Globalization Failure – Redux

We tend to think of the forces of globalization as a permanent part of the landscape—but then perhaps they were thinking that way too in 1914, when a number of factors from an over-extended superpower to a rise in terrorism ushered in the First World War. Our current international economy has similarities to the economic dynamics of ninety years ago. Could globalization collapse? It may seem unlikely today. Yet despite many warnings, people were shocked the last time globalization crumbled, with the onslaught of World War I. Like today, that period was marked by imperial overstretch, great-power rivalry, unstable alliances, rogue regimes, and terrorist organizations. And the world is no better prepared for calamity now!

Ninety years ago, the German submarine U-20 sank the Cunard liner Lusitania off the southern coast of Ireland. Nearly 1,200 people, including 128 Americans, lost their lives. Usually remembered for the damage it did to the image of imperial Germany in the United States, the sinking of the Lusitania also symbolized the end of the first age of globalization.

From around 1870 until World War I, the world economy thrived in ways that look familiar today. The mobility of commodities, capital, and labour reached record levels; the sea-lanes and telegraphs across the Atlantic had never been busier, as capital and migrants travelled west and raw materials and manufactures travelled east. In relation to output, exports of both merchandise and capital reached volumes not seen again until the 1980s. Total emigration from Europe between 1880 and 1910 was in excess of 25 million. People spoke euphorically of “the annihilation of distance.”

Then, between 1914 and 1918, a horrendous war stopped all of this, sinking globalization. Nearly 13 million tons of shipping was sent to the bottom of the ocean by German submarine attacks. International trade, investment, and migration all collapsed. Moreover, the attempt to resuscitate the world economy after the war's end failed. The global economy effectively disintegrated with the onset of the Great Depression and, after that, with an even bigger world war, in which astonishingly high proportions of production went toward perpetrating destruction.

It may seem excessively pessimistic to worry that this scenario could somehow repeat itself–that our age of globalization could collapse just as our grandparents' did. But it is worth bearing in mind that, despite numerous warnings issued in the early twentieth century about the catastrophic consequences of a war among the European great powers, many people–not least investors, a generally well-informed class–were taken completely by surprise by the outbreak of World War I. The possibility is as real today as it was in 1915 that globalization, like the Lusitania, could be sunk.

SIMILARITY IN CURRENT AND PAST STATES OF GLOBALIZATION

There are a lot of similarities between our own time and the pre-1914 period. That the years 1880–1914 were the “first age of globalization” is now quite a widely accepted idea among economic historians. The data on trade, capital flows, and migration certainly bear that out. To be absolutely precise about dating, I'd say it was from the moment the transatlantic cable was laid, which was in 1866, until the cutting of the cables to Germany, after war broke out in 1914. The Lusitania (which was sunk on May 7, 1915) is simply a good symbol for the end of this first age because so much had previously depended on safe navigation between New York and Europe.

We could just as easily find ourselves swept into economic “de-globalization” by an international political crisis as our great-grandfathers were in 1914. Like the Lusitania, globalization could be sunk by great-power conflict. I just say it's possible. Like the outbreak of the First World War, a crisis of globalization today is a low-probability worst-case scenario. The key causes of the 1914 crisis were:

1. Overstretch of the hegemonic empire (Britain replace with United States currently).

2. The escalation of rivalry between great powers (Britain and Germany in particular, but also Germany and Russia replace with United States and China).

3. The destabilization of the alliance system (unreliability of Austria in German eyes, of Britain in French eyes replace with unreliability of the Europeans in American eyes, unreliability of the Americans in Japanese, South Korean, and Taiwanese eyes).

4. The existence of a rogue regime sponsoring terror (Serbia replace Syria, Iran etc).

5. The rise of a revolutionary organization hostile to global capitalism (Bolshevism replace with Al Qaeda).

It would be a very good idea if the United States were to act now to avert the danger of a clash with China over the future of Taiwan. There is a real danger that Taiwan could be what Belgium was in 1914: the small state over which two great powers went to war without either quite meaning to. I am not sure waves are the right natural-world image here. I would prefer to think of events such as forest fires or earthquakes — sudden crises arising from the advent of what scientists call “criticality.”

A NEW BIRTH OF FAILURE FROM HISTORY

Civil War bankrupts wrote their own version of history, yet they shared Abraham Lincoln's vision of a new nation. Even as the clash became a war for abolition, it continued to be a war for ambition—for the right to transcend one's origins. From Fort Sumter to Appomattox, Lincoln defined the war this way. “I almost always feel inclined, when I happen to say anything to soldiers, to impress upon them in a few brief remarks the importance of success in this contest,” he said in August 1864, greeting the 166th Ohio Regiment as it made ready to muster out. “Hundred days men” like them were serving short hitches to ease troop shortages that summer. Lincoln often made time to thank such units—in words that not only defined the war but also presaged post-war capitalism. Lincoln addressed the Ohio troops on the White House lawn during the warmest August anyone recollected, in a city noted for torrid summers. At dawn and dusk, Lincoln commuted on horseback between the presidential mansion and a summer cottage on the edge of town. It was cooler there, and he could work undisturbed in an unceremonious white suit and Panama hat: small comforts in the war's bleakest month. With Sherman stalled in Georgia and Grant dug in outside Petersburg, opposition newspaper editors called Lincoln “an egregious failure.” Even his own political advisors confided to each other, “I fear he is a failure.” Friend and foe badgered him to withdraw from the 1864 presidential election.

Three days before addressing the 166th Ohio, Lincoln consulted Frederick Douglass in the White House. Lincoln resolved to defy public demands that he repudiate emancipation and sue for peace. Making plans should he be forced to give in, he asked Douglass to organize a federally backed underground railroad, to help as many slaves escape to the North as possible. On 22 August—the same day the Buckeye regiment listened to the president's speech—the editor of the New York Times sent Lincoln a private letter, warning that unless he would drop emancipation from his peace terms, he could not be re-elected. Lincoln pondered what to do: When his cabinet met the next morning, he would ask them to sign a blind pledge to make peace on any terms if he lost. With such matters cluttering his desk, even working in shirtsleeves barely made the office less stifling. Maybe Lincoln welcomed the chance to step outside and greet the Ohio soldiers under the blistering sun.

Who was more uncomfortable: almost a thousand soldiers in scratchy wool uniforms or the man in the long black coat? “The countenance of the President . . . was inexpressibly sad,” wrote a member of another Ohio regiment Lincoln had greeted earlier in the summer. “He heard the music, saw the crowd, but his mind was evidently not there.” The soldiers, at least, could daydream of going home. Hold out for victory, the president was telling them, “not merely for today, but for all time to come.” In a great, muscular hand he held his stovepipe hat, because despite the heat he always uncovered to show respect for the troops. The front ranks could see him sweating with them. Rivulets moistened the face Walt Whitman had described exactly ten days earlier, upon glimpsing the president as Lincoln rode into the city that morning: “Abraham Lincoln's dark brown face, with the deep cut lines, the eyes . . . with a deep latent sadness in the expression.”

Lincoln's high tenor voice squeaked some, but it carried like a bugle call, each word a clear, distinct note that made him easy to hear and understand. “I happen temporarily to occupy this big White House,” he was saying. “I am a living witness that any one of your children may look to come here as my father's child has.” Perhaps wandering thoughts outnumbered his words—nearly a thousand visions of fathers and children back in Ohio, interrupted by scattered sighs in the ranks of men anxious to return to neglected farms and shops. Even if some barely listened, they knew that Father Abraham started out life as a poor boy with dreams like theirs. It did not take a Walt Whitman to recognize a tanned brow accustomed to manly sweat.