A groundbreaking new study suggests that a nation's geopolitical relationships are nearly as crucial for economic growth as traditional factors like institutional quality and geography. The research clearly indicates that whether a country is aligned with or in conflict with other states directly impacts its wealth.
Quantifying Geopolitical Coherence
To analyze this complex relationship, researchers developed a detailed measure of geopolitical coherence. Using large language models (LLMs), they analyzed over 440,000 political interactions between countries from 1960 to 2019. These interactions spanned the full spectrum of state behavior, from conflicts and sanctions to alliances and critical bilateral agreements.
The Economic Dividend of Friendship
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The study yielded a highly illustrative conclusion:
- An improvement in geopolitical relations by one standard deviation correlates with an increase in GDP per capita of approximately 10% over the subsequent 15 years.
- When a nation transitions from a state of hostility to one of friendliness—such as South Africa following the end of apartheid—its national income can nearly double.
This powerful effect is mediated by several key mechanisms:
- Domestic Stability: Stabilizing foreign policy immediately improves the internal climate, reducing risk and boosting domestic and foreign investment.
- Trade and Technology: Over time, these improved relations intensify trade, open up crucial access to technology, and often lead to a higher level of education for the populace.
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The Cost of Isolation
Conversely, isolation is expensive. Countries that deliberately distance themselves from the world or become subject to international isolation forfeit a significant portion of their potential growth. For poorer nations, the losses can range from 20% to 30% of their potential wealth level, a fate exemplified by countries like Venezuela and Zimbabwe.
Importantly, the research emphasizes that the ideology of the alliances does not matter; the fact of cooperation does. Improving relations yields the same economic benefit, whether the engagement is with the U.S. and Western nations or with Russia and China. The essential ingredient for prosperity is being integrated into global trade and financial networks.
