Global Power Is Shifting. How Can Leaders Adapt?

The geopolitical order is clearly shifting, and it is often asserted that the world has become “multipolar.” Previous eras of multipolarity, where power is spread across multiple countries and regions, created spheres of opportunity for countries and their companies, as well as significant restrictions on their freedom of action.

But is the world today truly multipolar? To understand the answer, executive leaders must understand what constitutes “power” and “poles” in an era of fast-changing economic and trade dynamics, shifting alliances, widely dispersed control over critical natural resources and industrial technologies, and increasingly asymmetric warfare.

To help leaders identify poles and measure their influence, we have developed the BCG Institute Power Index. Our methodology analyzes data spanning more than 50 indicators across three dimensions through which nations can build power: economic, military, and soft power. It also allows us to track how the keys to global power have changed historically along with shifts in polarity, going back as far as the early 20th century and even to the early 19th century for some metrics. (See the sidebar “Our Methodology.”)

Our analysis shows that the US currently has a strong lead militarily, while China is essentially its economic equal. Europe leads on soft power and, when united and acting in a coordinated way, can be considered a pole—despite lagging the US and China in the military and economic dimensions.

The index also reveals the crucial role that alliances play in global power dynamics. These alliances can broaden, deepen, and amplify the projection of power much more quickly than any single power can strengthen or weaken through organic growth or decline. Using the index, it is possible to test different alliance-based scenarios for the current structure of global power. As mentioned, Europe, allied and united, would be a pole in itself. And if Europe were tightly allied with the US, this North Atlantic pole would vastly outrank China across all three dimensions. Against a divided US and Europe, however, a tightly aligned China and Russia pole would roughly rank as the US’s equal in the index when all three dimensions are combined.

For leaders in governments, businesses, and international organizations, these considerations are not merely theoretical. Although a truly multipolar world has not been a reality since before the Second World War, today it would create a cascade of impacted markets, supply chains, and regulatory implications. Leaders who are aware of these geopolitical dynamics will be best positioned to adapt to the changes.

The Core Drivers of Power

The BCG Institute Power Index brings together the following factors to assess the economic, military, and soft power of nations and alliances. We also consider two capabilities that enable the projection of power through these three dimensions—namely, control over strategic technologies and the characteristics of governing institutions. (See Exhibit 1.)

• Economic Power. This factor includes metrics that indicate economic scale, such as GDP, export volumes, and financial strength, including foreign direct investment, human capital, the depth of capital markets, and the use of the national currency in global reserves. It also assesses control over strategic industries and resources whose importance has shifted through history. In the 19th century, dominance in manufacturing and control over energy resources such as coal were key drivers of power. Today, leadership in state-of-the art semiconductors and digital technologies, as well as the processing of critical minerals, are powerful sources of leverage.

• Military Power. Decisive military capabilities have also shifted through history. A dominant navy enabled the British Empire to project power in the 19th century, for example, before Germany, the US, and Japan bridged much of that gap before World War I. Nuclear weapons helped define the balance of power between the US and Soviet Union during the Cold War.

  Our index also measures the ability to project power within and outside a given nation’s region. It includes the scale of military spending, personnel, and stocks of material as well as the capacity to project force, such as through overseas bases and possession of advanced weaponry.
  

• Soft Power. This composite metric considers many factors, including the provision of international public goods, such as through overseas development assistance programs and contributions to the United Nations. It also takes into account attractiveness to global migrants and measures cultural influence, such as exports of entertainment, and the ability to drive narratives, such as through the control and reach of digital platforms.

Projecting economic, military, and soft power assets into achieving global influence requires several enablers. Among the most important are:

• Technological Capabilities. Key power-enabling technologies change over time. Today, for example, it is clear that leadership in AI, next-generation robotics, semiconductor design and manufacturing, and emerging fields such as quantum computing are critical to national power. Their importance is evidenced by the measures being taken by today’s great powers not only to master these technologies but to control them.

  Such technologies help define global economic competitiveness and are increasingly critical on modern battlefields (especially in an era of asymmetric warfare). Leading digital platforms, meanwhile, enable nations to project soft power through news, entertainment, and social media.
  

• Governance. Strong and stable governance is another enabler for sustaining state power. Throughout history, many countries and empires have fallen not because another power invaded their territory, seized their capital, and took charge. Rather, their declines were fueled by domestic dynamics that led to regime change or collapse. Sound institutions allow states to mobilize and direct military and economic capabilities effectively. In nations with weak governing institutions, by contrast, strategic advantages can be undermined by corruption, poor planning, and an inability to adapt and innovate.

