The Rules-Based Order

Understanding what it is, how it works, and why it matters for investors.

"He who makes the rules, rules the world."

This phrase epitomizes the foundation of modern international relations, where the concept of a Rules-Based Order (RBO) is frequently cited as a framework for global governance.

Advocates argue that it ensures stability, fairness, and cooperation among nations, thereby reducing conflict. However, critics contend that it serves as a system of control, benefiting the dominant global hegemon while marginalizing others.

Or perhaps it is both, and merely opposites sides of the same coin.

We will examine both perspectives, using Robert Gilpin’s International Political Economy to explain the foundational ideals of the RBO and John Perkins’ Confessions of an Economic Hitman to expose an alternative interpretation. Additionally, we will explore how the financial system, regulatory structures, and militaries have been used throughout history.

The Rules-Based Order and Global Capital Markets

Global capital markets do not operate in a vacuum. Every stock traded, every bond issued, and every currency exchanged flows through an intricate web of regulations, policies, and institutions that reinforce the Rules-Based Order (Gilpin, 2001).

The system dictates who gets access to capital, under what terms, and at what cost. It is not a free market—it is a structured hierarchy where the dominant players write the rules while the rest must play within them. When a developing nation steps out of line, it suddenly finds its sovereign bonds downgraded, foreign investment drying up, or its currency in freefall (Hudson, 2018). Conversely, when a favored ally needs a bailout, the liquidity taps miraculously turn on.

This is not coincidence; it is the mechanics of power in action. (Stiglitz, 2002)

And to successfully navigate these markets, one must first understand how the system actually works.

Investors, policymakers, and business leaders alike must recognize that money moves according to geopolitical interests, not just economic fundamentals. Market crashes, debt crises, and inflationary spikes are not just economic phenomena but often deliberate byproducts of financial engineering (Perkins, 2004).

Recognizing these forces is not just an advantage—it is a necessity for survival as investors attempt to navigate the landmines ahead. After all, if you don’t understand how the system works, how can you possibly expect to surive in it, let alone thrive in it?

If you truly want to grasp how the system operates beneath the surface, you first need to explore a foundational concept—one that American political scientist Robert Gilpin outlined in his seminal work on geopolitics.

But what exactly is this order, and why does it shape everything we see today?