The world is increasingly integrated through goods and capital flows and communication. One group of people sees this as the status quo. Another group of people finds this trend to be problematic. "Whether an integrated global economy will be maintained is one of the great questions of our age" (7).
Figure 1 (8):
Before WWI, the global integration of the economy was robust and provided for long-term growth and stability. The international monetary order, the gold-standard, was king. Labor and capital mobility provided for efficient investment where needed. While there were some tensions, especially surrounding rising powers, these paled in comparison to the rich growth that took place. This all was brought to its knees in a very short period.
"Why could the first era of global capitalism not be restored? It was not for lack of trying" (11).
"The classical international economy of the gold standard era rested upon a consensus among elites about the priority of international economic commitments. IN virtually every country, for virtually all of this period, economic and political leaders agreed that governments needed to ensure that their economies would adjust quickly to changing international economic conditions, rather than the other way around" (12).
"To summarize and generalize, the first age of globalization worked because it was economically and politically feasible for governments to do what was necessary to sustain their international economic commitments. It was not restored after World War I because these enabling conditions were no longer present" (14).
The breakdown of the free-market order after WWI was rebelled against. The previous order did not emphasize a redistributive, or ameliorative branch of policy in response to the encroachment of the market. As people recovered from The Great War, they were forced to reevaluate priorities. Many rejected the free-market in whole, but accepted it in part: it would form part of the new global order, along with state-based policies that were socialist, nationalist or both.
Bretton Woods was also established, in part, to help the transition back to a global capitalist order after WWII through an international structure that attempted to mitigate some of the excesses of capitalism that were previously experienced. These policies were so successful that they eventually led to an increased push for more free market based approaches.
"The first era of globalisation collapsed because there was no effective political and policy response to changing economic and social conditions. It did not fail, in my view, for technical or objective economic reasons, but rather for political-economy reasons" (19).
The concern expressed by the author is that the current stage of global integration represents the potential beginning of a backlash against economic integration, as the political-economy has not been structured in such a way as to mitigate the negative effects of this integration on large segments of the population. Frieden explores the current (2006) position of the US in relation to domestic pressures emerging from global economic integration (ie., deficits, rising inequality, etc).
Will capitalism die again? Maybe. But there are many things we can do to make sure that this doesn't happen.
