GLOBAL INTERCONNECTEDNESS

Building a prosperous world for future generations – Sanjeewaka Kulathunga

 

Today’s world is becoming more interconnected with economic activities in one corner of the globe reverberating across distant regions. And this complex web of trade, investment, technology and migration is transforming how economies operate.

The 21st century has seen a dramatic rise in global economic interconnectedness, driven largely by advancements in technology, and the liberalisation of trade and finance. According to the World Economic Forum (WEF), globalisation has created immense wealth with global trade growing from US$ 10 trillion in 2005 to 25 trillion dollars in 2022.

However, these benefits have been unevenly distributed with major disparities between countries and within societies. The pandemic exposed vulnerabilities in the global supply chain, and prompted discussions on the need for more resilient and diversified economic systems.

Over the next century, technological advances will continue to shape global economic interconnectedness. As technologies such as AI, quantum computing, blockchain and 5G networks mature, they will transform industries, governments and international trade.

These technological shifts will also create new opportunities and challenges in global economic integration.

Artificial intelligence will streamline production and optimise supply chains by helping companies produce closer to consumers. This shift will reduce transport costs and environmental impacts.

Meanwhile, blockchain will transform international transactions by creating transparent, secure and decentralised systems. It will enhance cross border payments and supply chain management, reduce costs and build trust among global partners.

Driven by e-commerce, the digital economy, digital services and financial technology will continue to fuel cross border economic activity. According to McKinsey Global Institute, it could contribute over US$ 60 trillion globally by 2030 with growth expected to persist in the decades ahead.

In the longer term, global economic power dynamics are expected to shift. While the US, China and the EU will remain influential, emerging regions such as Africa, South Asia and Latin America are poised to become economic players.

The African Continental Free Trade Area (AfCFTA) is set to boost intra-African trade and attract foreign investments. Similarly, South Asia – especially India – is expected to experience substantial growth driven by technological advancement, a young workforce and rising consumer demand.

Climate change will be one of the most significant challenges to global economic interconnectedness in the 21st century. As the environmental impact of global trade, transportation and industrial activities becomes increasingly unsustainable, there are calls for more eco-friendly economic models.

And sustainability will be at the forefront of future economic interconnectedness with governments and businesses under pressure to reduce their carbon footprints and adopt green technologies.

There could be a global transition towards renewable energy sources, circular economies and sustainable supply chains. Nations will need to collaborate on policies that promote environmental sustainability while fostering economic growth.

Moreover, international climate agreements and carbon pricing mechanisms will play critical roles in regulating emissions and promoting sustainable practices.

International institutions will continue to play a vital role in maintaining global economic stability and ensuring that interconnectedness benefits all nations.

Multilateral lending organisations will need to adapt to the challenges of the 22nd century such as managing technological disruptions, addressing climate change and navigating shifting geopolitical landscapes.

Reforms in these institutions will be necessary to address issues of inequality, trade disputes and global governance. There is a need for stronger international institutions to manage the complexities of an interconnected global economy and ensure that globalisation works for all.

Global economic interconnectedness will be shaped by a combination of technological innovations, geopolitical shifts, sustainability imperatives and institutional reforms. While challenges such as inequality, climate change and geopolitical rivalries will undoubtedly arise, the opportunities for fostering inclusive growth, innovation and sustainability are immense.

The future of global economic interconnectedness depends on the ability of nations, businesses and international institutions to collaborate and adapt to the changing global landscape.

By embracing technological advancements, promoting sustainability and strengthening international cooperation, we can create a more interconnected and prosperous world for future generations.