Globalization and the backlash in historyThe world economy is more globalized today than at any time in history. But the first era of globalization under the Gold Standard reached heights of economic integration that were comparable (Figure The second half of the 19th century was a time of trade liberalization in Europe. The repeal of Corn Laws in Britain 1846 led to a Franco-British trade agreement in 1860, which in turn produced a series of commercial treaties among all major European countries. By 1880, the Gold Standard and free capital mobility had effectively become the norm. And people were free to move, which they did in large numbers from Europe to the New World. Just as today, improvements in transport and communication technologies – the steamship, railroad, telegraph – greatly facilitated trade in goods, capital, and workers. In each of these areas, a political backlash was not late in coming. In trade, the decline in world agricultural prices in 1870s and 1880s produced pressure for resumption in import protection. With the exception of Britain, all European countries raised agricultural tariffs towards the end of the 19th century (Bairoch 1972). In some cases agricultural protectionism also spread to manufactures. Bismarck’s Germany raised tariffs on both agricultural and manufactured products, as a result of the famous marriage of “iron and rye,” an alliance between landowners and industrialists.
The conflict would come to a head in Europe during the interwar period. A return to the Gold Standard and open trade policies were to prove unsustainable under the weight of economic crisis and political turmoil at home. As Jeffry Frieden (2006) summarizes it, the reaction to mainstream politics then took two forms. Communists chose social reform over the international economy, while fascists and Nazis chose national reassertion. Both paths took a sharp turn away from globalization.This capsule history raises a number of questions.
Why does globalization, in its many forms, cause political conflict? How does the intensity of the conflict vary over time, depending on the stage of globalization, state of the business cycle, and other factors? In view of the contentious history of the first era of globalization, what enabled the later flowering after the Second World War? And how similar (or dissimilar) is the current populist backlash
