Geoeconomic fragmentation
Topic: Globalisation and MNCs · NCERT: Beyond NCERT
Meaning
Geoeconomic fragmentation is the splitting of the world economy into rival blocs, driven by government policy and based on strategic and security concerns. Trade, investment and technology flows increasingly follow political alliances rather than cost alone. The IMF warns that this makes the whole world poorer.
Example
The IMF's Staff Discussion Note SDN/2023/001 (2023) estimates the long-run cost of fragmentation at about 0.2% of global GDP in mild cases and up to about 7% in severe ones. Signs of fragmentation include FDI splitting along geopolitical lines and rising trade restrictions after the US-China trade war (2018) and the Russia-Ukraine war (2022).
Don't confuse with
- Deglobalisation: an actual fall in trade and cross-border flows compared with world output. Fragmentation is about the world economy splitting into blocs, and it can happen even while total trade holds steady.
- Slowbalisation: the period after the 2008 financial crisis in which world trade grows no faster than world GDP.