From Satanic Mills to Machine Learning: Western Technology and Global Markets in the 19th and 20th Centuries 9783110744477, 9783110744354

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Francesco della Porta From Satanic Mills to Machine Learning

Francesco della Porta

From Satanic Mills to Machine Learning Western Technology and Global Markets in the 19th and 20th Centuries

ISBN 978-3-11-074435-4 e-ISBN (PDF) 978-3-11-074447-7 e-ISBN (EPUB) 978-3-11-074449-1 Library of Congress Control Number: 2022936821 Bibliographic information published by the Deutsche Nationalbibliothek The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available on the internet at http://dnb.dnb.de. © 2022 Walter de Gruyter GmbH, Berlin/Boston Cover image: akg-images. Hübner, Carl Wilhelm 1814–1879. „Die schlesischen Weber“, 1844. Printing and binding: CPI books GmbH, Leck www.degruyter.com

Acknowledgments Mauro Creatini at Fondazione Giangiacomo Feltrinelli enabled me to publish some early ideas at the roots of this essay. Three short articles appeared on the Fondazione newsletter in December 2019. Paolo Carta encouraged me to consider an Italian edition. Paolo was patient enough to read various drafts, offering invaluable advice on style and substance. His support was essential in crafting Una Breve Storia della Globalizzazione, published in February 2021. Rabea Rittgerodt, editor of International History at de Gruyter accepted my proposal for an English edition, and patiently waited for it to be compiled. This translation benefitted of the comments by several good friends, particularly Christer Olin, Francesco Cavalli Sforza, and Enrico Baraldi. I would like to thank Rebecca, Christer, Paolo, Mauro, Francesco, and Enrico for their warm and frank support. They should not be deemed responsible for all errors and imprecisions, which are of my own making. In the last chapter of The Western Canon, Harold Bloom wrote: “This book is not directed to academics, because only a small remnant of them still read for the love of reading”. Yet, I was fortunate enough to meet teachers who infected me with their love of reading. Among them were Alberto Giordano, Germano Facetti, Franco Fortini, Phyllis Deane, and Jim Howell. Finally, I would like to thank Micaela and Axel for withstanding my obnoxious presence, and silent absences, over the past three years. Gubbio, May 2022.

https://doi.org/10.1515/9783110744477-001

Contents Introduction

1

Chapter One Section Section Section

15 1: Mechanization and the Factory System 2: The Satanic Mills Conquer the World 3: The First Global War 46

Chapter Two Section Section Section

54 56 1: The Treaty of Versailles 2: Ferrero, Canetti, and Polanyi 3: Keynes and von Hayek 73

15 32

61

Chapter Three 85 Section 1: Solid-State Electronics 91 Section 2: Mobile Phones, the Internet, and Artificial 97 Intelligence Section 3: Technology, Finance, Migrations 116 122 Section 4: The Information Age Chapter Four Section Section Section

126 1: World Trade Disorganization 126 139 2: The Great Divergence 3: The Second Copernican Revolution

Chapter Five Section Section Section

158 1: The De-globalization Risk 158 2: The Iron Law of Wages and Other Traps 169 3: Democracy, Globalism, and Common Goods 174

Post-scriptum References

180 181

Index of Names Subject Index

185 188

147

Introduction The book you are holding is a selective narration of two globalizations: the Information Age born from the semiconductor cluster of Silicon Valley; and the Victorian Age, which was rooted in the Manchester textile cluster. As the idea of comparing those two ages might sound simplistic, I should briefly explain its genesis. Between 1987 and 2004 I managed two semiconductor equipment companies in California. One of them is a global leader of gas purifiers. Highly purified gasses are used to ensure that the atmosphere where integrated circuits are manufactured does not carry contaminants. That company went public in 1997 on NASDAQ, and I was rewarded with a sabbatical year, spent at Stanford. The purifiers company was subsequently acquired in a private deal for US$375 million. The other company is a manufacturer of epitaxial reactors. Epitaxy is used to modify the electrical or optical properties of silicon surfaces, the substrate on which integrated circuits and solar panels are constructed. For that company, I established the American subsidiary. It was sold in 2020 to a Chinese investment fund, but the Italian government blocked the acquisition on strategic grounds. Before moving to Silicon Valley, I graduated in economic history and in economics. My research focused on the impact of technical progress on economic development. In short, I am an eyewitness to the recent information revolution, and a scholar of the eighteenth-century Industrial Revolution. A few analogies between the Victorian Age and the Information Age led me to imagine a consistent pattern. In both episodes a major innovative process grew out of a small cluster; it led to transcontinental labor migration, promoted the growth of a global supply chain, and ultimately subverted the international balance of powers. Each episode runs through a sequence of similar steps. Those lines of steps form parallel traces leading from innovation adoption to global leadership. Could the outcome of the former globalization be used to draw plausible future scenarios of the latter? To answer that question, I had to clear an information imbalance: acquaintance with the semiconductor revolution – the second episode – came from personal observations as a direct witness. On the contrary, knowledge of the first episode – the textile revolution – was based on the works of historians committed to an objective reconstruction of events. Objectivity implies distancing; and distancing from current events requires abstraction. On the other hand, direct

