Introduction to Geopolitics

State actors are entities like national governments that control a country's security and resources, while non-state actors include NGOs and multinational companies that influence global affairs without controlling national resources.

Political cooperation involves countries working together towards shared goals, which can range from economic to cultural objectives. Cooperation is facilitated by standardization of rules and regulations, promoting smoother interactions between countries.

Countries' cooperation can be influenced by their natural resources, the standardization of engagement rules, and soft power, which includes cultural influence and non-coercive means of persuasion.

Institutions, both formal and informal, play a crucial role in stabilizing political forces internally and externally, thus enhancing a country's capacity for international cooperation.

Countries prioritize their interests based on a hierarchy where essential needs are at the top. This hierarchy guides their cooperative or non-cooperative behaviors based on the perceived benefits and costs.

The priorities and decisions regarding national interests can vary significantly with different political leaders, influenced by the length and nature of political cycles.

Non-cooperation occurs when countries prioritize self-determination over cooperative benefits, which can lead to political isolation or sanctions, as seen in extreme cases like Venezuela.

Globalization is driven by economic and financial cooperation, involving the active trade of goods and services, capital flows, currency exchange, and cultural and information exchange. It is primarily carried out by non-state actors like corporations and individuals, rather than governments.

Companies and investors are motivated to globalize for increasing profits through higher sales and reduced costs, accessing new markets and resources, and intrinsic gains such as personal growth and increased empathy among global actors.

Globalization can lead to unequal economic gains, lower standards in environmental, social, and governance aspects, and significant political consequences which may foster income and wealth inequality and affect local politics.

Political shifts towards nationalism and protectionism, such as those seen in recent US policies, pose threats to globalization. These include increased tariffs and changes to trade agreements which could potentially reverse some aspects of globalization.

Geopolitical risks are categorized into event risks (known and date-specific), exogenous risks (sudden and unpredictable), and thematic risks (evolving over time like climate change or cyber threats).

Investors assess geopolitical risks based on their likelihood of occurrence, the velocity of their impact, and the size and nature of their impact. This assessment helps in determining the relevance of the risk to their investment strategy.

The impact of geopolitical risks can vary widely from immediate market volatility to long-term economic effects. High-velocity risks cause immediate but short-lived impacts, whereas low-velocity risks can have prolonged effects on economic conditions and investment valuations.

Signposts are indicators or events that help investors gauge the evolving likelihood, velocity, or impact of a geopolitical risk. They guide investors on when to take action or adjust their investment strategies.

Geopolitical risks manifest in various forms, affecting asset prices, market volatility, and long-term economic indicators. Investors need to understand these manifestations to manage risks effectively.

Investors act on geopolitical risks by adjusting their asset allocation, employing scenario analysis, and using multifactor models to account for the geopolitical risk factors in their investment decisions.

These tools include military actions, espionage, and alliances like NATO. They can be used to directly influence or coerce other nations, either actively or as a deterrent. Examples include armed conflicts, espionage, and collective security agreements.

Economic tools involve actions that affect trade and economic policies between countries. They can be cooperative, such as trade agreements and common markets, or non-cooperative, such as tariffs, quotas, and nationalization of industries.

Financial tools are used to influence geopolitical outcomes through financial mechanisms. They include cooperative tools like free currency exchange and foreign investment, and non-cooperative tools like financial sanctions and restrictions on foreign investment.

Geopolitical tools often overlap and interact, involving multiple aspects of national security, economic, and financial strategies. Organizations like the EU and ASEAN use a combination of these tools to foster integration and cooperation among member states.

Geopolitical tools and risks can influence a country's comparative advantage in international trade. Factors such as stability, resource endowment, and geopolitical strategies can either enhance or diminish a country's attractiveness for trade and investment.

Countries are categorized into four archetypes based on their approach to globalization and cooperation: autarky (self-sufficient, non-cooperative), hegemony (influential, potentially non-cooperative), multilateralism (cooperative, integrated into global systems), and bilateralism (selective cooperation, often one-on-one agreements).

Geopolitical risk analysis involves assessing the stability and movement of countries within the defined archetypes. Analysts must consider both the current position and the potential shifts in a country's behavior to evaluate the impact on investment and economic outcomes.

Geopolitical actors use various tools that can be categorized into national security, economic, and financial tools. These tools can either facilitate cooperation or escalate conflict, influencing the geopolitical landscape and the associated risks.

The IMF provides financial assistance and policy advice to member countries facing balance of payments problems. It aims to stabilize the international monetary system, promote economic growth, and reduce poverty. The IMF also monitors global economic trends and provides a platform for economic cooperation.

The World Bank aims to reduce poverty and support development in developing countries. It provides financial and technical assistance for projects that improve education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management.

The WTO deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably, and freely as possible. This includes providing a forum for negotiating trade agreements, handling trade disputes, monitoring national trade policies, and providing technical assistance and training for developing countries.