Krugman installed at Delphos

Michael Pollak mpollak at
Sun Jan 2 20:22:06 PST 2000

[Krugman's inaugural column at the New York Times]

January 2, 2000


Once and Again

C AMBRIDGE, Mass. -- Beginnings are always difficult: even the most

tough-minded writer finds it hard to avoid portentousness. And

since this is a quadruple beginning (new year, new century, new

millennium, and, for me, new column), I won't even try. What

follows are some broad opening-night thoughts about the world


I deliberately say world economy, not American economy. Whatever

else they may have been, the 90's were the decade of globalization.

Both the bad news (it was a banner decade for financial crises) and

the good (living standards in much of the world continued to rise,

in some cases -- China -- spectacularly) were closely tied to the

ever-increasing integration of national economies with each other,

to the seemingly unstoppable logic of growing trade and investment.

Or is it unstoppable? You see, we've been here before.

Historians sometimes call it the First Global Economy: the era from

the mid-19th century onward in which new technologies of

transportation and communication made large-scale international

trade and investment possible for the first time. In their quest to

create that global economy, to abolish the traditional constraints

of geography, engineers accomplished miracles -- laying telegraph

cables beneath the Atlantic, digging tunnels through the Alps and

building paths between the seas. The Panama Canal, whose

construction required breakthroughs not only in earth-moving

technology but in medical science, was the high-water mark of the

age (literally: the locks raise ships 85 feet above sea level).

And just as the canal reached completion, the global economy fell


To some extent, the First Global Economy was a casualty of war. The

Panama Canal and the Western Front both went into action in August

1914. The war and its indirect consequences -- hyperinflation and

political instability in Germany, isolationism in the United

States, and so on -- partly explain why the forces of globalization

went into a retreat that by 1945 left the world economy thoroughly

Balkanized. But the truth is that even before 1914, though the

volume of trade and investment continued to expand, the globalist

idea was on the defensive. Intelligent men might explain that wars

were no longer worth fighting and borders obsolete; a

sophisticated, cosmopolitan elite -- like the U.S.-educated

technocrats who ran Mexico until they were overthrown in 1911 --

might move freely between continents; but the political foundations

for a global economy were never properly laid, and at the first

serious shock the structure collapsed.

We are now living in the era of the Second Global Economy -- a

world economy reconstructed, largely under American leadership,

over the past half century. It took a long time to put Humpty

Dumpty back together again: the share of world output entering into

trade didn't reach its pre-1914 levels until the 1970's, and

large-scale investment in "emerging markets" -- that is, places

that are to today's world economy what America was to our

great-grandfathers' -- has revived only in the last decade. But

this time the economic achievement is built on stronger foundations

-- isn't it?

Well, yes -- but maybe not strong enough. True, we have gotten

better at making the distinction between commerce and conquest --

trade no longer follows the flag and blatant imperialism is out of

style. (We handed the Panama Canal back last month.) And Western

nations seem to have more or less grown out of the saber-rattling

nationalism that led to catastrophe back in 1914. But now as then

the global idea is very much a minority persuasion, all too easily

portrayed as an ideology of and for a rootless cosmopolitan elite

that is out of touch with ordinary people.

For that, surely, is the lesson of the trashing of the World Trade

Organization meeting in Seattle last November. Not that the

protesters were right: it is a sad irony that the cause that has

finally awakened the long-dormant American left is that of -- yes!

-- denying opportunity to third-world workers. But though the facts

may be on the side of the free traders, though global trade really

ought to have mass public support, one can hardly deny that the

opponents are winning the propaganda war. For the moment, as long

as it seems to deliver the goods and services, globalization is

tolerated; but it is not loved.

The big economic question for the next century, in other words, is

really political: can the Second Global Economy build a

constituency that reaches beyond the sort of people who congregate

at Davos? If not, it will eventually go the way of the first.


Copyright 2000 The New York Times Company

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