In the wake of the coronavirus pandemic, emerging supply chain challenges across all sectors, Russia’s unprovoked war on Ukraine, as well as trade and geopolitical rifts between key global players deepening, many have asked whether the age of globalization, which followed the end of the Cold War, is over.

With the world having become increasingly interconnected and interdependent in the years that followed the collapse of the Soviet Union, fears that globalization is dead are likely overblown, but, as the Wall Street Journal pointed out earlier this year, it is certainly changing.

The world is becoming more fragmented, and, as Jared Cohen, president of Global Affairs and co-head of the Office of Applied Innovation at Goldman Sachs wrote earlier this month, “in the 2020s, everything is geopolitical.”

As he outlines: “Each great power has a privileged position in the global economy, and they all face new risks and uncertain futures.” 

He elaborates:

“The United States is leaning more into its status as the holder of the world’s reserve currency, using the dollar and related payment systems to sanction adversaries and competitors. China is leveraging dependency on its position in supply chains. And Russia—with nowhere near the power of China or the U.S., but with more appetite for risk—has wielded energy to intimidate and coerce its neighbors and limit global support for Ukraine. There is no country or multilateral organization that has the capacity to arbitrate these tensions.”

With the above-referenced events at the top of this decade and the accelerating global push towards net zero carbon emissions a new class of states have entered the spotlight in the global geopolitical realignment – the “geopolitical swing states,” and their role could grow exponentially in the coming years.

Goldman Sachs’s Cohen defines a geopolitical swing state as “critical to the world economy and balance of power” but without “the capacity by themselves to drive the global agenda, at least for now.” He adds that “as long as the tensions between the U.S. and China continue to get worse, they will have outsized abilities to navigate geopolitical competition and take advantage of and influence it.” 

According to Cohen, there are four – often overlapping — categories of geopolitical swing states:

• Countries with a competitive advantage in a critical aspect of global supply chains;
• Countries with a unique ability to make themselves attractive for nearshoring, offshoring, or friendshoring;
• Countries with a disproportionate amount of capital and willingness to deploy it around the world in pursuit of strategic objectives; and
• Countries with developed economies and leaders who have global visions that they pursue within certain constraints.

As Cohen concludes, “[t]he rise of geopolitical swing states may balance the great powers and help stabilize the global order. Their interest-based decision-making could be a source of consistency in uncertain times. Or their newfound prominence may increase global instability by putting more actors and variables in play. But even if today’s world is not yet multipolar, a rising group of countries recognize that they can determine the course of world events. Those geopolitical swing states are aware that their power may be unsustainable, or event fleeting and they are determined to take advantage of the current window of opportunity.”

While the rise of the geopolitical swing states has business implications for multinational businesses and investors, these trendlines are have real-world implications for U.S. stakeholders from a policy perspective, and, in the critical mineral resource realm, underscore the importance of a comprehensive all-of-the-above approach to securing critical mineral resource supply chains.

As Cohen closes:

“For years, geopolitics mattered more to certain industries than others. Now they matter to everyone.”

The sooner U.S. policy stakeholders realize this and pursue a comprehensive “soup-to-nuts” approach that embraces nearshoring, offshoring, and friendshoring, while also focusing on bolstering the domestic critical minerals framework, the better.