Geopolitical Research and Geopolitical Economics

Giving a definition

Macroeconomist Christian Takushi has advanced Geopolitical Research to incorporate geopolitical forces and proposed the concept of Geopolitical Economics to highlight the changing nature of our world economy. He has proposed following definition:

Geopolitical Economics is a kind of Geopolitical Research. In contrast to traditional geopolitical analysis, it is decidedly more driven by academic analysis than ideology. It is primarily macroeconomic analysis & reasoning that takes into account geopolitical forces and factors. How geography and control over all types of resources  are not only shaping the political process and foreign policy, but increasingly the economy and financial markets. Nevertheless not in exclusive mono-causality, but with causality in both directions. Geopolitical interests are increasingly driving economic and monetary policy, but economic interests are also shaping military, foreign & energy policy. This reflects the complexity of a fast-evolving globalised economy with its feedback-loops.

Because “Geopolitics” encompasses all factors related to the geography & resources of nation states (from river-grids, impassable mountains, minerals, gas, oil . . to . . labor force, population, their religion and political system), and those factors are undergoing dramatic changes, Macroeconomic Analysis can no longer focus solely on monetary and financial phenomena as it did during the Cold-War era. It will otherwise continue to produce unacceptably inaccurate Economic Outlooks. The post-modern Global Economy is becoming increasingly geopolitically-influenced, thus we live in the era of Geopolitical Economics.  

(above definition sprang from over 20 years of exposure to academic theory, empirical research and practice as an economist & investment manager. It is the result of real-life work, decision making and the fact that most political and geopolitical research is ideological, not independent and not practically relevant for business owners and investors. How will a geopolitical risk impact the economy, trade and currencies? Which sectors will benefit or suffer? Investors cannot afford to worry about every crisis somewhere in the world. Having said that, businesses and investors need to embrace the new realities of a world in which geopolitical and political factors are influencing policy decisions, the economy and financial markets.)

The rise of Geopolitical Economic Research is in part a response to the fact that over the past two decades world equity, bond & derivatives markets were dramatically affected by so-called external shocks and forces. Some of the biggest moves in financial markets were not driven by financial variables, rather policy makers, geopolitics, etc.  Example: The recovery of equity prices from 2009 to 2015 was mainly achieved by a massive intervention of US policy makers. They drove the prices of Government Bonds higher in order to lower Bond Yields in financial markets, single-handedly shifting inflation & risk expectations out of a “Liquidity Trap”. The rise of China and other powers as key trade partners, biggest US creditors, but also contenders for global supremacy played a role in the magnitude and timing of policy-making.  

Wikipedia offers one of the best definitions for both Macroeconomics and Geopolitics: (here only excerpts)

Macroeconomics .. is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies. With microeconomics, macroeconomics is one of the two most general fields in economics.

Geopolitics .. is the study of the effects of geography (both human and physical) on international politics and international relations. Geopolitics is a method of foreign policy analysis which seeks to understand, explain, and predict international political behaviour primarily in terms of geographical variables. Typical geographical variables are the physical location, size, climate, topography, demography, natural resources, and technological advances of the state being evaluated. Traditionally, the term has applied primarily to the impact of geography on politics, but its usage has evolved over the past century to encompass wider connotations.

Although a synthesis is needed, the main objective remains

Christian Takushi and his team have developed a synthesis of Geopolitical and Macroeconomic Analysis that can lead to interpretations and predictions that at times go against the consensus of mainstream financial and broad media. Nevertheless, the main objective is to provide as clear a future outlook of the Global Economy as possible. Geopolitics in Christian’s research is not an end in itself, rather the necessary broader analysis in order to capture the dramatic changes in the post-modern world economy, i.e. since the end of the Cold War.  

A growing number of decision-makers want to have access to the insights gained through this distinctive broader approach (Geopolitical Economics). The conclusions of this approach often differ from the consensus. We endeavour to offer decision-makers a consistent Geopolitical Macro Perspective that could allow them to weigh opposed rationales and to make better and more balanced decisions.  As every other analytical approach, this approach has also its disadvantages, thus it may not be ideal for everyone. Every approach has its place and reason of existence. This approach is not designed to replace traditional political analysis nor traditional geopolitical analysis, rather to complement them. Many have said after a conference where Mr. Takushi gave the keynote speech “this is different, it is an economist’s approach to political analysis”.  

Traditional political and geopolitical analysis is often confrontational and driven by ideology, competition and at times by the need to advance one party’s interests at the expense of other parties. Our economics-driven approach is more driven by the desire to analyse, understand and forecast.

The methodology, filters and constraints are explained in the methods and approach section of this site.