https://doi.org/10.1515/9783110744477-002

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Introduction

observation provides impressions and explorations of human motives and behaviors, which are often lost in posthumous reconstructions. ¹ Symmetry required calling on direct witnesses for the former episode and quoting plausible abstractions about the latter. The first four chapters of this book are the product of that balancing act. Chapters One and Three describe the evolution of global networks that spun from the Manchester cotton cluster and, respectively, the Silicon Valley semiconductor cluster. Chapters Two and Four (and the last section of Chapter Three) present theories and abstractions produced by observers of the events. It will be for the reader to decide if those patterns are indeed common to both globalizations. Which patterns? In the past 250 years the West has brought two fundamental innovations to the organization of human undertakings. The first one is the mechanized factory system; the other is automated data processing. No other innovations in modern times have been so transformative of the way we operate, and so pervasive across all areas of activity. The adoption of each of those innovations spread across all continents in a matter of a few decades. No other innovation has been adopted so swiftly and so broadly on a global scale. Each innovation originates from a small industrial cluster: the cotton industry concentrated around Manchester, England; the Semiconductor industry in Santa Clara County, California. From the earliest stages, those clusters created intercontinental supply chains. Their purpose was provisioning of indispensable production factors: African forced labor and American cotton in the first globalization, Asian exact and disciplined workers, and microelectronic components in the second. Intercontinental infrastructures were built to access those resources; integrated webs of commerce ran along those infrastructures. The cotton trade and the semiconductor industry soon became global seamless supply chains. Mechanized factories and information technology migrated through those channels. Globalization resulted from the adoption of those organizational innovations by other countries and other industries. The infrastructure was built at first to procure resources needed by the originating cluster. However, in the process of building the infrastructure, the genie escaped the bottle. Those innovative methods to organize human activities migrated from the original industry clusters to other industries and other, less developed, economies. Where the adoption of those organization changes was actively supported by national governments, those less developed economies were able to reach and then leapfrog

 For instance, Satanic Mills was William Blake’s reference to the Albion Flour Mills, the first major factory built in London: And was Jerusalem builded here, among these dark Satanic Mills? (from the preface to the poem Milton, written by Blake in 1804).

Introduction

3

the originating countries, becoming world leaders of those new industries. That was especially the case at the far end of the supply chains. Migration (forced or voluntary) and reverse migration between the originating countries and the new adopters promoted knowledge transfer. Early adopters received support from their national governments, to protect their infant industries against foreign oligopolistic companies with vast multinational interests, attempting to dominate the globalized markets. For reasons that will be explored, economic leadership moved from the region where the innovation originated, to other countries and regions which had swiftly adopted it. During the Victorian Age industrial leadership migrated from England to the Unites States and Germany; in the second globalization the leadership of information technology moved from the United States to Asia. The dilution of economic supremacy is inevitably associated with fragmentation of the globalized market into protected regional islands, competing for third countries’ resources and customers. As a result, the globalized ages were followed by harsh de-globalization carrying financial instability and, towards the end of the Victorian Age, increasing social conflict. As the single global marketplace becomes fractured among regional subsets, former global oligopolies become regional industry leaders. Former global leaders turn towards their imperial sub-domains first, and later revert to autarchy and protection: the opposite of globalization. The First World War, a war of attrition, became a competition among imperial nations for the appropriation of the world’s raw materials and agricultural output. The 2020s transition towards renewable energy, highly subsidized by national governments, is constrained by Local Content Requirements (LCR) and promises to raise domestic employment. A latent thesis through this book is that both the first and second globalization episodes emerged from the migration of radical process innovation from the originating cluster to less developed economies. The cumulative impact of migration was a takeover of the dominant position by one of those new economies. Two unsettling questions lie in front of us: will the second de-globalization end, like the first one, with a global war followed by a transfer of global leadership? And how should the West act to mitigate that risk? To answer those questions, the first and second globalization have been outlined through a selection of steps across the histories of technology, economics, and economic ideas. Between two globalization spikes, the plot also delves into the deep gulf of two world wars, the collapse of three empires and the outbreak of four revolutions. The narration is often entrusted to a chorus of eyewitnesses; as the plot unfolds, they attempt to make sense of events from a Western perspective. In particular, the Industrial Revolution is described by Friedrich Engels. The collapse of