Tracking Power Shifts of the Past

The BCG Institute Power Index identifies the global balance of power between poles over more than a century. (See Exhibit 2.)

What do we mean by a “pole”? A pole is a nation-state (or cluster of nation-states) that meets a threshold level of power in the international system. We define a pole as scoring 10 or above on the composite index or 15 in one or more of the economic, military, or soft power dimensions. This threshold is consistent with both our analysis of historical periods of multipolarity and assessment of key academic literature. For instance:

• In 1914, before the onset of World War I, our index clearly shows the world as multipolar. The British Empire was the leading power with a composite score of 15, followed by the US (14), the Russian Empire (11), and the German Empire (10). None of these poles dominated all three dimensions. France, Italy, and the nascent Republic of China also wielded significant influence, ranking just behind the four top powers. The war that followed redrew the world map. The collapse of the Austro-Hungarian and Ottoman empires restructured not just political relations but also commercial relationships in favor of the victors. British, French, and US firms gained preferential access to newly carved-out or created territories and markets.
• In 1939, global power was even more tightly contested. Gaps between the four poles—the Soviet Union, the US, the British Empire, and the Third Reich—were narrow. The US dominated economically, with 25% of global GDP, and the Third Reich militarily, with 36% of spending. The Soviet Union met the 10% threshold for both economic and military indices.
• After World War II and throughout the Cold War, power consolidated into two poles: the US and Soviet Union. Each accounted for around 30% of military spending for several decades. This bipolar order remained entrenched through the end of the 1980s, segmenting the global economy into Western and Eastern blocs with sharply limited commercial exchange between them.
• By 2000, the world was unmistakably unipolar. The US was at the center of global economic and security architecture, with a composite score of 23. Its economic influence was underpinned by globalization that enabled the increasingly freer movement of goods, capital, and people. All of this was mediated through strong international institutions such as the World Trade Organization, which was created in 1994. Europe, including the UK, had risen to second position after the 1992 signing of the Maastricht Treaty, which significantly increased European integration economically and politically. Moreover, Europe was clearly strategically aligned with the US—militarily, economically, and to a lesser extent, culturally. The Russian Federation, which replaced the Soviet Union in global institutions, tumbled down in the index after the fall of the Berlin Wall and the independence of many former Soviet republics and satellite states. For business, this period of globalization was the high point of capitalist freedom: firms could buy, manufacture, and sell wherever they wanted with limited government-imposed trade and technology restrictions.

Where the World Order Stands Now

Today, the world is more multipolar than it has been since before World War II, and the commercial openness that defined the post–Cold War era is eroding. Tariff and non-tariff barriers are proliferating based on geography, technology, and company origin, fragmenting the commercial landscape in ways not seen in decades. The US remains on top, with a composite score of 19 in 2025, but China, in second position, has rapidly gained ground, with a score of 14. Yet neither the US nor China leads in all three dimensions, and so they must work with allies if they wish to achieve many strategic aims at a global level. (See Exhibit 3.)

Europe—defined here as the 27 members of the European Union, along with the UK and the four members of the European Free Trade Association—is a pole, assuming that it can act in a coordinated manner. It generally does so on trade and economic policy. The region, however, is no longer as closely aligned with the US. Meanwhile, Russia and India do not rank as poles on a global level, with composite scores of 4 and 3, respectively. But we still regard them as key powers, given their unique roles in world affairs, particularly in their regions of influence (see below). In addition to these five key powers, several other nations wield significant global and regional influence on certain issues, but working in concert with other nations gives them better leverage.

The US. As a global economic power, our index shows the US virtually tied with China overall and well ahead of Europe. But the tie with China masks different sources of power. In addition to the larger nominal US GDP, the use of the US dollar as a global reserve currency, which has accounted for around 60% of global foreign reserves, has been a durable source of global US financial power. This allows the US to exert control over international payments systems and influence specific geopolitical situations through economic and financial sanctions. The US also wields influence over international financial institutions through its deep capital markets. Technologically, the US dominates advanced semiconductor design and is a leader in AI. Although quantum computing is in its early stages, the US is a global leader in investment and patents around this technology, giving it the potential to disrupt cryptography, material science, and other fields.

From a military perspective, the US is roughly twice as powerful as China, particularly in its ability to project military force. Key advantages are its unmatched global network of bases, nuclear capabilities, and alliances in Asia, the Middle East, and Europe.

