[Krugman's inaugural column at the New York Times]
January 2, 2000
RECKONINGS / By PAUL KRUGMAN
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
economy.
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
apart.
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.
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Copyright 2000 The New York Times Company