Navigating the collinear economics and geopolitics of a fractured world order

It is undisputed that world order is undergoing profound change in character: still-evolving Great Power Rivalry; rising trade protectionism and a reshaped globalisation; a fraying multilateral, rules-based order, experiencing unilateral challenge and plurilateral response. In this seminar, Quah will address the profound changes underway in the character of world order. What are the fundamental shocks and propagation mechanisms driving these changes? Will geopolitical alignment and geoeconomic incentive hold the system together? If Great Powers once built the international system and Great Powers, again, are now pulling the thread on that system's unravelling, how can smaller nations and economic enterprises best navigate the still-transmogrifying new world order?

In this AGI Public Policy Seminar, Danny Quah discussed the evolving relationship between economics and geopolitics, challenging traditional views that treat economics as a stabilizing force and geopolitics as disruptive. He argued that since World War II, economics and geopolitics have been aligned, working in tandem. Quah also emphasized that while most of the world’s population lives outside the US and China, they are nonetheless significantly affected by US-China competition. Key takeaways include:

• Multilateralism as a foundation: Multilateralism provides an order-based system where every country has a fair opportunity, with international cooperation as its default mode. However, US-China competition is eroding this international order.
• Perceptions of trade: While the principle of comparative advantage remains valid, many now view trade as a source of crisis and external shocks. A significant portion of the general public, who are crucial in shaping political outcomes, perceives trade as one nation exploiting another.
• Economics and the future of multilateralism: Economics remains central to sustaining multilateralism. Despite current geopolitical trends toward isolationism and decoupling, the long-term economic costs of fragmentation will likely drive a return to international cooperation and a multilateral system.