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globalization after the First World War is recorded through the eyes of John Maynard Keynes, Elias Canetti, Guglielmo Ferrero, and Carl Polanyi. The second globalization dynamics are explained by the findings of AnnaLee Saxenian, Carlota Perez, and Geoffrey Moore. Finally, the rise and fall of neoliberal institutions borrows from the works of Quentin Slobodian, Kristen Hopewell, and Anne Applebaum. The book is organized in five chapters and sixteen sections: their titles are listed in the Table of Contents. Narration begins with the English textile revolution in 1776 and ends with the first year of Joe Biden’s presidency in 2021. Here is a short synopsis. The first section of Chapter One describes the English Industrial Revolution from early mechanization to 1848. That year was labeled Springtime of the Peoples by romantic historiography, and the birthdate of modern socialism by Fredrich Engels. Textiles is an ancient craft: identical techniques for spinning and weaving have been used worldwide for millennia. In the seventeenth century the Moghul Empire of central India became the largest world exporter of cotton textiles. As Indian cotton clothing began to be sold also in Europe, the English Parliament banned its trade in 1700 and again in 1720, to protect wool, hemp, and linen, the traditional domestic fabrics. The cotton fiber is softer and less fragile than either linen or hemp; therefore, it lends itself to automation. In fact, in 1768 the mechanization of cotton spinning began to change the textile craft. The first textile factory moved by steam was built close to Manchester in 1787, and the substitution of able craftsmen with machines and child labor proceeded swiftly thereafter. But Europe is cold, and cotton had to be imported. The southern states of America offered the right blend of warm and humid weather, cheap land, and entrepreneurial spirit. Slave traders procured the labor force. The first commercial railway was inaugurated in 1830 to connect the port of Liverpool, where American raw cotton was unloaded, to the city of Manchester, where it was mechanically spun and woven. Between 1800 and the American Civil War, export of American cotton rose from 20 million pounds per year to almost 2 billion. Forced migration from Central Africa to New Orleans grew in proportion. But the condition of the English working class was only marginally better than that of African slaves. In 1845 Fredrich Engels, then 24 years old, published in Germany the eponymous book, which changed the global history of the workers’ movement. The second section of Chapter One describes the migration of the factory system to other industries and regions. The weight of other countries within the trading network was a function of how proactively they adopted mechanization,

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5

and what commodities and production factors they contributed to the global supply chain. While the first wave of mechanization was largely the result of entrepreneurs’ trials and errors, in the subsequent wave scientists and engineers played critical roles. And while the first phase was by all measures a bootstrap entrepreneurial process, the second one was backed by bankers and governments, as a new generation of capitalists mingled with the state powers. Artillery construction and the supply of ordnance provide the most vivid examples of how governments turned their national champions into monopolies in France (Schneider-Creusot) Britain (Armstrong) and Germany (Krupp). On the other hand, growing concentration of industrial workers in urban districts generated pauperism and issues of public order, strengthening the liaison between industrial concerns and national governments. As a response, working-class movements began to organize across borders. The Second International was established in 1881 and included delegates from 20 countries. It was dominated by the German social democrats and dissolved in 1916 because its delegates could not agree on a common position to oppose the First Global War. The third section of Chapter One briefly analyzes the motives of the First Global War. According to J.L. Gaddis, World War One (WWI) was the extreme result of nationalistic populism, rather than a conflict among industrial powers. Its motives should be sought in domestic social conflict, rather than international competition. Besides WWI, Gaddis mentions two more identitarian conflicts, which he calls non-Clausewitz wars, as they are devoid of an international competitive motive: the Napoleonic Wars and the Thirty Years War. The latter was about religious identity. About the former, along the same line of reasoning, in 1914 Guglielmo Ferrero wrote: “The French Revolution had been forced to set all Europe on fire in order to defend itself. […] The French Revolution initiated in Europe the true war of the peoples.” In 1904, on the verge of the war against Japan, Russia’s interior minister Vyacheslav von Plehve reportedly said: “This country needs a short, victorious war to stem the revolution.”² What separates the Napoleonic and Thirty Years wars from WWI is the Industrial Revolution, and the two perverse incentives a total war provides to industrial monopolies: (i) militarization of the working class, and (ii) unlimited demand for its own products. Another exception to Clausewitz’s rational wars is known as the Thucydides Trap, from the Peloponnesian War: “It was the growth of Athens, and the fear it created in Sparta, that made the war inevitable.”