On soft power, the US remains highly influential. Its alliance network is the world’s most extensive, its universities attract more international students than any single country, and US-based digital platforms exert near-global dominance of online discourse.

China. Our index ranks China roughly tied economically with the US but with a different set of advantages. It has a dominant share of global manufacturing and goods exports, particularly in key sectors such as EVs, batteries, and renewable energy systems. And it is the only major competitor to the US in frontier technologies such as AI models. China also controls 60% to 90% of processing capacity for metals and minerals that are critical to energy transition, defense manufacturing, and consumer electronics. However, the renminbi remains far from being a global reserve currency, reflecting only about 2% of international reserves. Meaningful internationalization would require China to open its capital account significantly and make the renminbi convertible, which would carry domestic risks that the central government so far has been unwilling to accept.

In the defense domain, China spends around half as much on its military than the US and lacks the overseas bases and alliances needed to project significant military power globally. But it is a superpower in its region. And in terms of soft power, China has leveraged its financial resources for development assistance programs such as the Belt and Road Initiative, which funds and builds infrastructure projects around the world. Powerful Chinese digital e-commerce and social media platforms, meanwhile, generate significant global cultural influence.

Europe. When the countries we include in Europe act together, Europe ranks as a pole, with a composite score of 13. When these countries act individually, however, the region loses global influence. Taken alone, Germany, the UK, and France, for example, each have composite scores of 2, behind Russia, Japan, and India.

A cohesive Europe can help shape global systems across several dimensions. Europe leads all other poles in soft power, supported by institutional maturity, substantial development assistance, extensive diplomatic networks, and broad cultural reach. Although an integrated Europe is the world’s largest consumer market, it lags behind the US and China as a global economic power. The euro accounts for around 20% of the world’s reserves, but the Eurozone countries do not have an integrated fiscal policy to match the ECB’s unified monetary policy. Militarily, a combined Europe (minus NATO allies US, Canada, and Türkiye) is about on par with China and slightly more powerful than Russia. However, deploying its military capability requires political consensus among many governments, a constraint neither Russia nor China face. 

Russia. Although Russia doesn’t meet our index’s definition of a pole, with a composite score of 4, it remains a key power—particularly in the military domain. Its nuclear arsenal accounts for nearly half of the world’s deployed strategic warheads, and its 1.3-million-strong standing military gives it formidable conventional capability in its region. Russia’s energy exports provide additional economic leverage across parts of Eastern Europe, South Asia, and beyond. However, its economic base has weakened considerably under sanctions related to the conflict in Ukraine as well as structural challenges, and its soft power reach remains limited.

India. With a composite score of 3, India is not yet a pole but is arguably the power with the greatest potential to become one. It has the world’s largest population, a fast-growing economy, and a wealth of technical talent. In recent decades, it has deepened ties with both Western and non-Western partners. Since 2007, India has participated in the Quadrilateral Security Dialogue (known as the Quad) alongside the US, Australia, and Japan, while simultaneously maintaining long-standing defense and energy relationships with Russia. This strategic flexibility, combined with its growing economic weight, makes India’s trajectory and alignment choices important to watch.

Other Significant Powers. In addition to the five key powers, the next five powers according to our index are an eclectic group. They have different sources of power and different economic and political relationships with the US, China, and Europe.

• Japan scores highest among this group on the strength of having the world’s third-largest economy and its soft power, which includes extensive foreign assistance programs and its diplomatic network. These factors give it a global reach disproportionate to its composite score.
• South Korea is a major advanced manufacturing economy, with a strong semiconductor, consumer electronics, and heavy industrial base. South Korea is also a significant military power, ranking sixth globally on our military index, with substantial warship and armored-vehicle inventories.
• Canada has vast energy endowments spanning hydrocarbons and renewables as well as coastlines on three oceans, giving it strategic trade and defense positioning. It is also a top global destination for international students and a significant investor in R&D.
• Australia occupies a strategic position in the Indo-Pacific, is a key US defense partner, and holds significant reserves of critical minerals, including lithium and rare earth minerals.
• Türkiye has a strategic position straddling Europe and Asia that includes control of the Bosphorus chokepoint and a relatively large and well-equipped military.

Outside of the top ten, there are several considerable powers, including Indonesia, Nigeria, Brazil, and Saudi Arabia. These nations have different economic, military, and soft power trajectories, but they can play critical roles not only in their regions but also on a global scale.

