine the people, groups, businesses, and national governments that engage in political, economic, and financial activities and their interactions with one another.

The risk posed by tensions or acts between parties that impact the regular and peaceful development of international relations is known as geopolitical risk. When the geographic and political elements influencing country relations change, geopolitical risk increases. A change in legislation, a natural disaster, a terrorist attack, a heist, or a conflict could all result in a shift.

Economic expansion, interest rates, and market volatility are all impacted by geopolitical risk in the capital markets.

Geopolitical risk can affect whether a security or investment strategy is suitable for an investor’s objectives, level of risk tolerance, and time horizon. The expected return on an asset class might increase or decrease depending on the likelihood of geopolitical risk, which can affect how appealing it is for an investment plan.

Geopolitics from Cooperation and Competitive 

The two main types of actors relevant to geopolitical risk are:

1. State actors; and
2. Non-state actors.

State actors often exercise authority over a nation’s national security and resources through national governments, political groups, or country leaders. Examples are presidents, heads of government, and political parties.

Non-state actors engage in international political, economic, or financial activities without direct access to a nation’s resources or security. Non-governmental organizations (NGOs), multinational corporations, charitable groups, and even influential people like corporate executives or cultural celebrities are a few examples.

We may be able to estimate the possibility of geopolitical risk by comprehending and classifying the risks and opportunities a nation faces. Economic, financial, and national security concerns and social, cultural, and non-state actors significantly impact nations and their governments.

At the most fundamental level, interactions between nations or national governments (state actors) can take either a cooperative or competitive form.

Cooperation is the process by which nations get together to cooperate toward a common objective. A cooperative nation participates in and supports international accords on commerce, immigration, and regulation, as well as standardization of laws, tariff harmonization, and the free flow of information, including technology transfer. A non-cooperative nation has erratic, often arbitrary policies, limits cross-border trade in capital, goods, and people, engages in retaliation, and offers little in the way of technological exchange.

Reasons for Cooperations

Reasons why a country may cooperate with others include:

1. National Security or Military Interest

National security protects a nation, including its inhabitants, economy, and institutions, from external threats like terrorism and natural catastrophes. Geographical variables are crucial in determining how a nation will approach national security and how much cooperation it will choose. Countries that are well-connected to trade routes, like Singapore, or nations that operate as a conduit for trade, like Panama, may be able to influence larger international dynamics by their physical location.

2. Economic Interest

Social stability, another crucial element of national security, can be enhanced by increasing national wealth and reducing income disparity. It is becoming more and more vital for national companies to operate globally. Countries that seek to work together to advance their economic interests are probably motivated by one of two goals: either to level the playing field for their businesses globally or to trade for key resources.

3. Geophysical Resource Endowment

Resource endowment in terms of geophysical resources includes things like livable terrain and climate, as well as accessibility to food and water. Some nations might be completely self-sufficient, while others might depend heavily on others for vital production inputs. When dealing with a country that is in dire need of a certain resource, a nation that is richly endowed with it may discover that it has more political clout.

4. Standardization

The process of defining protocols for the manufacturing, marketing, delivery, or usage of a good or service is known as standardization. When all parties concerned consent to abide by these protocols, standardization results. This can take a variety of shapes, including operational synchronization, process standardization, and regulatory collaboration.

• An example of operational synchronization is containerization, where standards are set for containers to ensure uniformity in size and shape. This increases international trade by reducing the costs and time of shipping goods.
• An example of process standardization is Society for Worldwide Interbank Financial Telecommunication (SWIFT) which was established to provide a global financial infrastructure as financial transactions across borders had become costly for any cross-border transactions.
• An example of regulatory collaboration is the Basel Committee on Banking Supervision (BCBS) which was established to allow for better supervision of the global banking sector and international capital flows.

5. Cultural Considerations and “Soft Power”

These might be rooted in the past, such as enduring political relationships, migration trends, common experiences, or cultural affinities. Countries may use soft power, a non-violent method of swaying the actions of another nation. Soft power can be gradually developed through initiatives like cultural programs, advertising, travel scholarships, and university exchanges.

Hierarchy of Interests

A nation’s objectives and aspirations make up its national interest. It might be a need for independence or for the nation-state to grow. Many of the other crucial demands of the nation may conflict with these. The hierarchy of interests serves as a behavioral guide for governments. The needs at the top of the hierarchy are given priority over those at the bottom.

Power of the Decision Maker

The national interest hierarchy may become less objective where one government may prioritize particular issues differently than its predecessor. The duration of a nation’s electoral cycle significantly affects priority classification. Political parties and individuals making decisions at the national level each have their own set of requirements and influences. It is crucial to recognize that a nation’s cooperative and non-cooperative decisions can be influenced by the motivations of decision-makers.

Political Non-Cooperation

The need for cooperation is not universal for all nations. Over time, most nations work together to standardize some norms on a global level. There are, however, some instances of extreme non-cooperation, where the right to political self-determination is prioritized over the advantages of any cooperative measures.

Question

 Which of the following is least likely a reason why a country may want to cooperate with others?

1. National security.
2. Economic interest.
3. Political self-determination.

The correct answer is C.

Political self-determination is a reason why a country may be non-cooperative. Countries whose political self-determination is more important than the benefits of any cooperation take a non-cooperative stance.

A is incorrect. National security is a motivation for cooperation. It involves protecting a country from external threats like military attacks, cyber-security, and natural disasters.

B is incorrect. Economic interest is another motivation for cooperation. Countries choose to cooperate to secure essential resources through trade or to level the playing field for their companies or industries.