 History repeated itself with the invasion of Ukraine in 2022.

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Chapter Two tells how the First Global War produced the first de-globalization, the most tragic quarter-century in modern history. The purpose of that recollection is to envision what might happen again if the second de-globalization ends in uncontrolled collapse. The Thucydides Trap will be mentioned again in Chapter Five, dealing with China and the USA. A comparative analysis of the first and the second de-globalizations will remind that the migration of economic leadership from the USA to China might trigger an equally catastrophic outcome. While the second globalization subsides, it is useful to reflect upon the causes and consequences of the first globalization’s breakup. Today’s pressing issues such as climate, health, pollution, demography, and the un-democratic use of distributed information, can only be tackled through a concerted global approach. The first section of Chapter Two describes, through the eyes of John Maynard Keynes, the outcome of the Treaty of Versailles, which ended WWI. In 1919 Keynes attended the peace conference on behalf of the British Treasury, and the following year he published The Economic Consequences of the Peace, a devastating review: “Paris was a nightmare and everyone there was morbid.” He argued that Germany couldn’t possibly abide by the economic aspects of the treaty; that the treaty was incompatible with international laws and violated the 14 points of the truce negotiated by President Wilson; and that the settlement produced a perfect recipe for de-globalization, on three counts: “First, the absolute falling off in Europe’s productivity; second, the breakdown of transport and exchange; and third, the inability of Europe to purchase its usual supplies from overseas.” Upon reading Versailles through Keynes’s eyes, a question remains unanswered: why did Western leaders miss the opportunity to pilot de-globalization towards a soft landing? The second section of Chapter Two describes the writings of Guglielmo Ferrero, Karl Polanyi, and Elias Canetti: three eclectic scholars investigating the relationship between power and the people in a mass industrial society. They witness three revolutions, the collapse of four Central Empires, a two-year pandemic that caused 50 million deaths, famines in the Soviet Union (5 million deaths) and Germany (1 million), in addition to the 20 million deaths of the war. Analyzing the collapse of the global economic order of the Victorian Age, and its replacement by dictatorship, bankruptcy, and autarchy, Ferrero, Polanyi, and Canetti reflect upon the sources of political power, the conflict between social and economic powers, and the relationship between power and the masses. Looking for answers to Keynes’s question from different angles, they converge upon similar conclusions: Western leaders were unwilling or unable to reconcile

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7

popular consensus, the legitimating ingredient of modern democracies, with the economic and social powers prevailing in the defeated countries. The third section of Chapter Two presents a response to de-globalization by two survivors of the collapsed Habsburg Empire, Ludwig von Mises and Friedrich von Hayek. Mises and Hayek have shaped the modern liberal relationship between democracy and globalization. Hayek went from supporter of un-democratic regimes, such as that of Chile’s Pinochet, to consultant to Thatcher and Reagan, to inspirer of the World Trade Organization (WTO). He culminated his career with a Nobel Memorial Prize in economics and a Medal of Freedom. Hayek thought that a supranational trade authority would satisfy popular demand for self-representation, while preserving the international division of labor and the free search for profitable markets. In other words, applying the democratic rule within a global trade court such as the WTO might provide a fig leaf to smuggle the postcolonial order in developing countries. Chapter Four will show how, in a surprising nemesis, at the dawn of the new millennium Western economies lost control of the WTO because of an over-confident application of the democratic rule. That is a testament to the fragile truce between democracy and the neoliberal design. On the other hand, the practice of democracy offers the most reliable defense of common goods. And because many common goods are global in nature, keeping the global dialogue open is even more urgent when the neoliberal utopia of a globalized market loses its appeal. The first section of Chapter Three tells the story of the second globalization, from its source in the Silicon Valley semiconductor cluster, to the convergence of wireless communication, computers, and the Internet, which ignited the Information Age. Those 30 years ended with the Internet financial bubble, and with the 1997 epitaph by chairman of the Federal Reserve Allan Greenspan: “Even if the most recent, tentative indications that productivity growth may be speeding up were to turn out to be less than we had hoped, it is possible that the big increases in efficiency growing out of the introduction of computers and communications systems may still lie ahead.” During those three decades the Asian population in Santa Clara County grew from 4 % to 25 % of total residents. The second section of Chapter Three discusses the rapid evolution of distributed information from the early days of the Global Village to the age of machine learning oligopolies, such as Google, Microsoft, or Apple. That section has been repeatedly updated from the 2021 Italian edition of this book, as technology and its uses are constantly evolving. For instance, in the speech quoted earlier, Allan

