A Deeper Look at Forces Fragmenting Our World—and How to Respond
IMF Blog, June 2, 2022
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Bibliographic details
- Authors: Gita Bhatt
- Published: June 2, 2022
Overview
- Author: Gita Bhatt
- Date: June 2, 2022
- Framing: The rare confluence of geopolitical, economic, and technological forces may reverberate for generations.
- Context: Trends discussed amid a slowing global recovery, rising inflation, deglobalization, and shrinking policymaking space.
Immediate risks and shocks
- The war in Ukraine is identified as the most immediate risk.
- Consequences cited:
- Geopolitical realignment.
- Supply disruptions.
- Food and energy insecurity.
- More volatile financial markets.
- Potential societal effects:
- Shocks could shake social and political stability in some countries.
- Shocks could weaken the ability of the world as a whole to confront climate change.
Geopolitical fragmentation and its characteristics
- Pierre-Olivier Gourinchas describes a sudden geopolitical shift revealing hidden underlying fault lines.
- He warns of a world fragmenting into “distinct economic blocs with different ideologies, political systems, technology standards, cross-border payment and trade systems, and reserve currencies.”
Economic, technological, and policy debates presented in the issue
- Sanctions and economic warfare:
- Nicholas Mulder argues that sanctions against Russia have unprecedented consequences and should prompt a rethink of their use as a weapon of economic warfare.
- Refugee economics:
- Giovanni Peri discusses the economic impact of refugees fleeing Ukraine.
- Food crisis:
- The “Picture This” series depicts the food crisis that threatens millions with hunger.
- Energy and climate:
- Some contributors see soaring war-induced energy prices as a chance to spur the transition to green energy.
- International currency:
- Eswar Prasad argues that despite predictions to the contrary, the dollar will become more entrenched as the global go-to currency.
Calls for collective action and multilateralism
- Tharman Shanmugaratnam (Singapore) argues that a more fragmented world makes greater investment in global public goods even more urgent.
- He calls for unprecedented public-private collaboration and a stronger, more effective multilateralism.
- Priority: to “accommodate a multipolar world without becoming more polarized.”
- Historical perspective:
- Patricia Clavin notes that turbulent times can energize actors and ideas that lead to new and better modes of cooperation.
- Overall message: While risks are high, there is hope if collective, cooperative responses are pursued.
Other topics featured in the same issue
- Raj Chetty and Nathanial Hendren discuss how to increase the upward economic mobility of low-income youth.
- Barry Eichengreen and others write on the erosion of trust among the young.
- Noam Angrist addresses learning lost during the pandemic.
- Eric Hanushek and Ludger Woessmann discuss why the basic skills gap means meeting the SDGs is still a faraway goal.
- Profile: Harvard’s Melissa Dell.
Reader engagement
- Invitation to provide feedback via a 3-question survey on IMFBlog.
IMF Blog — Gita Bhatt, June 2, 2022.