CIAO DATE: 08/05

Will Globalization Survive?

Abstract

Ours is not the first age of globalization. The decades before the First World War were remarkably similar to our own era. Under the aegis of the United Kingdom and stimulated by a host of technological advances, the world enjoyed an era of liberal trade, remarkably free movement of people, and almost entirely free movement of capital. The world also enjoyed an unprecedented rise in prosperity. According to the economic historian, Angus Maddison, real GDP per head rose at a rate of 1.3 percent a year in the world as a whole between 1870 and 1913.3 This is not far short of the improvement of the past three decades. As table 1 shows, only Asia and Africa, both victims of colonialism, failed to share in the rising prosperity.

Then came the war. Norman Angell, in his notorious book, The Great Illusion, published in 1910, argued persuasively that war was a ruinous folly. He hoped to persuade people that nothing could come from a European war but mutual ruin. His hopes failed. Many have since condemned him for his innocence. But if one reads his book, one will find not that he thought war impossible, but that he thought it insane. He hoped people would prove rational. People, as is their wont, disappointed him.

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