Geopolitical terms: Vocabulary for a new world
Changes and unprecedented challenges sprout new trends, market environments, and regimes. Common companions to such shifts are new words and phrases that explain them. On the flip side: As old patterns and dynamics shift, or even lessen in relevance, so too do the terms that accompany them. Make sense of this new world and understand it, one geopolitical term at a time.
Do our words shape the world? Or does the world inform our words? This age-old philosophical question highlights the inextricably intricate relationship between our words and our realities. It’s therefore logical that, as our world shifts, so too do the words we use to speak about it.
Why is this important for investing? Let us give just one example: Investors tend to shy away from riskier assets, such as equities or high-yield bonds, when geopolitical risk rises, as these types of assets are more sensitive to price volatility. How can an investor make informed decisions if they don’t understand the key terms used to explain geopolitical risk?
Following our deep dive into the macroeconomic vocabulary – the terms that shape us – we’re continuing with an explainer on geopolitical terms. While by no means an all-encompassing catch-all list, it sheds light on some of today’s most common geopolitical terms, the meaning of new and emerging wording, and why some classic terms from the past need to be rethought, or even forgotten.
With geopolitics, we refer to the power relationships on a global scale that span across topics like territorial disputes, resources, national interests and population management – and how each country, region or group attempts to reach their goals. It includes both diplomatic power disputes on a friendly level and confrontational power struggles, such as war. It can also take more abstract dimensions, such as religion or ideologies. Put simply, it entails everything that could shape – and reshape – the current and future global order. At a time when the world is facing renewed tensions between the global superpowers US, Russia and China, this term is likely to take on a more prominent role in the news in the foreseeable future.
Some other terms that are related to this topic are the following:
Populism is closely linked to nationalism but carries a specific distinction. While nationalism is an important factor in populism, this ideology specifically speaks to “the people” and depicts “the elite” as a group that disregards their needs and makes their lives worse for it. Populists try to invoke feelings of pride, fear and anger among their voter base, so they feel a “us against them” dynamic, in order to create division among the population.
Here, too, a new term emerged in recent years:
When a country’s government decides to restrict international trade in order to support domestic industries and to improve the domestic economy, it’s also called protectionism. The views differ on this policy. Opponents of protectionism say that it often has the exact opposite effect, and that it could even cause prices to rise . Those in favor argue that such a stance creates jobs for the domestic market and in turn boosts economic activity, and sometimes the notion of national security can also be a driver of protectionism.
Continuing on from protectionism, a country might perceive that a rival nation is benefiting from unfair trading practices when it comes to trade. This can lead a government to implement measures explained above against another country’s imports.
Here, too, views differ on whether these practices are beneficial to the economy of the country issuing the new measures. Proponents say trade wars protect national interests and give an edge to local companies. But critics take the view that such policies have the opposite effect, as companies might end up having to pay more for raw materials, forcing them to pass on price increases to consumers and consequently risking inflation – hence being detrimental not only to the domestic economy, but also the trading relationship with the country the measures are imposed on.
Some of the biggest moves occurred in 2018, when former US President Donald Trump imposed a series of tariffs on everything from steel to aluminum to solar panels and washing machines, impacting goods from the EU and Canada, as well as China and Mexico. In turn, the EU also imposed tariffs on American agricultural imports and products like Harley Davidson motorbikes. China, too, retaliated with duties on American imports. The costs were largely shouldered by importers and the prices passed on to consumers of the countries that issue the new measures, showing that it had the opposite effect of what was intended.
This term dominated headlines after Russia invaded Ukraine earlier this year. The EU and the US imposed a series of sanctions that aimed to weaken Russia’s economy, freeze assets and restrict travel by individuals close to Russian President Vladimir Putin and those seen supporting, financing or benefiting from the war.
Sanctions can also mean that other governments and companies around the world need to comply or otherwise risk legal and financial damage. Let’s take a look at some of the different types of sanctions.
This term refers to a liberal democratic model that has dominated international order since the end of the Cold War when the US became the world’s only superpower at the time. The model is marked by a rules, such as the declaration of human rights, strong relations between North America and Europe, and an emphasis on the values of democracy and peace through established international institutions like the United Nations. Both Russia and China have a certain antipathy against this western-led order, with both countries seeking to bolster their power and upend it.
Dissatisfaction among a population about an event can lead to social unrest, taking the form of protests, riots and resistance. One recent example includes the protests in China about the lingering Covid restrictions, but the Black Lives Matter movement in the US following the death of George Floyd in 2020 is another. In fact, this past decade was witness to numerous occasions of social unrests, including the anti-government uprisings during the Arab Spring and the Occupy Wall Street movement that highlighted economic inequality and how money influences the world of politics. An International Monetary Fund study found that social unrest weighs on economic performance and stock markets.
New terms have emerged:
