Globalisation: technology v. politics

Many observers of and commentators on the world economy would argue that the globalisation phenomenon we see today is by and large a technological issue. Once learned, with few exceptions, new technologies are typically not forgotten which is why many see globalisation as an irresistible force. However it can also be argued that a more careful study of history shows that globalisation is as much a political as a technological phenomenon. This means that it can easily be reversed. This argument is made in an article on VoxEU.org by Ronald Findlay and Kevin H. O'Rourke. The article is Lessons from the history of trade and war and uses the lessons of history to identify challenges for 21st century globalisation.

Findlay and O'Rourke explain that

... history also tells us that politics matters for globalisation in a far more fundamental way. The new steam technologies of the Industrial Revolution would never have had the effect that they did if they had not operated within the context of a stable geopolitical system within which the Royal Navy guaranteed the freedom of the seas for all; within which wars between the major European powers were relatively rare; and within which those same European powers used their military superiority to impose more or less open trade on most of Africa and Asia. With the outbreak of World War I, that geopolitical system was destroyed, and 19th century globalisation with it, despite the fact that technological progress continued unabated during the interwar period. And while in the rich countries of Western Europe and North America the post-1945 period saw a gradual reconstruction of open trading conditions, deglobalisation characterised much of the rest of the world until the 1980s thanks to the spread of communism and decolonisation, which themselves had their roots in the century's two world wars, and the intervening economic debacle.

The Findlay and O'Rourke article is based on their recent book, Power and Plenty: Trade, War, and the World Economy in the Second Millennium, Princeton University Press 2007. Findlay and O'Rourke note that,

The 'Power and Plenty' of the book's title refers of course to the mutual dependence of trade and warfare during the Mercantilist era, when the links between commerce and violence were particularly explicit and clear. But great expansions of world trade were linked to conquest even earlier. The pax Britannica and pax Americana which provided the geopolitical stability underlying the globalisations of the 19th and late 20th centuries have their counterpart in the pax Mongolica of the 13th and 14th centuries, which produced an impressive integration of the Eurasian economy. The Muslim conquests, which unified a vast region stretching from India to the Atlantic, provide an earlier example, while the Iberian conquests of the 16th century provide an even more spectacular later one.

What then are the lessons for the 21th century? What challenges might arise to threaten the current period of globalisation?

One striking feature of today's international economy is that, as in the 19th century, regions with very different factor endowments are being drawn into closer contact with each other, as what used to be known as the Third World opens up to the rich countries of the North. Will the modern day equivalents of the farmers of 19th century Europe, namely unskilled workers in the OECD, eventually press for and obtain a rolling back of trade liberalisation?

Later they argue,

Even more fundamentally, the continuation of a broadly liberal international trading environment will require that the geopolitical system adapt to the rise of China, India and other "Third World" giants. In a historical context, this represents of course the restoration of the status quo ante, the end of a "Great Asymmetry" in international economic and political affairs caused by the Industrial Revolution, which was itself in large part a product of the interactions between early modern Europe and the rest of the world. But that is not to say that such an adjustment will be easy. The international system has historically done a pretty poor job of accommodating newcomers to the Great Power club. German unification and industrialisation during the late 19th century led to tensions with Britain and France over colonial and armament policy, while Japan's rise to regional prominence during the interwar period, and its search for secure sources of raw materials, ended in war against United States and its allies. Both precedents are worrying, in that similar questions are posed today, both in terms of the rights of emerging nations to rival the established powers' military capabilities (notably with regard to nuclear weapons), and in terms of the strategic importance to countries like China of ready access to oil supplies and other natural resources.

This last point cause Findlay and O'Rourke to reflect on the idea that trade does not necessarily guarantee peace. Trade implies interdependence, while interdependence implies vulnerability, and vulnerability can lead to fear. This can have unpredictable consequences, as Anglo-German rivalry in the run-up to World War 1 and Japanese reactions to the Great Depression and Smoot-Hawley both show. If there is any lesson that we can draw from history, it is that history has not ended. But hopefully we can lean enough from it, not repeat the worse parts of it.