By Vasiliki Carson, CEO, Sapphire Capital Partners LLP
When I sat down with Bruce Clark, former international security correspondent for The Economist and author of Twice a Stranger and An Empire’s New Clothes, our discussion ranged from the waning days of the British Empire to today’s shifting global order. His insights carried a striking resonance for investors navigating what feels like a new era of de-globalisation, fiscal strain and geopolitical fragmentation.
It is my conviction that capital must be deployed intentionally, grounded in shared values, informed by historical context, and guided by a rigorous understanding of prevailing macroeconomic risks. Bruce’s reflections on empire, nationalism and the limits of free trade illuminate patterns that investors would do well to study.
Bruce reflected on his early years reporting in the 1990s, a time of optimism following the Cold War. “In the euphoria of the Clinton era,” he recalled, “America seemed unchallenged as a military and economic power.” The liberal consensus of the time — free trade, open markets and ever-expanding global integration — seemed permanent.
But, as he observed, “new powers develop… There are countries that benefit from this process at an even greater pace than the supposed global hegemon.” He noted that the G7’s share of global GDP has fallen from roughly 50% in the 1990s to “maybe 30% today.”
This empirical shift demands strategic reconsideration. The reduction in the G7’s share of global output underscores the case for structural exposure to non-G7 growth markets, particularly in Asia. The rise of India and China represents redistribution of geopolitical influence.
For investors, this translates into a renewed focus on:
Emerging Market Investment Opportunities: Beneficiaries of long-term industrial and consumption growth cycles.
Infrastructure and Supply Chain Resilience Plays: Firms localising production in Asia or diversifying sourcing beyond single-country dependence.
Currency Diversification: Managing sovereign risk premiums as fiscal sustainability and monetary tightening diverge across blocs.
As the old Pax Americana gives way to a multipolar world, Bruce’s analogy to the waning Pax Britannica, a decline that was already discernible as early as 1900–1910, is telling: “Protectionist voices began to be heard — much as we hear in the United States today.” For investors, this signals a medium-term environment of decoupling, regionalisation and geo-economic headwinds that challenge the assumptions of the past three decades.
Bruce cautioned against complacency about the economic effects of rising defence expenditure. “There is a lot of boosterish talk about the effect which high defence spending will have on Western economies,” he said, “but it will drain money from the Exchequer… and [may] increase the likelihood of a fiscal crisis.”
For fixed income investors, this is a clear warning. Elevated military budgets may pressure sovereign balance sheets, increasing sovereign risk premiums and the probability of fiscal policy pressure (i.e., tax hikes). In the short term, defence manufacturing and aerospace technology may enjoy cyclical upside, but over time, deficit-financed expansion could:
Push up long term yields as debt issuance rises.
Tighten credit spreads as monetary policy conflicts with fiscal expansion.
Suppress productive investment as public capital is redirected from infrastructure, education and innovation.
This echoes early twentieth-century patterns, when arms build-ups diverted resources away from productive enterprise. As Bruce noted, “The defence-industrial complex risks crowding out productive investment.” For long-term investors, that crowding-out effect can depress productivity growth and undermine the real returns of equity portfolios reliant on innovation-driven growth.
Fiscal discipline is an essential pillar of long-term enterprise success, starting from the earliest stages of company development. Rising government defence ratios and persistent deficits must therefore be considered in the pricing of investments when providing early stage capital. This translates to investment managers required to revisit duration risk, currency exposure, and credit decisions more frequently than in the past.
Bruce’s observation that “the era of free trade has perhaps faded away” marks a profound shift for global markets. For three decades, integrated supply chains and tariff liberalisation underpinned corporate profitability and asset valuation. The reversal of that trend — mirrored in renewed tariffs, reshoring incentives and energy nationalism — introduces friction into trade-linked sectors.
This changing landscape implies differentiated outcomes across asset classes:
Global Industrials and Logistics: May face cost inflation and margin compression as supply chains fragment.
Domestic-Focused SMEs and Venture Sectors: Could benefit from reshoring trends and localised investment incentives, such as the Enterprise Investment Schemes (EIS).
Commodities and Energy Transition Assets: May experience heightened volatility, but also opportunity, as strategic autonomy drives state-backed investment.
Sapphire’s approach is to consider geo-economic impact into our due diligence. Historical analogies remind us that protectionism can be both a brake on growth and a catalyst for technological innovation within a country's shores, depending on where capital is deployed.
In discussing the population exchanges that followed the Treaty of Lausanne, Bruce remarked: “For a social contract to work, there has to be at least a minimum of common denominators… civic rather than ethnic.” His insight transcends politics. It offers a useful framework for evaluating the stability of institutions — whether sovereign or corporate.
I see this concept of a civic contract directly correlated to governance quality in investment analysis. Countries or firms that demonstrate high transparency, respect for the rule of law, and institutional accountability tend to exhibit lower political and governance risk over the long term.
Just as social cohesion sustains a democracy, trust and alignment sustain investment value. In an era of fragmentation, these qualitative factors can be more predictive of performance than raw macro data.
“No geopolitical arrangement we took for granted in the past can be taken for granted in the future.”
Journalist and author
As our conversation concluded, Bruce offered a sober reminder that geopolitical arrangements cannot be taken for granted. However, for investors, this need not be a warning alone. Uncertainty creates mispricing — and with it, opportunity.
Resilience and Adaptability: Companies that invest in digital infrastructure and supply chain security are poised to outperform.
Dual-Use Innovation: Defence technologies that spin off into civilian applications — AI, robotics, cyber-security — present high-growth potential.
Alternative and Private Markets: Offer a means to hedge against public-market volatility driven by geopolitical cycles.
At Sapphire, we interpret historical cycles not as fate, but as frameworks. The late nineteenth century reminds us that unbridled optimism can precede structural shocks — yet disciplined, context-aware capital allocation can turn dislocation into advantage.
In today’s world of fragmented trade, fiscal strain and shifting alliances, resilience, adaptability and trust are not abstract virtues. They are investable themes — and, increasingly, the truest metrics of global progress.
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