Skip to content

From the archives

Our Violent National Game

The great hockey debate continues

Pax Atlantica

NATO’s long-lasting relevance

“Ization” versus “Ism”

Let's define our terms before predicting the end of the world as we know it

Jennifer Welsh

"Sinking Globalization"

Niall Ferguson

Foreign Affairs

Volume 84, Number 2, Pages 64-77 ; March/April 2005

The Collapse of Globalism and the Reinvention of the World

John Ralson Saul

Viking Canada

309 pages, hardcover

ISBN: 0670063673

Globalization is in free-fall. This is the conclusion of two prominent public intellectuals—one a historian and the other a philosopher. If they are right, there will be egg on more than a few faces. A large cadre of politicians, CEOs, management consultants, journalists and academics have staked their policies, fortunes, strategies, slogans and careers on the idea that the future is increasingly global. While drinking the globalization Kool-Aid, such figures have dedicated little time to conceiving of alternative scenarios. Instead, the electorates in established as well as new democracies have been presented with an unstoppable juggernaut: globalization as the inevitable force that is better to join than to beat.

Yet if the challenge levelled at this prevailing orthodoxy is similar, the line of argument taken by each author is different. For Niall Ferguson, in “Sinking Globalization,” an article in the March/April 2005 issue of Foreign Affairs, the prediction that globalization could soon sink is derived from a comparison between 2005 and the highly
interconnected world that existed just prior to Then, as now, five factors were conspiring to bring down the world economy and with it the optimistic belief that, paraphrasing the great pamphleteer Norman Angell, war had become irrational: imperial overstretch, great-power rivalry, unstable alliances, rogue regimes and the rise of a revolutionary terrorist organization hostile to capitalism. And while we might think we have foolproof structures and policies to prevent a catastrophic war and worldwide depression, Ferguson believes we are no better prepared for the doomsday scenario than were the champions of the last age of globalization. “Today,” he writes, “no one can be sure how stable the international monetary system is, but one thing is certain: it is no more stable than the system that preceded World War I.”

John Ralston Saul also sees eerie parallels between the eve of World War One and today. The “clever beneficiaries of global economic destiny” in the early 21st century, he claims in The Collapse of Globalism and the Reinvention of the World, are not so different from the “naively contented middle class” of pre-1914. However, Saul’s challenge to globalization is more confident and definitive, moving beyond warning to herald globalization’s death. The evidence he presents seems formidable. Those who once preached the dictum “privatize, privatize” have now backtracked, recognizing the importance of the rule of law as a necessary foundation for economic growth. A family feud is raging among economists over the wisdom of loosening controls over capital markets.Malaysian leader Mohamad Mahathir, once ostracized for defying the edict of the International Monetary Fund by pulling its currency off the global market and imposing capital controls, was given red carpet treatment at the World Economic Forum meeting in Davos in 2003 for leading his country to the top of the charts in world competitiveness. Voices who once dismissed national attachments as old-fashioned and only for those who had yet to experience the pleasures of cosmopolitanism are now calling for nation-states to reclaim their jurisdiction and reinforce their borders against global terrorism and other “new” threats to security.

If these reversals are not sufficiently convincing, Saul invites us to consider what globalization has actually delivered. His book’s earlier incarnation, an article in Harper’s in 2004, incurred the wrath of several economists who questioned his mode of calculation and pointed to continued growth in trade and investment. Saul does not
deny these facts. He simply asks us to look further, at globalization’s alleged benefits. Even if his data set is not always as full as it could be, there are other authoritative sources that question the moral underpinnings of a system that continues to produce such a staggering gap between the world’s rich and poor. One recent intervention is Worlds Apart: Measuring International and Global Inequality (Princeton University Press, 2005) from Branko Milanovic, a leading economist with the World Bank, who sifts through the statistics to paint a picture of a world in which the number of countries that are considered rich is lower than it was in 1960, and income inequality between individuals is on the rise.

In explaining why globalization did not unfold as predicted, Saul focuses primarily on the failures of corporatism, and the weakness and lack of imagination of contemporary political leaders, corporate titans and public servants. His tone is most biting when condemning current management fads, business education and the elusive quest to apply rationalist models to the unpredictable and chaotic—yet wonderful— reality of modern historical development. In Saul’s view, we have been training public officials and businesspeople to be followers of conventional wisdom, rather than creative thinkers who understand the power and potential of human choice. This confusion of management with leadership is largely responsible for the ill-fated policies of the globalization era. For Saul, the symbol of globalization’s demise was the rejection in 1998 of the Multilateral Agreement on Investment, which would have enhanced the rights of foreign investors and reduced the policy prerogatives of national governments. He salutes the brave foot soldiers in a few well-placed nongovernmental organizations for reminding elected leaders that considerations of the public good should trump investment—and not the other way around.

