A report by Foreign Policy on Tuesday explores how, for centuries, a nation’s power was rooted in tangible resources that governments could directly observe, measure, and control. These included conscripted populations, conquerable territories, deployable navies, and tradeable goods like oil that could be restricted or released.

According to the report's historical analysis, in the sixteenth century, Spain asserted its dominance through vast armies, expansive colonies, and abundant reserves of precious metals. In the nineteenth century, the United Kingdom held global sway with its unmatched naval power and the economic benefits of the Industrial Revolution. By the twentieth century, the United States and the Soviet Union emerged as superpowers, primarily due to their massive nuclear arsenals.

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In the modern era, power is increasingly drawn from intangible resources like knowledge and cutting-edge technologies such as AI, which fuel economic growth, scientific advancements, and military strength. However, due to their intangible nature and the ease with which they spread across industries and borders, these assets become difficult for governments to manage once they’re “in the wild," according to the report. 

The Foreign Policy report highlights that intangible resources like knowledge and algorithms are far more difficult for governments to control compared to traditional assets. For example, unlike when the George W. Bush administration demanded the return of a US spy plane that crash-landed on Hainan Island in 2001, US officials today cannot compel an adversary to return an algorithm. Similarly, they cannot retrieve the knowledge a Chinese bioengineer acquired from postdoctoral research in the US.

Decline in tangible power

Knowledge has become the most portable and elusive form of power.

The fact that these resources often originate in the private sector and academia further complicates the government’s ability to control or manage them effectively.

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The report highlights that foreign policy has traditionally operated as a two-level game, with US officials balancing domestic actors and foreign adversaries. However, the increasing influence of private companies is now significantly shaping geopolitical outcomes, often with interests that diverge from national objectives.

Challenges of modern governance

According to the report, Meta, the parent company of Facebook, Instagram, and WhatsApp, now plays a crucial role in defining what constitutes truth for the three billion users of its platforms. Additionally, over the past year, American CEOs with substantial Chinese business interests have met with Chinese leader Xi Jinping nearly as often as Secretary of State Antony Blinken.

When the NATO-orchestrated war broke out in Ukraine, billionaire tycoon Elon Musk unilaterally determined the timing, location, and extent of the Ukrainian military's use of his Starlink satellite network.

Deteriorating US capabilities

At the same time, many of the US government’s capabilities are deteriorating, and its traditional foreign policy tools have dwindled.

How is that manifested? Confirming presidential appointments has become so fraught that at least a quarter of key foreign policy positions remained unfilled halfway through the first terms of the last three US presidents, according to Foreign Policy.

This issue is compounded by the rising federal debt, which has led the US to spend more on interest payments than on defense for the first time this year.

Additionally, the Pentagon's reliance on stopgap budget measures—due to Congress's frequent inability to pass a comprehensive annual budget—restricts funding to existing programs only, stifling new research and development initiatives.

This dysfunctional system disproportionately affects new, small, and innovative companies, resulting in the persistence of expensive, outdated weapons systems, while more affordable, innovative solutions struggle to emerge, Foreign Policy argues.

If China were to design a budget process aimed at undermining American defense capabilities and stifling innovation, it might look exactly like the current US system.

Adding to these challenges, the health of the US K–12 education system and research universities—vital for long-term innovation—is also in decline, the report detailed.