Fragmented Globalization

Less global integration will bring new costs and inefficiencies.

A perennial challenge faced by all big or small, developed or developing economies is achieving sustainable economic growth that boosts standards of living and financial stability. Globalization has been the road that brought economies to that destination.

The existing globalization model has worked well since the 1990s when the world started to become more interconnected. Easing restraints on flows of goods, services, and people has boosted growth, developed several emerging markets (EMs), and pulled millions out of extreme poverty. In advanced economies, it delivered lower prices, a particular benefit to low-income consumers.

Despite established benefits, discontent with the model has been growing. And as China and other major emerging economies develop, they are seeking to rewrite the rules governing world trade. The West, the original backer of globalization, is evolving toward a stance of greater protectionism.

A slow and uneven recovery from the 2008 financial crisis, rising income inequality, U.S.-China tensions, COVID, and the Ukraine war have all added to skepticism about the benefits of a global orientation. This has fueled geopolitical rivalries, technology decoupling, and trade barriers. With geopolitics becoming a driving force behind economic plans, the era of global integration is giving way to geo-economic fragmentation.

Trade Restrictions Imposed