HISTORICALLY, TECHNOLOGY HAS been the single most important force for opening up borders. In the 1800s it was the spread of the steamship and refrigeration, the expansion of railroads and the invention of the telegraph that gave a push to globalisation. In the 1980s and 1990s it was the shipping container, and more recently it has been the internet, allowing information and services to be exchanged in the blink of an eye.
But technology is not enough; globalisation also needs political patronage. Writing in 1973, Charles Kindleberger pointed to the importance of an economic hegemon who would act as an importer of last resort and financier of the world’s monetary system. From the mid-1800s until 1914 that hegemon was Britain. In 1846 it unilaterally reduced import tariffs by repealing the Corn Laws and in 1860 it signed a free-trade agreement with France, starting a virtuous cycle of falling tariffs worldwide. As guarantor of the gold standard, Britain made possible a system of fixed exchange rates, financing the deficits of some countries while absorbing the surpluses of others.
In 1910 Norman Angell, a British journalist, concluded in his book “The Great Illusion” that Europe had become so economically interdependent that war would be futile. Ten years and one world war later, John Maynard Keynes wrote: “What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914! …The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole Earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep.”
Keynes worried, correctly, that the vindictive Treaty of Versailles would further fragment the damaged global economic system. It tumbled into abyss a decade later because, Kindleberger wrote, “Britain could not act as a stabiliser, and the United States would not: every country turned to protect its national private interest, the world public interest went down the drain, and with it the private interests of all.”
In 1945 America took up the mantle of benevolent hegemon. “Our foreign relations, political and economic, are indivisible,” said Harry Truman in 1947; and the pursuit of international peace and freedom was “bound up completely with a third objective: re-establishment of world trade.” America underwrote the International Monetary Fund and the Bretton Woods system of fixed exchange rates to end beggar-thy-neighbour currency devaluations, and the General Agreement on Tariffs and Trade to end trade disputes.
The breakdown of Bretton Woods, two oil-price shocks and the Latin American debt crisis severely tested globalisation in the 1970s and 1980s. Fearful of Japan’s growing economic clout, America turned protectionist. Free trade gave way to managed trade. But in 1989 the Berlin Wall fell and in 1990 Japan’s bubble economy burst. America became the “hyperpower” and presided over an unprecedented expansion of globalisation.
These days America is acting less like a hegemon. Americans have grown leerier of foreign entanglements and more self-interested on economic matters. America walked away from the Doha trade talks in 2008 when it concluded it was getting too little in return for its own sacrifices, and Congress has refused to expand the International Monetary Fund’s resources. Many Americans think that China is violating the spirit of free trade.
Others also see America as less of a leader. In a poll earlier this year the Pew Research Centre found that in 23 of 39 countries the largest groups of respondents thought that China had already replaced, or would replace, America as the main superpower. But China is not yet ready to take the hegemon’s mantle.
From the print edition: Special report (The Economist)