Why the forever wars are ending, and what it means for frontier capital

For the better part of 3 decades, the global economy ran on a quiet and rarely stated premise, which is that instability in certain regions of the world was not a malfunction of the system but a feature of it.

This is because the destabilisation of a region generates two distinct and sequential revenue streams, first the weapons sold into the conflict and then the reconstruction contracts awarded once the fighting subsides, and for as long as that arrangement held, the major powers had every reason to keep the cycle turning. This was often enacted through proxy nations that absorbed the human cost while the financing and the contracts flowed elsewhere.

The argument I want to make here, drawing on a framework that has gained currency among financial commentators, including Simon Dixon, is that this model is now being dismantled, not out of any sudden moral awakening but because a larger and more profitable business model is being assembled in its place. And the new model requires the one thing that the old model was structurally incapable of producing, which is stability.

Dixon's framing identifies 3 power structures that compete for control of Western capital.

The first is the Financial Industrial Complex, the world of banks, asset managers, and the institutions that move money across borders.

The second is the Military Industrial Complex, which monetises conflict through defence procurement and the long and lucrative tail of reconstruction.

The third, and the newest, is the Technological Industrial Complex, which monetises computation, and which is now building data centres, robotics, and surveillance infrastructure at a scale that has no real precedent in economic history.

What looks from the outside like incoherent or even contradictory foreign policy is, on this reading, better understood as a contest and collaboration among these three factions over which one writes the operating rules of the next two decades.

The decisive variable in that contest is the physical nature of the technology being built. A buildout valued in excess of $1 trillion is not a portfolio of abstractions; it is a network of enormous, power-hungry, water-cooled, capital-intensive facilities called data centres that depend on uninterrupted electricity, functioning supply chains, and jurisdictions that behave predictably across a planning horizon measured in decades.

You cannot site a hyperscale data centre in a theatre of active war, and you cannot underwrite a 20-year financing structure against a backdrop of engineered chaos. Where the Military Industrial Complex profited from fragility, the Technological Industrial Complex cannot tolerate it, and this single structural fact reorganises the incentives of nearly everyone whose capital has now been committed to the latter.

This is also why the political rhetoric around traditional alliances and open-ended overseas commitments has shifted so abruptly, and so confusingly, for observers who still read foreign policy through a 20th-century lens.

The scepticism toward permanent military entanglement among many American pundits and podcasters, in this reading, an isolated ideological development; it is the political expression of a capital base that has migrated from the war economy toward the computation economy, and that now wants the state to stop underwriting the former so that it can accelerate the latter. The faces change because the money has already moved.

I would caution, however, against reading any of this as the arrival of peace in the ordinary and comforting sense. The more sober version of the thesis holds that the transition itself may be violent, because the incumbents of the war economy will not surrender their business model quietly, and because the very liquidity required to finance the technology buildout may be summoned through the same engineered energy shocks and controlled crises that have always served to justify monetary expansion.

What is ending is therefore not conflict as such but conflict as the central organising logic of capital, which is a narrower and more precise claim, and it is precisely the claim that matters for those of us who allocate from the periphery rather than the centre.

It is worth being precise about the alignment that produces this outcome, because the contest is not symmetric. The Financial Industrial Complex, which once profited comfortably from financing both the wars and the reconstructions, has discovered that the returns available from the computation economy are larger, more compounding, and far less politically exposed than those available from the war economy, and so the money has increasingly chosen to stand with the technologists rather than with the generals.

When 2 of the 3 complexes converge on the same preference for stability, the third is no longer setting the agenda; it is defending a position, and positions that are merely defended tend, in the end, to be conceded.

For Bangladesh, and for frontier markets generally, the implications run through a chain that is worth tracing carefully. A world that begins to price stability at a premium is a world in which the great energy chokepoints, the Strait of Hormuz foremost among them, are managed toward normalisation rather than maintained as instruments of leverage. And a normalised oil price is the first link in a sequence that South Asian economies feel with unusual force.

For an oil-importing economy that has spent the last several years defending its currency against a swollen import bill, the easing of that bill translates first into a more stable taka, then into receding inflation, and then into the gradual restoration of the real returns that foreign portfolio investors require before they will re-enter a market they had quietly written off.

This is the transmission mechanism that should occupy every serious investor on the Dhaka Stock Exchange. The institutional-quality names that anchor this market, the strongest banks, the dominant telecom operators, the large pharmaceutical franchises, are not cheap today because the underlying businesses are weak; they are cheap because foreign capital applied a country-risk premium calibrated to a world of permanent volatility, and that premium is exactly what a stability-seeking global order begins, over time, to compress.

The re-rating, when it comes, will not be the product of any single earnings surprise; it will be the local echo of a global reallocation away from war as a service and toward infrastructure and computation as a service, the latter of which offers returns that are both higher and considerably more durable.

None of these licenses complacency, and the timing of such transitions is notoriously difficult to call. The point for policymakers is to recognise that the country's pricing is partly hostage to forces that originate very far from Dhaka.

And that the most productive domestic response is to remove every avoidable obstacle in the path of returning capital, from the friction that still encumbers cross-border investment to the discretionary risk premia that our own regulatory machinery sometimes imposes on our most creditworthy institutions.

The forever wars are ending because they have become unprofitable to the very people who once financed them, and the frontier markets that read this shift early, and that position themselves ahead of it rather than behind it, will be the ones that capture the peace dividend rather than merely reading about it after the fact.

Sajid Amit, PhD, is a development professional, capital markets and macro advisor, with work experience in Morgan Stanley and BRAC EPL, and has been awarded investment research awards by Morgan Stanley and BlackRock UK. He can be reached at sh2367@caa.columbia.edu.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.