The globalization god has feet of clay

Recent statements from Beijing and Tokyo suggest that China and Japan may be pulling back a bit from the brink of confrontation over the Senkaku/Diaoyutai islets. Let's hope it's true, but regardless of whatever diplomatic settlement evolves, we must recognize that the whole affair undercuts a central premise of U.S. foreign policy.

This is the notion that globalization leads to peace. It is actually quite an old notion. Richard Cobden, the English manufacturer and advocate for free trade who in the 1840s led the move to remove British tariffs on grain (so called Corn Laws), argued in the 1850s that globalization is "God's diplomacy" and that free trade would lead to peace among nations. For a while in the early twentieth century it seemed that that might be the case. The global economy had become highly integrated with enormous flows not only of goods and services but also of capital creating global supply chains that tied nations together.

It was John Maynard Keynes who wrote of that period in The Economic Consequences of the Peace noting that:

" 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 door-step; 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 share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighboring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent."

Of course, it turned out in August, 1914 not to be permanent at all. The globalization of the 19th century had led to a high degree of interdependence among nations and to greater creation of wealth than had ever previously occurred. But the wealth not only served to improve the standard of living of the citizens of London and other metropolises. It also provided the means for pursuing ancient rivalries and for acting on paranoiac fears at an entirely new level of potential destruction. After the first shots of the Guns of August of 1914, the world economy would not be as fully integrated and globalized again until the advent of the Clinton administration in 1993.

Significantly, it was this administration that enthusiastically embraced globalization as America's new strategy, replacing the containment (of the Soviet Union) strategy of the Cold War era. According to a popular mantra of the time, globalization would make all nations rich, being rich they would all become democratic, and being democratic they would all become peaceful because democracies don't go to war against each other, or, at least, that was the belief. In effect, globalization was widely viewed among the American policy elite as a kind of Americanization. The whole world would become like the United States and then America would have no enemies and peace would reign.

This thinking was a powerful force behind the drive to bring China into the World Trade Organization. It was widely believed that countries whose industries participated in the same global supply chains would not go to war with each other. This view was reflected in the widely articulated notion of making China "a responsible stakeholder" in the global economy.

To be sure, World War III has not yet begun and hopefully never will. But what we are seeing in Asia looks a lot like what we saw in Europe in the early 20th century. Globalization has not led, at least not yet, to full democratization. The creation of wealth has not only lifted living standards. It has also increased the ability of nations to pursue ambitions and old rivalries despite being in the same supply chains and despite being interdependent.

Far from leading to peace, the god of globalization is revealing feet of clay as the possibility of war becomes more apparent.