How Alliances Redefine the Power Balance

Because the balance of economic, military, and soft power is so dispersed, the ability to project power depends increasingly on a nation’s or region’s choices of allies—rather than just on their individual underlying capabilities. But as decades-old alignments now erode and become more transactional, the configurations of such alliances frequently shift, and their futures are harder to predict.

We explore several hypothetical scenarios of what the global balance of power might look like under different configurations of partners. These scenarios are nonexhaustive, and other cooperation axes could also shape future dynamics.

These three configurations would entail dramatically different implications for business leaders in terms of market access, tech stack choices, supply chain decisions, and many other factors. But by understanding the impact of these configurations on an organization, CEOs can measure their exposure to possible futures and plan accordingly.

Configuration 1: US and Europe are formally aligned, but China and Russia are not. If combined, the US and Europe would represent a pole roughly twice as powerful as China, with a composite score of 32 versus 14. (See Exhibit 4.) A US-Europe alliance would dominate every dimension. On its own, China would remain competitive economically—albeit less so than the North Atlantic duo. However, the US and Europe would be around three times more powerful than China militarily and in terms of soft power. Russia would lag significantly in each dimension.

Configuration 2: China and Russia are aligned, but US and Europe are decoupled. A pole consisting of China and Russia, with a composite score of 18, would be only slightly less powerful than the US on its own and far more powerful than a unified Europe. (See Exhibit 5.) Although there is no de facto alliance in place at present, China and Russia combined would have more economic power than the US while lagging behind in military capability and soft power. A united Europe would still count as a pole, with a composite score of 13, primarily as the leader in soft power. But Europe’s economic and military gap with a hypothetical China-Russia pole would be considerably wider than if China and Russia acted individually. As potential allies, India, Japan, South Korea, Türkiye, Brazil, Saudi Arabia, and Indonesia would carry disproportionate weight in areas such as trade, technology policy, security cooperation, and regional issues. But these nations would be well behind the other poles in all three dimensions.

Configuration 3: China and Russia remain aligned, but US acts independently of a unified bloc of its traditional military allies. A bloc consisting of the nations with whom the US has mutual defense agreements but excluding the US itself—NATO members and Asia-Pacific nations, including Australia, Japan, South Korea, and the Philippines—would have a composite score of 22. (See Exhibit 6.) As such, it would be slightly more powerful than the US and a unified China and Russia, with composite scores of 19 and 18, respectively. This new bloc would also dominate in soft power and be closely competitive with the other two poles in economic and military power.

Adapting to a Multipolar World

There is no question that the global balance of power is shifting. While we may not be in a truly multipolar world at present, the “unipolar moment”—in which so many of our current leaders came of age—is clearly over.

History shows that when polarity shifts, governments are driven to adapt national economic policies to the emerging international reality. And that can create both risk and opportunity for companies, wherever they are headquartered and operate. The end of World War I brought commercial benefits to the victors, as the US, UK, and France redrew the world map in their favor, providing rich rewards to their national companies. Today’s evolving multipolar order presents several imperatives for decision makers aiming to avoid being left behind:

• Stress-test global strategy against multiple future power configurations. Leaders should prepare their companies and organizations for a range of outcomes. They should assess the implications of potential shifts in geopolitical alignments on their investment, sourcing, manufacturing, product development, and global marketing strategies under different scenarios.
• Assess exposure by domain, not just geography. Traditional geopolitical risk assessment focuses on country exposure. But the evolving nature of global power means that exposure to geopolitical blocs and to specific domains—such as semiconductor supply chains, critical mineral processing, digital infrastructure, and financial architecture—may matter more than exposure to specific countries. A firm heavily dependent on certain nations or facilities for chips or processed rare earth elements, for example, faces concentrated risk regardless of where it is headquartered.
• Monitor where new concentrations of capability are forming. The historical record shows that shifts in the levers of power are often visible before they become decisive. But such shifts appear as weak signals that are easy to ignore or dismiss. Leaders should track emerging concentrations in critical and emerging technologies such as AI, quantum computing research, critical mineral processing, and new materials as leading indicators of where geopolitical leverage will shift next.

History has shown that when polarity shifts, government policy can shift too—often quickly. These shifts can have real and sudden impacts on the ability of firms to operate internationally. Trade routes that were open for decades can close within months or even days. Technology partnerships that were routine can become restricted. Supply chains that were optimized for efficiency can become liabilities.

Understanding the dependence of a firm’s operations on nations away from its home base—where it purchases, where it transforms or adds value, and in which markets it sells—is no longer merely a compliance exercise. It is essential to ensuring competitiveness in the years ahead.

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