Does the weight of these two prominent voices fortify the conclusion that globalization is dead or dying? Or does the fact of different paths to the same end call for some skepticism? I take the latter view. Indeed, it could be argued that the contributions of Saul and Ferguson, taken together, muddy the waters. It is best to begin by analyzing them on their own terms.

Given that Ferguson’s thesis is less ambitious (it doesn’t talk, for example, about “reinventing the world”), it is at first blush more appealing. The prudent British historian is simply counselling us against complacency. The fragile artifice of (relatively) free trade and capital movement, low inflation, and unfettered travel and communication could reverse itself, just as it did with the onset of war in 1914.

Where Ferguson is particularly compelling is in describing the precarious situation of the linchpin of that system: the United States. As in the early 20th century, the reigning imperial power is overstretched, both militarily and economically. I’ll focus on the second dimension.

In both periods, the U.S. constitutes the world’s largest economy. But a hundred years ago, that country was much less significant as a market for the rest of the world. The real hegemon of that era—Great Britain—was driving global economic activity by exporting capital and sending its domestic savings to Asia, Africa and the Americas to finance the creation of infrastructure. Its successor, the American behemoth, Ferguson explains, could not be more different. Through its excessive spending, the U.S. has become “the world’s debtor rather than the world’s creditor, absorbing around three-quarters of the rest of the world’s surplus savings.”

Some economists contend that the U.S. current account deficit is sustainable, given the size of its economy and projected growth rates. But what if, Ferguson asks, those projections turn out to be wrong? More importantly, isn’t there a downside to such high levels of debt? Each day, the U.S. needs to attract approximately us$2 billion in capital to finance its deficit; to do so, it looks to private investors and foreign governments. It is their willingness to purchase U.S. assets that keeps the dollar from taking a nosedive. As a result, it is the decisions of key central bankers in Asia about their U.S. reserve holdings, and not just the pronouncements of the aging Mr. Greenspan, that increasingly have the greatest effect on U.S. interest rates. When Asian central bankers even hint that they might, at some point, diversify out of U.S. dollars, the effect on the Dow Jones index and the value of the greenback is significant. What would happen if they actually did diversify? Aside from the damage done to Asian exports, ordinary Americans would be dangerously exposed. Let’s put it this way: you wouldn’t want to be a new homeowner with a large mortgage.

But while Ferguson’s warnings about the fragility of our global economic order are well justified, he stretches the analogy with pre-1914 too far on two counts. First, the current international system is not plagued by the unstable alliance system that characterized Europe in the lead-up to World War One. At that time, European statesmen forgot the wisdom of Bismarck’s agile diplomacy and created two opposing blocs: one centred on Germany, the other on Russia and France.As bipolarity became entrenched, flexibility was lost. The world of 2005 looks different. The Warsaw Pact is gone, and there is no formal alliance of, say, Russia and China, directed at the United States. Ferguson may be right to say that NATO’s purpose and identity are in flux. But it is a leap in logic to conclude that this puts us in a situation of rigid alliances. There just aren’t enough cold hard pacts to support such a conclusion.

The second and related problem is Ferguson’s suggestion that our contemporary world is marked by the same kind of great-power rivalry that dominated Europe in the late 19th century. During that time, European powers were directly engaged in wars over territory and colonial wealth. In addition, Great Britain and Germany were embroiled in a destructive naval race, and Russian efforts to build up its conventional land forces challenged Germany’s position on the continent. Today, however, the spectre of greatpower war is much less likely. In fact, one of the main achievements of the post-1945 period has been the sharp decline of destructive inter-state conflicts and wars for territorial aggrandizement. This is not to say that rivalries do not exist. Witness the tension between India and Pakistan, or Ferguson’s example of U.S. and Chinese competition over Taiwan. But better diplomacy, international institutions such as the United Nations Security Council, mutual dependence and the sheer memory of the destructiveness of World War Two have bred caution and led to alternative forms of dispute resolution. The greatest threats to the peace in the 21st century are not wars between nation-states, but rather destructive civil wars and privatized violence.

