The video explores the current push by nations like China, Russia, Brazil, South Africa, and figures such as Donald Trump to transform the US-led global economic order into a multipolar world system. The vision for this new order varies: some, like Brazil's President Lula, advocate for inclusive multipolarity empowering non-Western countries, while others foresee a retreat of Western influence. However, smaller nations and economists caution such shifts may lead to instability, increased protectionism, and a riskier global environment.

Using the analytical lens of geoeconomics, the video delves into how nations with economic might—hegemons—use threats and rewards to shape international behavior. It uncovers why some sanctions or foreign aid are effective and highlights three lessons: aid can effectively align countries, sanctions deter broader defection, and a hegemon's true power lies in coalition building. The transition from a unipolar to a multipolar order will likely reduce globalization and increase economic threats, with the actual outcome depending on whether the world follows a model of rival power spheres, inclusive cooperation, or economic blocs reminiscent of the Cold War.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. multipolarity [ˌmʌltiˈpoʊlərɪti] - (noun) - A system or situation in international relations where multiple countries or powers (poles) have significant and competing influence, rather than dominance by just one (unipolar) or two (bipolar). - Synonyms: (many-centeredness, pluralism, polypolarity)

In a multipolar world, specifically, Brazil's President Lula has called for inclusive multipolarity where non Western nations have a bigger say in global affairs and where Western powers stop meddling in foreign countries.

2. hegemon [ˈhɛdʒɪˌmɑn] - (noun) - A leading or major power that dominates others in a particular sphere, especially in international relations or the economy. - Synonyms: (dominant power, leader, authority)

These are hegemons. Hegemons are different from other countries who have control over their own firms and citizens in that hegemons have the ability to induce an entity, be it a foreign government or firm, to take an action that it would otherwise not want to take.

3. arbitrary [ˈɑːrbɪˌtrɛri] - (adjective) - Based on random choice or personal whim, rather than any reason or system; subject to individual will or judgment without restriction. - Synonyms: (random, capricious, unrestrained)

We are entering a new phase, one that is more arbitrary, protectionist and dangerous.

4. geoeconomics [dʒiːoʊˌɛkəˈnɑːmɪks] - (noun) - The study or practice of using economic instruments to achieve geopolitical objectives, analyzing how nations use their economic power to influence others. - Synonyms: (economic statecraft, political economy, international economics)

To answer that question, I went beyond the noise of the headlines and dug into the forgotten field of geoeconomics, which can elegantly explain big issues economists often get wrong.

5. sanctions [ˈsæŋkʃənz] - (noun) - Penalties or coercive actions imposed by one or more countries against a targeted self-governing state, group, or individual, often in the form of restrictions or punitive measures. - Synonyms: (penalties, restrictions, embargoes)

Like why both sanctions and foreign aid are much more effective than you think.

6. protectionist [prəˈtɛkʃənɪst] - (adjective) - Relating to policies or actions that protect a country's industries from foreign competition by taxing imports. - Synonyms: (insular, isolationist, defensive)

We are entering a new phase, one that is more arbitrary, protectionist and dangerous.

7. coalition [ˌkoʊəˈlɪʃən] - (noun) - A temporary alliance or union of different groups, especially countries or political parties, for a common purpose. - Synonyms: (alliance, partnership, bloc)

It is just as much about being the best at coalition and institution building.

8. institutions [ˌɪnstɪˈtuːʃənz] - (noun) - Established organizations or systems, especially those with an important role in public or economic life (e.g., UN, IMF, World Bank). - Synonyms: (organizations, bodies, establishments)

Similarly, they recognize that international institutions are closely influenced by the hegemon.

9. deglobalization [diːˌɡloʊbəlaɪˈzeɪʃən] - (noun) - The process of reducing interdependence and integration between countries, often through protectionism or reduced trade and investment. - Synonyms: (fragmentation, decoupling, retrenchment)

If this happens, we'll surely still have painful effects from deglobalization, given that the US and Soviet Union were were never too interconnected, while China and the US certainly were.

