We've been here before, a century ago.
In the early years of the 20th century, the world took its first stab at globalization. Trade, investment, communications and immigration among nations grew to unprecedented levels. They called it the Belle Epoque, but it was Globalization I.
Then it ended, stopped dead by two world wars and the Great Depression. Not until 1975 did the world achieve that level of economic integration. Then a new burst of globalization took off. A mix of space-age technology, international cooperation, opened borders and, not least, American leadership produced the global economy we know today. Call it Globalization Redux, or Globalization II.
Can it last? A silly question -- until recently. Of course it would last. Globalization was real. The global economy dominated our lives. Every day, nations counted for less and less, global corporations for more and more. Besides, in the nuclear age, no world wars seemed possible. Granted, the global economy got a nasty shock in 2008, but we seemed to be recovering. Besides, if the Recession battered some national economies, it seemed to leave globalization unscathed.
But old storm clouds, unseen in the glare of globalization, are gathering, and they say that the continuing expansion of globalization is not the slam dunk we thought it was.
Is globalization dead? By no means. Or rather, it's much too early to write its obit. But it's not as healthy as we thought it was. Signs are appearing, on many levels, that globalization -- by far the most powerful economic force since the Industrial Revolution -- could still be derailed.
The Midwest and other hard-hit areas might not mourn its passing: a poll by Monmouth College found that 64 percent of Midwesterners felt globalization had hurt the region. But as the first half of the 20th century taught us, there are worst things than a globalizing economy.
Some of the clouds loomed over the conference on the global economy which The Chicago Council on Global Affairs sponsored May 2-4. Not that the death of globalization was on the agenda. The formal topic was "Searching for Strategies to Restore Global Economic Stability and Growth." If globalization is to deliver on its promises of global prosperity, these strategies must be found. But the conference's underlying motif was the sheer difficulty of getting this done.
It's clear that the recession has called into question everything we took for granted just a few years ago.
The euro crisis is an obvious place to start. The euro project is more than just a currency union. It is a symbol of the ability of nations, with different histories and languages, to unite their economies. Beyond that, it is the capstone of the European Union, which is no less than an attempt to put Europe's war-wracked history behind it. In addition, the European Union merged a couple dozen relatively small nations into one huge economic bloc big enough to compete in the global economy.
To make all this work, the European nations had to bury their national animosities -- become true Europeans -- and to compromise and sacrifice to share in the EU's prosperity and growth.
Which worked fine so long as Europe prospered and grew. With the debt crisis, though, compromise and sacrifice mean Germans bailing out Greeks, who have to accept lower standards of living. The Greeks voted "no" to this on Sunday. Any German election now would probably say the same. The French, also voting on Sunday, rejected what's been done so far to end the crisis.
Suddenly, people who thought they were Europeans are finding out that they are, first and foremost, Germans and Greeks and French.
Speakers at the conference spoke seriously, about the possibility that the eurozone or even the EU itself might break up. Considering the tight links between economies in the global economy, the breakup of the eurozone would send shock waves around the globe. More lastingly, it would show that dreams of nations sacrificing to build a stronger common global economy are just that -- dreams: if the Europeans can't do it, who can?
Worse, the end of the eurozone could send the entire European Project into reverse, breaking links that took 60 years to build and returning Europe to a snakepit of hostile nationalities. Which is where we were a century ago, when Globalization I died.
Other speakers suggested that a return of currency controls -- anathema to anyone who believes in the free flow of money -- might not be a bad idea. Global trade still lives but it seems accepted that the Doha Round -- the latest round of multinational World Trade Organization talks aimed at expanding free trade -- is dead and can't be revived.
Some speakers still assume that, in a crunch, the United States will ride to the rescue. After all, the U.S. pretty much invented globalization and has pushed the project forward. Global corporations, many of them American, dominate global markets. Global organizations formed by the U.S. and its allies, such as the WTO and the IMF, oversee the rules of globalization. American leadership, crucial to globalization's existence, will keep it alive.
Maybe, maybe not. One panel at the conference asked, "What Happens When No Country Leads?" Behind this question lay the growing realization that the United States, the "indispensible nation" for so many years, may no longer exercise this global leadership -- militarily, politically or economically. The relative decline of the United States is the topic of a shelf of new books. But the idea that this decline will leave a global leadership vacuum -- what the author Ian Bremmer calls "G-Zero" -- is a new one.
The problem, one speaker said, is that the U.S. no longer dominates the global economy: if China keeps growing, the U.S. shortly will be the world's second biggest economy. This means, he said, that America no longer has the financial clout or the political will to lead and, in addition, has lost the confidence that its free-market model may be the best.
"American leadership and intellectual authority have been diminished," proclaimed a keynote speaker, the former Mexican finance minister, Jesus Silva Herzog.
Well, if the U.S. is passing the leadership baton, who will pick it up? China? Maybe someday, but not yet: it is still inward-looking, developing a base from which to project global power. Japan? It had no taste for leadership, even when its economy was strong. The European Union? Get serious.
The result? G-Zero.
The world clearly is looking for a new model, to replace the broken American model. Any successful model embodies an implied social contract, which says that the success of an economy is shared by the people who live within it. In the United States, that social contract has vanished. In Europe, it is breaking up now. In China, the government scrambles frantically to provide the growth demanded by its still needy people. The Japanese model stalled a decade ago and the Brazil model may be stalling now.
Any economy, even a global one, needs political support to survive. People and voters have to believe the economy will deliver the goods. If it doesn't, they will withdraw their support and seek something else -- nationalism, perhaps.
That's what happened a century ago. History doesn't repeat itself, but it occasionally passes itself coming back.