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Greenspan observed that productivity of the US labor force was not yet showing the positive impact of distributed computing. A quarter-century later, during the Covid lockdown, work, education, social life, and consumption would have been unthinkable without the Internet. Meanwhile, the Big Quit, a massive exodus from the active workforce in 2021 has puzzled economists, who asked themselves how the customary “natural rates” of unemployment, inflation, wages, and interest should be modified to reflect a post-Covid concept of normalcy. As with the factory automation revolution in the nineteenth century, so the interconnected economy is re-shaping the social fabric. The situation at the end of the second globalization is further complicated because the agent of innovation is itself a tool which allows to manipulate the opinions and affect the ways people behave. The black box approach of machine learning on algorithm-controlled social networks creates a fractured public space, and that reduces the ability to grow different opinions out of a shared view of reality. The democratic debate cannot lead to deliberation or consent when its participants are fed different “realities.” Hence, critical approaches such as the DAIR (Distributed Artificial Intelligence Research Institute) are attempting to establish rules of transparency for the collection, organization, and access to data in the age of machine learning. The third section of Chapter Three presents three analytical studies on forces that made Silicon Valley the engine of the second globalization. The three forces are: the adoption cycle of technology innovation described by Geoffrey Moore, the cyclical link between innovation and finance identified by Carlota Perez, and the transfer of technology through intellectual migration (brain-drain, and reverse brain-drain) studied by AnnaLee Saxenian. Taken together, the three forces offer an explanation to the dynamics of power transfer across the Pacific Ocean at the dawn of the third millennium. One ingredient of the “decoupling” between new powers and mature Western economies is the integration of Southern economies through the creation of a trans-Pacific triangle, whereby agricultural products are shipped from Brazil to China in increasing volumes, to feed the growing population of China without disrupting the socioeconomic fabric of its traditional agriculture. Deforestation of the Amazon Basin is the most concerning consequence of that force. The other force is migration, and human mobility in general, which is bound to become the most contentious issue between the sovereignist rhetoric of nation-states and the globalist attitude of supranational organizations. The first section of Chapter Four describes the evolution of supranational trade organizations after the Second World War, from the GATT (General Agree-

