SYNOPSIS: First column. Fights for the Global Economy against continuing doubt.
CAMBRIDGE, Mass. -- Beginnings are always difficult: even the most tough-minded writer finds it hard to avoid portentousness. And since this is a quadruple beginning (new year, new century, new millennium, and, for me, new column), I won't even try. What follows are some broad opening-night thoughts about the world economy.
I deliberately say world economy, not American economy. Whatever else they may have been, the 90's were the decade of globalization. Both the bad news (it was a banner decade for financial crises) and the good (living standards in much of the world continued to rise, in some cases -- China -- spectacularly) were closely tied to the ever-increasing integration of national economies with each other, to the seemingly unstoppable logic of growing trade and investment.
Or is it unstoppable? You see, we've been here before.
Historians sometimes call it the First Global Economy: the era from the mid-19th century onward in which new technologies of transportation and communication made large-scale international trade and investment possible for the first time. In their quest to create that global economy, to abolish the traditional constraints of geography, engineers accomplished miracles -- laying telegraph cables beneath the Atlantic, digging tunnels through the Alps and building paths between the seas. The Panama Canal, whose construction required breakthroughs not only in earth-moving technology but in medical science, was the high-water mark of the age (literally: the locks raise ships 85 feet above sea level).
And just as the canal reached completion, the global economy fell apart.
To some extent, the First Global Economy was a casualty of war. The Panama Canal and the Western Front both went into action in August 1914. The war and its indirect consequences -- hyperinflation and political instability in Germany, isolationism in the United States, and so on -- partly explain why the forces of globalization went into a retreat that by 1945 left the world economy thoroughly Balkanized. But the truth is that even before 1914, though the volume of trade and investment continued to expand, the globalist idea was on the defensive. Intelligent men might explain that wars were no longer worth fighting and borders obsolete; a sophisticated, cosmopolitan elite -- like the U.S.-educated technocrats who ran Mexico until they were overthrown in 1911 -- might move freely between continents; but the political foundations for a global economy were never properly laid, and at the first serious shock the structure collapsed.
We are now living in the era of the Second Global Economy -- a world economy reconstructed, largely under American leadership, over the past half century. It took a long time to put Humpty Dumpty back together again: the share of world output entering into trade didn't reach its pre-1914 levels until the 1970's, and large-scale investment in "emerging markets" -- that is, places that are to today's world economy what America was to our great-grandfathers' -- has revived only in the last decade. But this time the economic achievement is built on stronger foundations -- isn't it?
Well, yes -- but maybe not strong enough. True, we have gotten better at making the distinction between commerce and conquest -- trade no longer follows the flag and blatant imperialism is out of style. (We handed the Panama Canal back last month.) And Western nations seem to have more or less grown out of the saber-rattling nationalism that led to catastrophe back in 1914. But now as then the global idea is very much a minority persuasion, all too easily portrayed as an ideology of and for a rootless cosmopolitan elite that is out of touch with ordinary people.
For that, surely, is the lesson of the trashing of the World Trade Organization meeting in Seattle last November. Not that the protesters were right: it is a sad irony that the cause that has finally awakened the long-dormant American left is that of -- yes! -- denying opportunity to third-world workers. But though the facts may be on the side of the free traders, though global trade really ought to have mass public support, one can hardly deny that the opponents are winning the propaganda war. For the moment, as long as it seems to deliver the goods and services, globalization is tolerated; but it is not loved. The big economic question for the next century, in other words, is really political: can the Second Global Economy build a constituency that reaches beyond the sort of people who congregate at Davos? If not, it will eventually go the way of the first.
Originally published in The New York Times, 1.2.00