To ensure that we do not squander the gains of the last three decades of globalization, let alone undermine our ability to confront the challenges of the future, we must find ways to uphold some level of economic integration and effective international cooperation. But overcoming the forces of fragmentation will not be easy.
LONDON – The world is at last waking up to the ways in which economic interconnectedness amplifies the risks of geopolitical turmoil. But while there is good reason for countries to boost resilience, a wholesale shift from integration to fragmentation, driven by geopolitical hostilities, bodes well for no one’s peace or prosperity.
The global economy is not there yet. While capital flows have declined considerably from their 2007 peak of $12 trillion (22% of global GDP) – a trend that began with the 2008 crisis – economic integration remains strong. Total global trade in goods and services exceeds $40 trillion – a tenfold increase since 1990.
But, from 2016 to 2021, trade restrictions nearly doubled worldwide, owing primarily to tensions between the United States and China. In fact, fragmentation – like globalization before it – would not be possible without China, whose rise transformed the regional competition for economic, financial, and geopolitical clout into a global one. While some hope to balance rivalry with engagement – the European Union views China as “a partner for cooperation, an economic competitor, and a systemic rival” – the dynamics are obviously complex.
LONDON – The world is at last waking up to the ways in which economic interconnectedness amplifies the risks of geopolitical turmoil. But while there is good reason for countries to boost resilience, a wholesale shift from integration to fragmentation, driven by geopolitical hostilities, bodes well for no one’s peace or prosperity.
The global economy is not there yet. While capital flows have declined considerably from their 2007 peak of $12 trillion (22% of global GDP) – a trend that began with the 2008 crisis – economic integration remains strong. Total global trade in goods and services exceeds $40 trillion – a tenfold increase since 1990.
But, from 2016 to 2021, trade restrictions nearly doubled worldwide, owing primarily to tensions between the United States and China. In fact, fragmentation – like globalization before it – would not be possible without China, whose rise transformed the regional competition for economic, financial, and geopolitical clout into a global one. While some hope to balance rivalry with engagement – the European Union views China as “a partner for cooperation, an economic competitor, and a systemic rival” – the dynamics are obviously complex.