Financial Strength and the Foundations of National Power

x

Financial strength is the cornerstone of state power, it's the quiet force that determines whether ambition can be funded, shocks can be absorbed, and dominance can be sustained over time.

Financial Strength covers the state of a nation's macroeconomic foundations, the depth and stability of its financial system, and its capacity to mobilise capital for development.

This research note provides a comprehensive assessment of national capability in financial strength across multiple dimensions. We introduce the domain and its strategic significance, present high-level national assessments using Pareto frontier methodology, and conduct detailed analysis of each of GINC's eight capability groups. The analysis includes five national case studies examining diverse strategic approaches, scenario testing and sensitivity analysis of national assessments, and exploration of data patterns including correlations between capability groups and alignment with published national framework definitions.

Contents

Introduction
National Assessments
Capability Groups
National Case Studies
Scenarios and Sensitivity Analysis
Data and Definitions

Introduction

Financial Strength is one of nine domains assessed within the National Capability Framework, positioned under the Economic Capability pillar with components covering monetary/currency stability, sovereign credit, growth trends, financial market development, international financial linkages, sovereign wealth, regulatory quality in finance, and capital availability. Together, in creating a country's Financial Strength, these metrics indicate the extent to which a nation’s economy is resilient to shocks, trusted by investors, and capable of financing both public and private sector needs.

Figure 1. Critical Capability Domain Overview

Emerging National Assessments

GINC’s emerging national assessments use synthetic expert simulations to evaluate each nation across individual capabilities. For every capability, nations are assessed against a structured rubric ranging from No Plans (NP), indicating no current intention to develop the capability, through to AAA, representing performance at the global frontier.

Capability Groups, such as Financial Markets Depth & Liquidity, aggregate the underlying capability ratings to represent the group’s overall capability level. Within the Financial Strength domain, these groups, listed in figure 1, comprise of 3 individual capabilities.

At the domain level, GINC expresses national capability in Financial Strength using the Pareto frontier, which evaluates nations based on whether they dominate, or are dominated by other nations across all underlying capabilities. Rather than weighting indices such as Capability Groups, the Pareto approach places countries into peer groups, or Tiers, according to their relative position and distance from the capability frontier.

It is important to understand not just whether domination occurs, but also how domination is formed. This is seen in the capability profiles of nations, understanding the shape of competitive advantage.

Through this Pareto domination analysis, it is identified that France, Germany, Singapore, Sweden, the UK, and the US are operating on the frontier, with nations like the UAE and Norway a tier below.

Figure 2. Financial Strength Capability Tiers

Further Pareto frontier analysis in a capability domination matrix seen in Figure X outlines the patterns of capability dominance among nations.

To read the matrix: each cell shows how many capability groups the column country dominates the row country in. Dominance occurs when the column country scores strictly greater than (not equal to) the row country in a given capability group. For example, if the United States (column) and Germany (row) shows a value of 8, this indicates that the US outperforms Germany in 8 of the underlying capability groups. As countries can not dominate themselves, some cells are marked with "-".

Figure X. Capability Domination Matrix: Cross-National Performance Comparison

[table here]

Capability Groups

Financial Strength is one of nine domains in the National Capability Framework, comprising 24 underlying capabilities organised into 8 capability groups. GINC's framework provides a standardised taxonomy that enables systematic cross-national comparison of Financial Strength. Figure X presents the top five nations in each capability group, ranked by their average capability score.

Figure X. Top 5 Nations by Group (countries are wrong)