It is here where Saul’s perspective seems closer to the mark. Modern conflict is less about big states clashing—or even big states defeating small states on the battlefield. Instead, it is “about fundamentally weak forces … learning how to fight the strong.” As he shows, the vast majority of those killed in conflict situations since World War Two died in “irregular warfare.” What Saul underplays is globalization’s key role in facilitating these unequal confrontations. His view of the part globalization has played is largely a negative one, that is, that “blunt economic mechanisms, abstract monetary theories and bogus technocratic measurement” have weakened and destabilized societies, making them prone to violence. For him, irregular warfare is testament to the fact that “the Globalization idea has not worked out.”

But globalization’s relationship to insecurity and violence is much more fundamental and still very much alive. As the University of Toronto’s Janice Gross Stein has shown, developments in science and technology have created a “networked world,” where power is diffused horizontally (across frontiers) rather than concentrated in hierarchical command-and-control structures. Some of these networks are benign, but many others—particularly networks of terror, violence and crime—are revolutionizing the security landscape. Such networks are not just assisted by globalization; they thrive on it. Global markets, open borders and rapid communications provide the oxygen that allows them to survive. Just as the threat is global, so too must be the solution. In short, purely national security strategies are no longer viable.

If in some cases Saul underemphasizes globalization’s continuing impact, in other cases he blames it for too much. One example is his treatment of Rwanda and what he describes as the “return of genocides.” Ethnic cleansing and the mass killing of civilians did not reappear in the 1990s. They had been part of the international landscape during the Cold War and, more specifically, the decade of the 1970s. In Pol Pot’s Cambodia, in Idi Amin’s Uganda and in East Pakistan, millions were slaughtered without a response from the “international community.” Instead, individual nation-states acted to stop the killing (Vietnam, Tanzania and India respectively) under the banner of self-defence and national interest. Twenty years later, hundreds of thousands of Rwandans were butchered not because we in the West “were busy speaking with confidence about Globalization,” as Saul writes, but for tragically familiar reasons: the lack of political will, more pressing national interests on the part of major western states (particularly the U.S.) and the hard-wired inertia of intergovernmental institutions. We risk learning the wrong lessons from Rwanda (and subsequent atrocities such as the Congo) if we attribute inaction to a preoccupation of political leaders with market-led reforms. Even if all states are “seized with the matter” (to use UN-speak), as they claim to be today in the Darfur region of Sudan, decisions about whether and how to act are ultimately (whether we like it or not) the result of a tradeoff among a variety of factors: a desire to do the right thing, the presence/absence of a strategic or economic interest, concerns about international stability, the enduring tendency toward racial indifference and fears about exit strategies.

Furthermore, it is not evident how Saul’s alternative to globalization— the revival of the nation-state or “positive nationalism”—would help us with these enduring problems. He cites, approvingly, the classical economist Adam Smith on the priorities of a good citizen: “The wise and virtuous man is at all times willing that his own private interest should be sacrificed to the public interest of his own particular order or society. He is at times willing, too, that the interests of this order or society should be sacrificed to the greater interest of the state or sovereignty.”

Be careful what you wish for. A desire to protect national sovereignty has been one of the major stumbling blocks in efforts to enshrine, at an international level, the right to intervene militarily in the jurisdiction of another state when there is a supreme humanitarian emergency (such as we saw in Somalia in 1992 or Kosovo in 1999). But a key factor pushing the issue onto the diplomatic agenda is a phenomenon that has been aided and strengthened by globalization: the movement to promote, enshrine and protect universal human rights. Although Saul speaks of humanism, this movement is given surprisingly little treatment in The Collapse of Globalism. (Perhaps he is assuming that his earlier writings, which spell out his humanist vision, are fresh in our minds.) While human rights agreements were signed early in the post World War Two period, it was only at Helsinki in 1975 that a recalcitrant Soviet leader named Brezhnev and an unsuspecting U.S. Secretary of State named Kissinger agreed to a document that would become a touchstone for dissident movements struggling against the shield of sovereignty. It would take the collapse of communism to finally debunk the argument that there could never be a consensus on human rights. Globalization was very much part of this story.

Part of the problem in determining Saul’s position on these questions is his lack of clarity about what, exactly, has collapsed. In other words, how does he understand globalization? Near the end of the book, he writes that “academics should keep themselves busy with definitions.” Forgive me, then, for indulging in the vice of my trade. As Saul defines it, globalization is “an inevitable form of internationalism in which civilization is reformed from the perspective of economic leadership.” There are two problems here.

