Sovereign capability is a milestone to hegemony
The goal of a business is to be a monopoly. The goal of a country should be to be a hegemon. Sovereign capability is the only way to maintain it.
One of my business mentors, Matt Dyer, told me, "No one wants to admit it, but the goal of a business is to be a monopoly."
He had sold EatNow to Menulog in early 2015, and the combined group sold to Just Eat for $855 million later that year. Then he did it again with Bookwell (where I met him), an aggregator for booking beauty and wellness appointments, which is now Fresha.
The customers were salons, with the biggest ones on Chapel Street in Prahran, the most leftist street in the most leftist city. He was a hardcore capitalist selling infrastructure to people who were as left as left could get.
Still, every one of those salon owners wanted the same thing Matt wanted. To be the only place people book when they want that service in that suburb.
Nobody objects to monopoly for themselves. They object to it in others.
Thiel agrees
Peter Thiel makes the same case in Zero to One, in Chapter 3.
Capitalism and competition are opposites. Capital accumulation requires margin, and margin requires that someone cannot easily copy you. Under textbook perfect competition, economic profit tends to zero.
Business school teaches perfect competition as the ideal and strategy as the discipline of escaping it.
Everyone lies about their market, and you can tell who is who by the direction of the lie. Monopolies describe themselves as small players in enormous markets, because they are afraid of attention. Non-monopolies describe themselves as dominant in markets defined so narrowly that the definition is the product. The restaurant that is the only place of its kind on its street is telling you it has no pricing power.
The ideal monopoly is earned by making something for which there is no substitute, but it is temporary, because new markets get created and old positions get taken.
Enter geopolitics
The argument doesn't change as you scale from the firm to the state. The goal of a country should be to be a hegemon. Control resources, set the terms of exchange, and hold decisive force.
This is the hegemonic stability theory, developed out of Charles Kindleberger's reading of the 1930s and formalised by Robert Gilpin. Kindleberger's claim was that the Great Depression was as deep and as long as it was because Britain could no longer stabilise the system and the United States was not yet able to. Someone has to hold the currency, absorb distressed goods, and lend when nobody else will. Absent that, the system does not find its own level.
The hegemon holds the reserve currency, writes the trade rules, and borrows cheaper than anyone else. Hegemony is reliably good for the hegemon.
That is the case for why the system needs a hegemon.
Partnerships should be temporary instruments
Every business pretends to love competition. Countries have their own version of the pretence, and it is partnership. The post-1991 consensus said you no longer needed to make things, because you could buy them from friends. Let Taiwan print the chips, let America carry the defence, let China run the factories, and specialise in whatever is left. Comparative advantage plus alliances equals security.
Every serious country signed the communiqués and quietly kept score.
Henry Farrell and Abraham Newman call it weaponised interdependence. The networks that partnership runs on, for money, goods, and information, grow around hubs, and the state with legal jurisdiction over a hub converts position into power. The hub is a vantage point, so whoever holds it sees everything that moves through.
A partnership is a temporary instrument through which both sides are trying to become the hub.
The lien gets called
Europe has just found out what its lien was worth. Seventy years of buying security from Washington looked permanent, right up until the guarantor started asking what it was getting in return. It took one wavering commitment to Article 5 for every capital in Europe to discover that its defence was a subscription.
The alternative is always sovereign capability.
Build what cannot be rented
Superiority should be sought where the leverage sits, and it has to be owned rather than licensed.
In semiconductors the leverage turned out to be the machines that print the chips. In defence it is sensors, autonomy stacks, and the industrial capacity to build a hundred thousand of something cheap. In health it is the manufacturing line, the reference dataset, the trial infrastructure, and the regulatory precedent, because whoever sets the first approved pathway defines the shape of everything that follows it through the door.
Superiority that runs on somebody else's machines and supply lines is a milestone on their road, not yours. Self-reliance is the only strategy that survives a partner's change of heart.