Book Review: A Future Imperfect

This article appeared in Reason magazine in November 2000.
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At last-a sensible book about globalization. Internationaleconomic integration is a phenomenon drowned in hype: Cheerleaderstalk breathlessly of a world without borders, while doomsayers rageagainst the supposed tyranny of uncontrolled market forces. JohnMicklethwait and Adrian Wooldridge, two reporters for TheEconomist, have succeeded in cutting through both sides' bombast.In their engaging and clearheaded guide to the shrinking of theplanet, they show that different parts of the globe are shrinkingat very different rates and that the whole process has a long, longway to go.

However fast they have grown, international markets remain theexception rather than the rule in contemporary economic life.Analysts at the renowned consulting firm McKinsey have estimatedthat only about 20 percent of world output is currently subject toglobal competitive pressures. Even when they are allowed tooperate, the forces of global competition are much more attenuatedthan most of us think. In that connection, Micklethwait andWooldridge cite an eye-opening study of Canadian trade patterns.Canada and the United States boast the world's largest bilateraltrading relationship. A common language and strong cultural tieslink the two countries. Tariffs have been eliminated by a freetrade agreement. And still, trade between Canadian provinces is 12times greater than trade between provinces and American states,after correcting for differences in the trading units' size anddistance. The bottom line: National borders still matter a greatdeal.

Despite all the loose talk about their imminent demise, thenation-states that defend those borders are still very much aliveand kicking. The authors point to the experience of their nativeGreat Britain, where from 1979 to 1997 Conservative governmentsstrove to limit the size of the bloated public sector. In the end,all they managed was to budge government spending from 43 percentof gross domestic product down to 42 percent.

In the United States, Microsoft's travails reveal thefatuousness of the claim that governments are powerless in the faceof footloose capital. "Companies are much less mobile than peoplebelieve," Micklethwait and Wooldridge remind us. "One reason whythe federal government can harass Microsoft is because it knowsthat the computer company will not move elsewhere."

The Internet, with its contempt for distance and its resistanceto top-down control, makes an appealing metaphor for the rapidlyintegrating world economy. But it is a deceptive one if taken tooliterally. Those of us under constant e-mail bombardment may thinkour plight a universal one, but half the world's 6 billion peoplehave yet to place their first phone call. Two-thirds of them stillsurvive by tilling the soil. The world economy, considered as awhole, remains more preindustrial than postindustrial. Micklethwaitand Wooldridge perform a valuable service by making clear thatglobalization, far from an accomplished fact, is a process onlyjust getting under way.

Though they debunk globaloney in both its triumphalist andapocalyptic variants, Micklethwait and Wooldridge are by no meansneutrals in the raging globalization debate. They mount a stoutdefense of international markets-a defense that is all the moreeffective because it is not Panglossian. Globalization has notbenefited everybody, they frankly acknowledge. They divide theunfortunate into three broad categories: the "has-beens," who workin declining and no longer competitive industries; the "stormdamage," who are rocked by the volatility of international finance;and the "nonstarters," the desperately poor who have yet to betouched by global wealth creation.

But it is wrong, they argue, to focus only on the losers whenthe winners so greatly outnumber them. "Deng Xiaoping's decision toopen China's economy in 1978," they recall, "helped some eighthundred million peasants more than double their real incomes injust six years, arguably the single greatest leap out of acutepoverty of all time." Meanwhile, the cure for what ails most of theworld's suffering billions is not less globalization but more: "Theonly places where the losers massively outnumber the winners are incountries, such as Cuba, that have shut the door on globalizationcompletely."

Micklethwait and Wooldridge strengthen their brief forglobalization by putting the phenomenon in historical context. Itis a task that doubtless comes naturally to writers for TheEconomist. Their magazine, after all, was launched in 1843 tocampaign for the repeal of Great Britain's protectionist Corn Laws.The success of that campaign three years later secured Britishcommitment to free trade and thereby laid the political foundationsfor the world's first great episode of globalization-the dramaticexpansion of trade and investment flows worldwide during thedecades prior to World War I. As Micklethwait and Wooldridge note,the extent of international economic integration a century ago,though on the whole less than now, was impressive nonetheless.

