What Could Bring Globalization Down?

Do you think the forces of globalization are here to stay? Harvard professor Niall Ferguson says nothing is for certain. Consider what happened to the "first age of globalization" in 1914—and then look around at the world today.
by Cynthia Churchwell

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.

Harvard professor Niall Ferguson believes that our current international economy has similarities to the economic dynamics of ninety years ago. Recently, Ferguson took time to expand upon the ideas expressed in his article "Sinking Globalization," which appeared in the March/April issue of Foreign Affairs.

Ferguson teaches in the Business, Government and the International Economy unit of Harvard Business School and is a professor of history at Harvard University.

Cynthia Churchwell: What drew you to seek historical parallels with our current state of globalization?

Niall Ferguson: I am an historian who has long been preoccupied by the 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.

Q: When was the first age of globalization? Do you see the sinking of the Lusitania in 1915 as a benchmark for the beginning of the end of this first age of globalization?

A: 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.

Q: You suggest that "The possibility is as real today as it was in 1915 that globalization, like the Lusitania, could be sunk." What do you mean by "sinking globalization"?

A: I mean that 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.

Q: What are the five major points you identify as contributing to the impending decline in the globalization of our present-day economy?

A: I don't say it's impending. 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. The overstretch of the hegemonic empire (Britain).
  2. The escalation of rivalry between great powers (Britain and Germany in particular, but also Germany and Russia).
  3. The destabilization of the alliance system (unreliability of Austria in German eyes, of Britain in French eyes).
  4. The existence of a rogue regime sponsoring terror (Serbia).
  5. The rise of a revolutionary organization hostile to global capitalism (Bolshevism).

To see my point, just change the words in parenthesis to:

  1. (the United States)
  2. (the United States and China)
  3. (unreliability of the Europeans in American eyes, unreliability of the Americans in Japanese, South Korean, and Taiwanese eyes)
  4. (Syria, Iran, etc.)
  5. (Al Qaeda)

Q: Are there any actions or events that could accelerate or forestall another decline of globalization? Which ones do you believe to be the most significant?

We could find ourselves swept into economic "de-globalization" by an international political crisis as our great-grandfathers were in 1914.

A: 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.

Q: Do you think globalization will continue to come and go in waves?

A: 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."

Q: What other business-related research currently interests you?

A: I am writing a book about the banker Siegmund Warburg, who was a key proponent of globalization after 1945 and deserves much of the credit for the emergence of the Eurobond market, among other things. More generally, I am continuing to do research on the international bond market before and after the First World War.

About the Author

Cynthia Churchwell is a business information librarian at Baker Library, Harvard Business School, with a specialty in the international economy.