Saturday, 16 August 2008

Krugman on globalisation

In a recent New York Times piece Paul Krugman makes an interesting point about the fate of globalisation,
Some analysts tell us not to worry: global economic integration itself protects us against war, they argue, because successful trading economies won’t risk their prosperity by engaging in military adventurism. But this, too, raises unpleasant historical memories.

Shortly before World War I another British author, Norman Angell, published a famous book titled “The Great Illusion,” in which he argued that war had become obsolete, that in the modern industrial era even military victors lose far more than they gain. He was right — but wars kept happening anyway.

So are the foundations of the second global economy any more solid than those of the first? In some ways, yes. For example, war among the nations of Western Europe really does seem inconceivable now, not so much because of economic ties as because of shared democratic values.

Much of the world, however, including nations that play a key role in the global economy, doesn’t share those values. Most of us have proceeded on the belief that, at least as far as economics goes, this doesn’t matter — that we can count on world trade continuing to flow freely simply because it’s so profitable. But that’s not a safe assumption. [...]

But the belief that economic rationality always prevents war is an equally great illusion. And today’s high degree of global economic interdependence, which can be sustained only if all major governments act sensibly, is more fragile than we imagine.
My fear would be that Krugman is right. In particular the necessity for all governments to act sensibly is not an idea that history gives us much reason to believe in.

1 comment:

matt b said...

I'm more upbeat that Krugman, FWIW. Has one stable, prosperous Western economy ever gone to war against another stable, prosperous Western economy?

There is, I think, a trifecta of forces against war. Trade, which Krugman talks about is one.

A second is diplomacy, which is much more important than it was sixty years ago. Economic and military alliances create stability by greatly escalating the weight of retaliation.

Third, the rise of free media makes bad behaviour on a large scale hard to get away with, probably impossible. It is simply not possible to amass troops on a border or kill large numbers of civilians without the world knowing.