When the Chinese emperor first encountered British mass produced manufactured goods he refused a trade deal on the grounds that he couldn't possibly need anything coming from Britain. Instead he threatened to bring us to our knees by cutting off our supply of rhubarb so that we all collapsed with constipation. The result was that China entered two centuries of rapid decline that transformed what had been the richest and the most advanced country in the world into one of the poorest and most divided. A huge independent nation was forced to accept the import of opium at the point of guns that were mass produced by a tiny country on the other side of the world.
The world is now undergoing another of its periodic surges in technological and economic change. We are moving from a situation where there were a few very rich first world countries with relatively self contained economies into a genuinely global world where billions more people are engaged in advanced economic activity. We are also rapidly moving out of an era dominated by fossil fuel technology into an era dominated by new ways of generating and storing electricity which are going to steadily push the old technology into the past.
Faced with these changes it is tempting for some to put their head in the sand and hope they will go away. That is why so many elderly white men living in industrial towns voted for Brexit. They were hoping all that globalisation stuff would stop changing the lifestyles they had grown up with and that the factories would return along with their pride. They had a point. Globalisation has certainly damaged the secure lifestyle that many of the white working class in advanced countries took for granted. It is not much fun being laid off from a steady job in a factory with protected rights and some good mates to find that you are rushing up to the front door of people delivering globally made internet purchases on a zero hour contract. It is enough to make anyone have a bit of nostalgia for the past. The switch from managed national economies to an unmanaged global one carries very real dangers.
Left to its own devices the global free market economy will grow rapidly, change rapidly and display every bit as much energy for creative change as happened during the industrial revolution in Britain. Left to its own devices the global free market will also lurch between ever bigger booms and busts accompanied by massive disparities between the earnings of a few big winners and a race to the bottom on wages and conditions of work for relatively unskilled workers. Left to its own devices a global free market economy will produce and sell whatever makes a profit for the individual owner and dump the costs of any by-products onto the rest of us.
During its extreme free market phase in the early nineteenth century the UK ended up with horribly polluted rivers, air that was dangerous to breathe, a life expectancy of 16 for inner city labourers and wild swings between hugely successful periods of expansion and nasty banking collapses, business failures and mass unemployment.
The way out of these problems for the UK was not to go back to the past in the hope that people could once again be employed in agriculture and tip their hat to the Lord of the manor. The way out of these problems for the UK was to go forward to an era where education for all equipped many more people to gain skilled or white collar work and government both nationally and locally became strong enough to enforce sensible standards. We moved forward to an era of nationally managed capitalism and for 30 years after the Second World War there was steady growth of economies guided by Keynsian economic theories that prevented excessive booms and slumps. Whenever a slump threatened the country simply expanded the money supply to see it off and whenever a boom was underway they did the opposite in order to control inflation.
That secure and successful world started to disappear in the early 1970s when it became obvious that no one country could manage its economy on its own. Any government that printed money to expand simply found that too much of it went out of the domestic economy because people were buying their goods from a global economy not from home producers. This was made worse by the realisation of oil producers that they were sitting on a very powerful monopoly and they could extract a lot bigger share of the world's income if they combined to restrict supply and put the price up.
Since the 1970s we have been living in an era of largely uncontrolled and unguided global markets. Predictably that has enabled very rapid growth but also created huge disparities between winners and losers, dangerous lurches between global booms and slumps and damage to the environment on a planet wide scale.
The way out of these problems is not to retreat into our own little nations and build a wall around ourselves in the hope that all that awkward change stuff will stop happening. It is to build powerful international institutions that can guide and manage the world economy and to use Keynsian demand management globally. You cannot have a global world economy without global economic management. Just as you cannot live on a single planet without effective global political management of the environmental consequences of individual profit seeking.
That is the challenge for our political leaders. Can they create the mechanisms that will enable us to guide and direct the world economy in such a way that it works for the benefit of all instead of serves the interests of a very narrow group of very wealthy people?
I leave it to readers to judge how well we are doing at that in the UK and in the US just at the moment!