Business Matters | Is the era of global integration giving way to fragmentation?

In this episode of Business Matters, we discuss how is fragmentation affecting countries and is globalisation giving way to ‘slow’balisation.

The International Monetary Fund has been saying that the world has been going into geoeconomic fragmentation.

In a note earlier this year, IMF chief Kristalina Georgieva said that at a time when we need more international cooperation on multiple fronts, we are facing the spectre of a new Cold War that could see the world fragment into rival economic blocs. “This would be a collective policy mistake that would leave everyone poorer and less secure.”

She uses some powerful words as warning – calling it a “stunning reversal of fortune”. After all, she argues, economic integration has helped billions of people become wealthier, healthier, and better educated.

Since the end of the Cold War, the size of the global economy roughly tripled, and almost 1.5 billion people were lifted out of extreme poverty. Her concern is that these hard-won benefits should not be squandered away.

In a paper in January this year, IMF staffer Shekhar Aiyar and others defined geoeconomic fragmentation as policy-driven reversal of integration, often guided by strategic considerations.

What is driving this trend?

In the paper, the authors point out that policies driving fragmentation come from national strategic interests, such as security considerations or enhancing self-sufficiency. Economic rivalry, such as between the US and China, could be another reason for this.