10. spheres of influence [sfɪrz əv ˈɪnfluəns] - (noun phrase) - Areas or regions over which a country or organization has significant cultural, economic, military, or political influence. - Synonyms: (zones of control, domains, areas of dominance)

On the left hand side of the spectrum, there's the Russian vision in which we have all of these great powers which have their own spheres of influence where they can freely use economic and non economic threats to maintain leadership over these countries.

11. materialize [məˈtɪriəˌlaɪz] - (verb) - To become actual or real; to happen or occur, especially after being expected or imagined. - Synonyms: (occur, emerge, happen)

Therefore, I expect that if we have the Russian vision, we will see a lot more economic threats materialize, especially between rival powers and countries at their peripheries.

12. incisive [ɪnˈsaɪsɪv] - (adjective) - Clear, sharp, and direct; able to analyze and express ideas well. - Synonyms: (penetrating, sharp, keen)

The Economist is a globally trusted source of intelligent, incisive journalism with a worldwide staff of reporters who cover the most important stories shaping our world.

What a multi-polar global economy will actually look like

China, Russia, Brazil, South Africa, and now even Trump. They all want to end the current US designed global economic order and replace it with something new, a multipolar world. In a multipolar world, specifically, Brazil's President Lula has called for inclusive multipolarity where non Western nations have a bigger say in global affairs and where Western powers stop meddling in foreign countries. This vision seems to closely align with that of Trump, in which the US stops policing the world and it rebuilds its struggling industries. At the same time, most economists and leaders of rich small nations warn of impending doom. For example, Singapore's prime minister recently said that the era of rules based globalization and free trade is over. We are entering a new phase, one that is more arbitrary, protectionist and dangerous. So which one is it? Will the multipolar order be more fair and prosperous or will it be more protectionist and dangerous? In other words, what can we actually expect from a new multipolar global economy?

To answer that question, I went beyond the noise of the headlines and dug into the forgotten field of geoeconomics, which can elegantly explain big issues economists often get wrong. Like why both sanctions and foreign aid are much more effective than you think. Remarkably, geoeconomics does not tell us that the multipolar order will be a disaster for sure. But crucially, it will depend on what type of multipolar order we end up with. Will it be a new free for all like the one Russia envisions? Will it be an inclusive rules based order like the one Brazil wants? Or will we end up with something similar to what we saw in the Cold War? Which scenarios we end up with not just shapes global politics, it has drastic implications for inflation, supply chain chaos, and whether or not there will be more crises. Yes, in this video we'll go through each of these scenarios, they're consequences, and then evaluate which one is more likely. But to properly do so, let's first get into a quick lesson on geoeconomics 101.

What is geoeconomics? According to Yale economist Dr. Christopher Clayton and his co authors, geoeconomics is the study about how countries use their economic strength to exert influence on foreign entities to achieve geopolitical or economic economic goals. As you can imagine, there are only a few countries that actually have the economic strength to do this. These are hegemons. Hegemons are different from other countries who have control over their own firms and citizens in that hegemons have the ability to induce an entity, be it a foreign government or firm, to take an action that it would otherwise not want to take. They can do this in two ways. The first is by threatening negative consequences if the target does not undertake the desired actions. And the second is by promising positive benefits. For example, in 2020, China imposed several tariffs on Australian imports just after it called for an international investigation into the origins of COVID 19 these are negative economic consequences China imposed for doing something China did not like. On the other hand, China has rewarded countries with positive benefits, such as loans and investments through the Belt and Road Initiative if these countries allowed Chinese firms to control strategic ports and other infrastructure. Similarly, the US famously gave loans and grants to European countries that resisted communism under the Marshall Plan and is now threatening China with sky high tariffs if it doesn't stop subsidizing key domestic industries. But as you may have noticed, only some of these threats and rewards produce the desired outcome. For example, the Marshall Plan did arguably stop the spread of communism in Europe. However, China's tariff against Australia did not significantly change Australia's behavior, and China then quietly dropped them in 2024. So why are some threats and positive benefits successful while others are not?