First, Saul fails to distinguish globalization from internationalization. “International” is an old term, going back to the writings of Jeremy Bentham in the late 18th century. To define globalization in this way is to focus on the increase in interaction, and interdependence, between people in different countries. In short, it is about interterritorial connections. If this is all there is to it, then Ferguson is right: we have been here before. In quantitative terms, trade and capital flows prior to World War One reached levels close to those of the early 1990s, while the free movement of people was actually more liberal than it is today—before the advent of passports, visas and refugee claimant boards. But if globalization as a concept is to have any purchase, it needs to have a distinctive meaning. To establish one, we should concentrate not just on the relations among countries, but on the advent of what Jan Aart Scholte in Globalization: A Critical Introduction (Macmillan, 2000) calls “supraterritorial” or “transborder” spaces—whether economic, political or social. I hasten to add that these spaces have not supplanted older territorial units; they coexist alongside them. Acknowledging globalization does not require an accompanying belief that territory no longer matters or that nation-states are obsolete. It simply necessitates recognizing connections and phenomena that are partly (if not wholly) detached from a territorial logic. Electronic finance, cyber-war and ozone depletion all stand as examples.

Understanding globalization also requires attention to its qualitative, as opposed to quantitative, dimension: changes in the way that people and groups think and identify themselves, and changes in the way that actors (whether states, firms or individuals) perceive and pursue their interests. This is where comparisons between pre-1914 and today break down. An embryonic form of global consciousness existed in the pre- 1914 era, aided by the advent of world fairs, the Olympics, the mass circulation of newspapers, and transnational religious and labour organizations. But it was restricted to a much narrower slice of the population, and pales in comparison to the myriad of global communities that exist today—whether of gender, class, generational cohort, profession, religion, race or sexual orientation. It goes without saying that these trans-border communal bonds have been greatly facilitated by instantaneous global media and the ease of travel and communication.

The second problem is that Saul slips back and forth between the terms “globalization” and “globalism.” While the book’s title focuses on globalism, both the jacket and the chapters frequently use the former term. This isn’t just splitting hairs. An “ism” is an ideology. An “ization” is a process. There is a difference between Saul’s ideology of globalism—the belief that economic forces (rather than political or social ones) determine the course of human events—and the process of globalization, as I have described it above.

It is reasonably easy to agree that the globalist ideology, which claims that civilization will be led by commercial forces, is dying. And a good thing, too. But only the most fervent prophets of globalization ever asserted this ideology. For those in positions of power (whether in nation-states or corporations), pure assessments of economic self-interest are usually contaminated by other considerations. So, for example, while the Government of Canada has declared itself a multilateral free trader, it continues to allow forms of protectionism in agriculture, whether in Quebec or Western Canada. Similarly, the claim that multinational enterprises automatically move to zones with low wages and low taxes is not borne out by the evidence. Instead, the attractiveness of investment locations has much more to do with the availability of skilled or knowledge-intensive labour, possibilities for research and development, and sound physical infrastructure such as transport and communications. It is also worth remembering that the logic of economic determinism—whether from the pro-globalization or anti-globalization camp—has been questioned for some time, not least by Ferguson himself. In his 2001 book, The Cash Nexus, Ferguson demonstrated that modern history (which he dates from 1700) has not been driven by economic laws. Rather, it has been an unpredictable process in which political events often shape economic developments, and in which individual human decisions and value systems can make all the difference. This emphasis on choice, and chance, is something Saul would surely agree with.

What is still an open question is whether the process of globalization has halted. I remain unconvinced. But even if we were to accept a weaker version of the thesis—that globalization is on the ropes—where do we go from here? Refreshingly, Saul admits he doesn’t know. “It is like being in a vacuum … filled with dense disorder and contradictory tendencies,” he writes. “Think of it as a storm between two weather fronts.”He does offer up one test for determining when we have emerged from the vacuum: the developing world debt crisis. “If the governments of the West find the clarity of mind and the courage to simply erase the debt, we will be clearly on to a new era.”

Well, that day is here. At the G8 Summit in Gleneagles this past July, government leaders agreed to eliminate 100 percent of the debt owed by 18 poor countries to international institutions such as the World Bank and the IMF (with the possibility that the number could rise to 38). What does this tell us about our new era? Several things. That leaders are capable of making choices, that the “root cause” thesis about terrorism may be having influence, that international agreements continue to reflect compromise and tradeoffs (debt relief promoters, such as Tony Blair, had to give to get), that global movements— using the power of technology to organize— can pressure governments to act, and that arguments about living in a global community still pack some punch. Would Saul agree?

Jennifer Welsh is a professor of international relations and co-director of the Oxford Institute for Ethics, Law and Armed Conflict.