Consistency and predictability

Consistency and predictability | Daily Tribune

Toyota’s long-term expansion in the USA was not driven by short-term incentives but by confidence in a predictable regulatory environment, reliable contract enforcement and stable macroeconomic policy.

Apple’s global supply chain similarly depends on predictable trade rules, secure shipping lanes, and relatively stable currency systems. When uncertainty rises, firms do not innovate — they hedge, delay, or exit.

Contrast this with environments marked by abrupt policy reversals. Argentina’s repeated currency controls and regulatory swings have driven capital flight and discouraged long-term investment. Businesses cannot plan balance sheets when exchange rates, taxes, or import rules shift unpredictably. In the end, capital does not chase ideology; it seeks predictability.

Governance follows the same logic. States earn trust when policies remain consistent across political cycles and are predictable in execution. This is not rigidity but reliability. Citizens and firms need assurance that laws will be enforced as written, contracts honored, and institutions insulated from sudden political shifts. Where these conditions hold, governance becomes a platform for growth; where they do not, governance itself becomes a source of risk.

At the international level, consistency and predictability underpin hegemony. The modern global economic order was built under US stewardship, embedding rules, institutions, and security guarantees that made global commerce scalable and relatively secure. Postwar frameworks from IMF programs to WTO disciplines lowered uncertainty and transaction costs across borders.

The dollar’s dominance reflects not just power, but trust. The Federal Reserve’s reputation for relative independence and policy coherence helped make the dollar the default currency of global trade and finance.

This is particularly evident in energy markets. The “petrodollar” emerged after the 1973 oil crisis, when the US deepened ties with key producers such as Saudi Arabia. In exchange for security and stability, oil was priced and traded in dollars, reinforcing global demand for the currency.

These arrangements were reinforced by credible commitments. The Carter Doctrine signaled that disruptions in the Persian Gulf will be treated as threats to the US national interest, while the Gulf War demonstrated a willingness to enforce regional stability. Whether one agreed with these policies or not, the signal to the markets was clear: the system would be defended and its rules upheld.

Yet consistency is easier to establish than to sustain. In recent years, more transactional and less predictable policy shifts have begun to erode trust. Trade disruptions, including the US-China trade war, injected uncertainty into global supply chains. The expanding use of financial sanctions, most notably against Russia, has underscored the “weaponization” of the dollar-based system.

Sanctions derive their power from the system’s centrality. However, that same power creates incentives for others to diversify. If access to dollar clearing or reserves can be restricted by geopolitical considerations, countries naturally reassess their dependence. This dynamic has given greater relevance to groupings such as BRICS which is exploring alternatives ranging from local currency trade to new fintech infrastructure.

Still, de-dollarization is not a sudden shift but a gradual process. The dollar remains deeply embedded in global finance, from sovereign reserves to corporate debt markets. Yet marginal changes matter. As more trade settles outside the dollar and reserves diversify, the cumulative effect can slowly erode US financial primacy.

The interplay between stability, energy, and currency dominance becomes specially visible during disruptions in the Middle East. Periods of conflict tighten global oil supply and heighten price volatility. In such moments, the structural advantages of the United States become more pronounced.

As one of the world’s largest producers of oil and gas — particularly after the shale revolution — the US is positioned to cushion supply shocks, both directly through output and indirectly through its influence over global logistics, finance, and security networks.

This creates a strategic paradox. Instability in key regions, while globally disruptive, can reinforce the centrality of the dollar and the broader system. The question today is whether the US responses are strengthening that system or coercing its preservation.

History suggests that declining hegemonies face this dilemma acutely. Yet war is a blunt and risky instrument in an interconnected global economy. Large-scale disruptions in the Middle East would generate volatility that harms allies and adversaries alike. Markets value stability, not shock.

The more durable path is to restore the attributes that built the system — consistency and predictability. This requires clearer policy signaling, restraint in the use of financial coercion, and renewed commitment to a rules-based multilateral order. It also demands recognition that trust, once eroded, is costly to rebuild.

For both businesses and nations, the lesson converges. Power is sustained not by its display, but by its reliability. When actors can plan with confidence, they invest. When they cannot, they hedge. And when enough of them do so, even the strongest systems begin to lose their center of gravity.