Global Fragmentation and the End of the Cheap Economy Era
Jakarta (ANTARA) - The world is leaving behind an era when economic growth could be built primarily through free trade, cheap energy, and efficient global supply chains. The economic model that has supported globalisation for decades is now losing its foundation.
This change has become increasingly evident in recent years. The pandemic disrupted cross-border goods distribution, wars have shaken energy and food supplies, while rivalries among major powers are driving competition for technology, strategic minerals, and global trade routes.
As a result, the global economy is moving towards a new pattern that is more expensive, more cautious, and increasingly influenced by geopolitical interests.
In this situation, many countries are beginning to reduce their dependence on external parties. Strategic industries are being relocated closer to domestic markets, investments are being screened more strictly, and supply security is becoming a top priority.
The world is not entirely abandoning globalisation, but economic interconnectedness is now built on a different logic than before.
If in the old era efficiency was the primary goal, in the new era resilience is equally important. Countries are willing to pay higher production costs to maintain the stability of their national energy, food, technology, and industries.
It is this change that is giving birth to global fragmentation. The world economic system is no longer operating as one relatively open large market, but is beginning to divide into narrower and more strategic networks of interests. Economic relations are increasingly influenced by political calculations, security, and the struggle for influence between countries.
The consequences are already being felt in various sectors. Energy prices are more volatile, logistics costs are rising, and international trade is increasingly vulnerable to geopolitical conflicts.
When disruptions occur in strategic routes like the Strait of Hormuz, the impact can quickly spread to inflation, production costs, and global financial markets.
This situation marks the end of the cheap economy era that has long been one of the engines of world growth. Cheap energy, cheap distribution, and cheap production can no longer be fully guaranteed in a world that is becoming increasingly fragmented.
For Indonesia, this change presents challenges that are far more fundamental than simply maintaining annual economic growth.
The issue is not just how to maintain stability amid global pressures, but how to avoid the trap of becoming a raw material supplier country in the new, increasingly competitive economic system.
For years, Indonesia’s economy has been relatively supported by a combination of commodity exports and domestic consumption. This model has been quite effective when global trade is in stable conditions.
However, in a world increasingly filled with geopolitical rivalries and supply chain uncertainties, dependence on commodities actually increases economic vulnerability.
When energy prices surge or global trade slows, the impact is immediately felt on exchange rates, inflation, state revenues, and domestic industrial production costs. External pressures enter the national economic system more quickly.
The challenge