Well, following the logic of geoeconomics, countries that are targeted by a hegemon essentially have two options. The first is the inside option, and the second is the outside option. If a country chooses to be inside the hegemon system, it may get certain benefits, like better market access or access to loans in the hegemon's currency. But in return, the country will have to undertake political actions that the hegemon wants it to do. These could be economic actions, like, for example, respecting intellectual property or respecting foreign courts if they order your country to repay foreign investors. But the hegemon may also demand political actions, such as joining it in a war against a foreign country or voting alongside it in the un. If the target country would not have chosen this action on its own, such a request will clearly have a negative value. However, the target country knows that if it refuses the request, it will end up outside the hegemon system. This means that it will lose rewards such as preferred market access or preferred access to loans. To make matters worse, if it chooses this outside option, it will likely face negative consequences such as sanctions or tariffs. So for each request, the target country compares the value of staying inside the system versus the cost of being outside of it. For example, in the case you see here, the hegemon's request is more costly than all the rewards that the target country receives inside the system. But thanks to the threat of sanctions and tariffs, the target country chooses to comply anyway and remain Inside the hegemons system. This geoeconomic framework can help us understand why great powers often take actions that make little sense from a purely economic perspective.

Specifically, I found three geoeconomic insights that helped me rewire my economist brain to make more sense of the multipolar world order. The first is that foreign aid is more useful than economists typically give it credit. Every so often, economists argue that aid from one state to another has failed to make developing countries richer. Take the billions that the US has sent to Egypt, for example. USAID used to claim on its website that it helped Egypt become a success story in economic development, but it rightly got criticized for that by economists because there is really very little evidence to back that up. However, USAID to Egypt makes total sense if we look at it through through the lens of geoeconomics. As USAID raised the value of the inside option for Egypt, leading it to stray away from the Soviet Union's economic system and later making it hard to refuse the US's request to make peace with Israel. The second way geoeconomics gave me a new perspective was by challenging the narrative that sanctions are largely ineffective because they do not get countries to do what you want. Did North Korea, Iran or even Russia suddenly comply with the US political demands after being sanctioned? No. But if we follow the geoeconomics framework, we can see that these sanctions did signal to all other countries that stepping out of the US led system would be very expensive indeed. After all, as Dr. Clayton and his colleagues, if the hegemon does not carry out its threat against one entity today, then other entities may think they will also be let off the hook in the future.

Thirdly, and finally, geoeconomics tells us that being a successful economic hegemon is not just about being a big strong independent economy. It is just as much about being the best at coalition and institution building. That is, geoeconomists recognize that the hegemon is much more powerful if it can get a coalition of countries to go along with it. Similarly, they recognize that international institutions are closely influenced by the hegemon. This could explain why despite staying at roughly the same percentage of global output in dollar terms, US global power has gotten way less. Crucially, it was not the US economy, it was that of the US main coalition partners Europe and Japan that became economically far less important. So the inside option of being inside the US led order is now less attractive and the outside option less painful because the US coalition is far less powerful. Indeed, as Dr. Clayton and his co authors note, US sanctions against Russia were far less painful than it could have been because the coalition did not include China and India, which were large alternative buyers for Russian energy.