But the initial burst of globalization did not last. It wasdestroyed by the outbreak of World War I and the ensuing calamitiesof totalitarianism, the Great Depression, and World War II. In thepostwar era international trade gradually resumed and expanded, buta truly global economy remained an impossibility: The communistnations sealed themselves off from international markets, as didmuch of the Third World. It is only in the past couple ofdecades-with the opening of China, the fall of the Soviet empire,and the abandonment by many developing countries of isolationist"import substitution" policies-that a global division of labor hasreasserted itself.

Micklethwait and Wooldridge cleverly encapsulate what they call"the fall and rise of globalization" by reviewing the twists andturns of John Maynard Keynes' posture toward the internationaleconomy. Keynes burst onto the scene in 1919 with his The EconomicConsequences of the Peace, in which he rhapsodized about the prewarinternational order and warned (correctly) that the draconianprovisions of the Versailles treaty were antithetical to thereestablishment of that order. By 1933, Keynes' faith in thepossibility of a stable, peaceful international system was so badlyshaken that he called for a turn toward "nationalself-sufficiency." "I sympathise," he wrote, "with those who wouldminimise rather than maximise economic entanglements betweennations."

Yet by 1944 Keynes' faith was sufficiently restored that heplayed a leading role in creating the Bretton Woods institutions(the International Monetary Fund, the World Bank, and the GeneralAgreement on Tariffs and Trade). Those bodies, for all their flaws,provided a framework for restoring "economic entanglements," atleast among the nations of what came to be known as the Free World.What we call globalization today has resulted in large part fromthe collapse of the communist and Third World alternatives to thatFree World international order.

This historical background puts the world economy in a verydifferent light than the one that colors most people'sunderstanding. Globalization is commonly portrayed, by friends andfoes alike, as a process whereby market forces-turbo-charged by themicrochip and the Internet-inexorably bend weakened governments totheir will. But until relatively recently, most people in the worldlived under governments that flatly rejected the verdicts of themarketplace. Why do they now pay attention? Yes, new informationand communications technologies allow markets to operate moreeffectively, but that hardly matters when governments ban marketsfrom operating at all. Why did many of them stop doing so?

The fact is that alternatives to markets - namely, centralplanning in various guises - were tried and found wanting. Thecommon contention that markets are causing the retreat of the stateis thus less true than the reverse: The collapse of statistpolicies has allowed market relationships to be restored. Theenemies of globalization who rail against supposedly uncheckedmarkets need to be reminded why those checks are being slowly butsteadily removed: They were an unmitigated disaster for thebillions of people subject to them.

To their credit, Micklethwait and Wooldridge do not restricttheir defense of globalization to narrow economic grounds. "Arguingthat globalization is, on balance, not a bad thing and showing thatit has generally enriched the world economically is certainlyvaluable," they write. "But the same could also be said for thelavatory or the lemon squeezer." They go beyond dollars and centsto make the case that globalization expands human liberty.

First, the authors trace the connections between economicopenness and broader freedoms. In one evocative example, theyrecount how British capital controls during the 1960s imposed atravel allowance that severely restricted citizens' ability totravel abroad-an intrusion on personal liberty that would beconsidered beyond the pale today. "It is not coincidental that thepace of globalization has picked up with the spread of democraticrights," they note; "the two are symbiotic."

Micklethwait and Wooldridge then go further to argue thatglobalization, by overcoming the "tyranny of place," deepens andenriches the exercise of individual freedom. Here they turn thetables nicely on communitarians like John Gray who bemoanglobalization's assault on "the blessings of a settled identity.""John Gray himself," they respond, "happily abandoned the Newcastleworking class into which he was born for the metropolitanintelligentsia. One of the many benefits of globalization is thatit increases the number of people who can exercise Gray's privilegeof fashioning his own identity."

The topics covered in this fine book range far beyond those Ihave touched on in this review. Among other highlights areintelligent discussions of the "failure of global government," thespread of American popular culture, and the currently modishanti-globalization backlash. If the book has a weakness, it is thatthe authors fail to bring the wide variety of subjects addressedwithin any overarching analytical framework. They sound somegeneral themes but do not sustain them. As a consequence the bookreads more like a series of set pieces than an integrated whole.But for someone interested in a smart and often witty overview ofglobalization in all its nebulous dimensions, Future Perfect makesfor excellent one-stop shopping.