So far, the
international economic consequences of the war in the Caucasus
have been fairly minor, despite Georgia’s role as a major corridor
for oil shipments. But as I was reading the latest bad news, I
found myself wondering whether this war is an omen — a sign that
the second great age of globalization may share the fate of the
first.
If you’re wondering what I’m talking about, here’s what you need
to know: our grandfathers lived in a world of largely self-sufficient,
inward-looking national economies — but our great-great
grandfathers lived, as we do, in a world of large-scale
international trade and investment, a world destroyed by
nationalism.
Writing in 1919, the great British economist John Maynard Keynes
described the world economy as it was on the eve of World War I.
“The inhabitant of London could order by telephone, sipping his
morning tea in bed, the various products of the whole earth ... he
could at the same moment and by the same means adventure his
wealth in the natural resources and new enterprises of any quarter
of the world.”
And Keynes’s Londoner “regarded this state of affairs as normal,
certain, and permanent, except in the direction of further
improvement ... The projects and politics of militarism and
imperialism, of racial and cultural rivalries, of monopolies,
restrictions, and exclusion ... appeared to exercise almost no
influence at all on the ordinary course of social and economic
life, the internationalization of which was nearly complete in
practice.”
But then came three decades of war, revolution, political
instability, depression and more war. By the end of World War II,
the world was fragmented economically as well as politically. And
it took a couple of generations to put it back together.
So, can things fall apart again? Yes, they can.
Consider how things have played out in the current food crisis.
For years we were told that self-sufficiency was an outmoded
concept, and that it was safe to rely on world markets for food
supplies. But when the prices of wheat, rice and corn soared,
Keynes’s “projects and politics” of “restrictions and exclusion”
made a comeback: many governments rushed to protect domestic
consumers by banning or limiting exports, leaving food-importing
countries in dire straits.
And now comes “militarism and imperialism.” By itself, as I said,
the war in Georgia isn’t that big a deal economically. But it does
mark the end of the Pax Americana — the era in which the United
States more or less maintained a monopoly on the use of military
force. And that raises some real questions about the future of
globalization.
Most obviously, Europe’s dependence on Russian energy, especially
natural gas, now looks very dangerous — more dangerous, arguably,
than its dependence on Middle Eastern oil. After all, Russia has
already used gas as a weapon: in 2006, it cut off supplies to
Ukraine amid a dispute over prices.
And if Russia is willing and able to use force to assert control
over its self-declared sphere of influence, won’t others do the
same? Just think about the global economic disruption that would
follow if China — which is about to surpass the United States as
the world’s largest manufacturing nation — were to forcibly assert
its claim to Taiwan.
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.
Angell was right to describe the belief that conquest pays as a
great illusion. 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. |