Goldman Sachs: Global Coordination Drops to Multi-Decade Lows as Fragmentation Has Already Dragged Global GDP Down by ~1%
0xBroomberg
Goldman Sachs warns that global alignment has fallen to its lowest since the 1980s, with fragmentation shaving roughly 1% off world GDP — recent de-escalations do not erase the structural damage, and volatility in the 2030s may far exceed the past few decades' baseline.
How far has global alignment actually fallen?
Goldman analysts Johan Allen and Joseph Briggs say alignment is now at its lowest since the 1980s.
Fragmentation has cut global GDP by roughly 1% — emerging markets lost ~1.9 percentage points, advanced economies ~0.8.
This means → emerging markets are paying more than double the price of rich nations. In a de-globalising world, the weaker side foots the bill first.
How did fragmentation build up to this point?
Since 2016, four structural shocks have stacked: trade wars, COVID, the Russia-Ukraine war, and U.S. expansion of influence in the Western Hemisphere.
Each accelerated the splintering of geopolitical alliances and the rise of competing trade, investment, and security blocs.
In plain terms = the world didn't shatter overnight. Eight years of back-to-back crises cracked it piece by piece — until the cracks became fault lines.
What separates a short-term shock from structural damage?
Goldman draws a clear line: short-term shocks transmit through commodity prices and typically fade within years; structural realignment lasts decades.
The recent U.S.–Iran conflict, for example, dragged growth by about 0.3 percentage points, and Strait of Hormuz shipping has already partly normalised.
This means → a short-term shock is a fever that breaks. Structural fragmentation is a chronic condition — left untreated, it only worsens.
What does Goldman mean by a "return to the imperial era"?
Goldman argues the world is drifting back toward a pattern of great-power spheres of influence and intensifying multipolar competition — the report explicitly invokes an "imperial era" frame.
China, Russia, Canada, and Israel show the steepest alignment declines in recent years.
In plain terms = the post-Cold-War consensus of "everyone trades with everyone" is unravelling. What replaces it is "pick your bloc, build your circle."
What does this mean for the next decade?
Goldman's conclusion: tail risks from short-term shocks may have partly faded, but broader fragmentation risk is still accumulating.
With alignment at a multi-decade low, volatility in the 2030s may far exceed the baseline of the past several decades.
This reflects a deeper problem: markets may be severely underpricing the long-run cost of structural fragmentation.
Content is for reference only, not financial advice.