A more fragmented world-letter


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The rare confluence of geopolitical, economic and technological forces facing the world today can reverberate for generations.

The war plunges us into a difficult period of geopolitical realignment, supply disruptions, food and energy insecurity and more volatile financial markets. These shocks could undermine the social and political stability of some countries while weakening the ability of the world as a whole to deal with its main long-term challenge, climate change.

Pierre-Olivier Gourinchas, chief economist of the IMF, describes a sudden geopolitical shift that reveals hidden underlying fault lines. He warns of the fragmentation of the world into “separate economic blocs with different ideologies, political systems, technological standards, cross-border payment and trade systems and reserve currencies”.

Accordingly, with this issue of F&D, we bring together respected thought leaders to help us understand these trends – all of which are unfolding against the backdrop of a slowing global recovery, rising inflation, de-globalization and of shrinking decision-making space – and how best to respond to it.

The war in Ukraine represents the most immediate risk. Nicholas Mulder argues that sanctions against Russia have unprecedented consequences that should prompt a rethink of their use as a weapon of economic warfare. Giovanni Peri discusses the economic impact of refugees fleeing Ukraine. Our “Picture This” series depicts the food crisis that threatens millions of people with hunger. Other contributors see the war-induced spike in energy prices as a chance to spur the transition to green energy. And while some predict that geopolitical competition and new technologies will end the dollar’s dominance over international finance, Eswar Prasad says the opposite: the dollar will become more entrenched as the world’s benchmark currency.

According to Singapore’s Tharman Shanmugaratnam, a more fragmented world makes increased investment in global public goods even more urgent – ​​an effort he says will require unprecedented public-private collaboration and stronger, more effective multilateralism.

There is hope. As historian Patricia Clavin reminds us, turbulent times can energize actors and ideas that can lead to new and better ways of cooperating. The top priority, as Shanmugaratnam explains, is to “adapt to a multipolar world without becoming more polarized.”

Elsewhere in this issue, Raj Chetty and Nathanial Hendren discuss how to increase the upward economic mobility of low-income youth; Barry Eichengreen and others write about the erosion of trust among young people; Noam Angrist talks about learning lost during the pandemic; and Eric Hanushek and Ludger Woessmann explain why the basic skills gap means achieving the SDGs is still a distant goal. We also profile Harvard’s Melissa Dell.

Thanks, as always, for reading.


GITA BHATT, chief editor


Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy.

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