These insights from geoeconomics are absolutely crucial, I believe. To get a better idea about what the multipolar global order will actually look like, first we need to clarify that in all historical global orders there are economic hegemons, plural. But in a unipolar global order, the world is dominated by one hegemon, whereas in a multipolar global order, it is dominated by multiple hegemons. So what is the economic effect of switching from a unipolar to multipolar global order? The geoeconomics papers that I read contained two key predictions. The first prediction is that multipolar worlds tends to be less globalized. Specifically, as you can see here, in a unipolar world order, global trade tends to go up and money moves across borders more easily. The simple explanation for this is that if a hegemon's coalition is strong enough, it will be extremely expensive for countries to deny its political requests. This then leads us to our second prediction which which comes from an economic model by Professor Fernando Broner and his co authors, which predicts that only a hegemon of intermediate size will use threats. The reason for this is that small hegemons do not really have the economic power to threaten others. On the other hand, a super dominant hegemon often does not need to threaten anyone because it is already really clear to everyone how powerful it is. So the second prediction is that the multipolar world order, which is by definition dominated by multiple intermediate hegemons, will have more economic threats and they will be acted upon more. These can be negative threats like tariffs and sanctions, but crucially, they can also be positive threats like giving aid and loans to countries, which can then later be removed if countries do not follow the local hegemon.

These two predictions can explain why Singapore's Prime Minister was so pessimistic about the new global order. Singapore is not a hegemon and it is very dependent on both global trade and finance. On the other hand, bigger nations like Brazil, Russia, India and China are logically more optimistic as they have far larger home markets. However, as history shows, they may be careful what to wish for, as some of these countries have benefited tremendously from globalization. Meanwhile, others have a naive vision about what a multipolar world will actually look like.

So what do these visions look like and how likely are we to get them? Let's have a look at three plausible scenarios and how likely it is that we get each of them. These three scenarios differ primarily in terms of how de globalized the world will become and how likely it is that we will see more economic conflict. On the left hand side of the spectrum, there's the Russian vision in which we have all of these great powers which have their own spheres of influence where they can freely use economic and non economic threats to maintain leadership over these countries. However, as we've seen with Ukraine, the South China Sea and now with Kashmir, great powers do not agree on the borders of these spheres of influence. Therefore, I expect that if we have the Russian vision, we will see a lot more economic threats materialize, especially between rival powers and countries at their peripheries. This is similar to what we saw in the 1930s and could bring economic trade and finance crashing down. Down. This is Singapore's horror scenario.

To counterbalance this, there's a second scenario which Brazil's President Lula has called inclusive multipolarity. In this scenario, South Africa's President Cyril Ramaphosa has said we reiterate our commitment to inclusive multilateralism and upholding international law. In other words, in this scenario we, rather than competing for spheres of influence, great powers work together inside existing institutions like the United Nations. Now this may sound very naive, but as a European living in a small country, right, Besides three local hegemons that all at some point considered my home country as part of their sphere of influence, I can confirm hegemons working together with lots of trade is actually possible. But then again, the US did play a big role in the creation of the European Union and as did the memory of how bad the great wars were. Therefore, I personally think the middle scenario, a second Cold War scenario, is the most likely.

Now in this scenario we may see the re emergence of two economic blocs, one centered around China and one around the us. Both these great powers then have their own economic institutions and coalitions of like minded countries. If this happens, we'll surely still have painful effects from deglobalization, given that the US and Soviet Union were were never too interconnected, while China and the US certainly were. And in this scenario we'll absolutely see a lot of conflict and uncertainty between these blocs, but it will be far less so than in Russia's spheres of influence scenario.

So how likely are these scenarios exactly? Nobody knows for sure, but if I had to bet my money on it, I would put 40% of it on Russia's spheres of influence vision, 5% on Brazil's inclusive multipolarity scenario and 55% on the Cold War 2 scenario. Of course, in reality the multipolar world order will end up somewhere in between. And practically for most of you watching, these three scenarios can be seen as a scale about how bad the two predictions about a multipolar world order will get. Brazil's optimistic scenario may have more global trade and less economic conflict than we see today, but Russia's spheres of influence this world will almost certainly have far less trade, far less financial freedom, and more economic threats like tariffs and sanctions. This would be terrible for economic growth, inflation and asset prices, but it may actually be good for some countries, like indeed Russia, that are already incredibly isolated in the current global order dominated by the U.S.

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