All politics isn't local

Domestic political risks with global economic & geopolitical consequences loom large around the world from China to the US. Brace for shocks.

The geopolitical aftershocks of Russia’s invasion of Ukraine continue.  The invasion and the Western-led response are accelerating the emergence of a more fragmented global economy, in which global trade and investment flows are shaped by shared political values and interests – values-based globalisation, or what Janet Yellen recently called ‘friend-shoring’.

But alongside intense geopolitical developments, recent events suggest elevated domestic political risks in countries from China to the US that could impact on the global outlook. 

Political incentives may be local, but in a deeply connected world the consequences are not.  Particularly in autocratic regimes with limited checks and balances, radical decisions can be made quickly – from the invasion of Ukraine to China’s Covid lockdowns – and with far-reaching implications.  And democracies, notably the US, are under strain – creating exposures for the rest of the world.  Political risks in systemically important countries are sitti…