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ment on Tariffs and Trade) to the WTO (World Trade Organization). Supranational organizations have helped industrialized countries to enforce free market principles upon less developed economies. However, as globalization produced an inversion of the economic hierarchy, supranational organizations became a boomerang. In 2003 Brazil and India, with the silent support of China, took over the WTO leadership, by leveraging a voting members’ coalition called G20-T. In 2013 the Brazilian Roberto Azevedo became director-general of the WTO. After the election of President Trump in 2016, the USA began to overtly obstruct multilateral treaties, including the WTO. In 2021, with the support of newly elected President Biden, Dr. Ngozi Okonjo-Iweala became the first woman and the first African WTO director-general. Dr. Okonjo-Iweala, a development economist, also chaired the board of GAVI, the Global Alliance for Vaccines and Immunization. Since her appointment, her priority has been procuring Covid vaccines for the developing countries. As the unified global market is gradually replaced by regional trade agreements, it is unlikely that the WTO will resume its global role of trade arbitration and dispute settlement. For instance, in 2020 China launched the Regional Comprehensive Economic Partnership (RCEP), “the largest free trade agreement in history.” RCEP has not been signed by India or the USA and is limited to Asia-Pacific. It is, however, the first trade agreement signed by all three largest economies of Asia: Japan, South Korea, and China. The second section of Chapter Four shows the long-term background behind the WTO transfer of powers. When did the standard of living in the West surpass Asia’s, and why? Humans’ diffusion across the Earth was a remarkably quick process, but demographic explosion and the increasing use of natural resources of the industrial age mark a transition from linear to exponential growth. The demographic and economic rise of India and China over the twentieth century, and the growth of the population of Africa in the twenty-first suggest that the acceleration has surpassed our ability to predict change and tame its impact. At the dawn of the twenty-first century, we are beginning to see the combined consequences of the information revolution and the demographic explosion. Our ability to manage migration, urbanization, demography, the struggle to gain or prevent access to information, common goods, and natural resources, will determine the legacy of Homo sapiens. Each is a global problem, and none can be solved on a local basis. Yet, the global perspective seems to be lost. The third section of Chapter Four argues that Western dominance of the world economy is coming to an end. In 1543 Copernicus showed that the Earth is not fixed at the center of the universe. It rotates around the sun, hence our view of the universe changes with the Earth’s rotation. Five centuries later, the West-

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Introduction

ern man discovers that he is no longer at the center of the human universe. Having realized how peripheral and vagrant his condition has become, how will the Western man modify his image of the world and of himself? And what is the role of the West in a future Asian-dominated world order? Will it unite with those around the world who are facing the same issues, and fight for common solutions? Or will the West fall into a new Thucydides Trap? Chapter Two quoted Keynes’s description of Versailles as a “nightmare,” where the victorious leaders decided to punish entire nations for the sins of their governments. Those leaders did not know or care about a theory of the crowds, their behavior, opinions, and manipulations. Keynes, Canetti, Polanyi, and Ferrero filled that gap. They warned against letting the genie of democracy out of the bottle, without the tools to interact, dialogue, and negotiate a trusted social contract with the crowds. Cheating the public into a bad-faith deal, by selling imaginary solutions, or pretending that the problems they face do not exist, are high-risk tactics. Walking along the populist path leads invariably to catastrophe. A globalism of power is therefore compared to a globalism of crowds. The former will deny that the West has lost its central position and will fight an identitarian war to defend its privilege. The latter deals with issues that can only be confronted through a global approach, first and foremost the contentious issue of common goods. A democratic government will obtain the confidence of its voters by acknowledging that the object of the social contract is nothing short of the right to use natural resources, nature, and the Earth itself. The first section of Chapter Five suggests that the “second Copernican revolution” has caused an identity crisis in mature Western countries. The realization that the world economy is no longer orbiting around the West amplifies the social and economic consequences of de-industrialization and “churning.” An identity crisis often leads to a crisis of legitimation. Identitarian wars were described as a possible attempt to re-establish a government’s legitimacy, in the third section of Chapter One. What are the chances that the second de-globalization may result in a conflict? And how could that be avoided? Those are the next questions: if Western governments maintain legitimacy through peaceful means, the next global war may be avoided. The identity crisis of a democracy may be cured by finding other compelling goals capable of crystallizing the consensus of a majority. Preserving equitable access to natural resources and common goods might be that crystal. However, it requires setting limits to the free market. That proposition is not immediately compatible with the allegiance of Western leaders to liberal economics. In addition, to ensure a soft landing for the second

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globalization, a second condition is needed. The plan will work only if coordinated on a global basis by both rivals: Asia and the West. In the short-term equilibrium is precarious. China depends on Western technology to produce semiconductors: only 27 % of the semiconductor components mounted in electronic devices assembled in China are produced in China. The rest come from Taiwan, Japan, or Korea. Furthermore, China produces only 20 % of the semiconductor equipment it uses. The rest comes from four companies located in California, the Netherlands, and Japan. On the other hand, the West relies on China for the supply of rare earths and solar panels. Finding a compromise on Taiwan, the source of most semiconductors for the Chinese market, would buy some time. The purpose of that lull should be a joint management of some key common goods, such as climate, environment, health, and finite resources, that can only be preserved through global action. The second section of Chapter Five argues that the loss of a globalist mindset would be an opportunity wasted on Homo sapiens, particularly in an age where pressing open issues can be solved only through a global approach. The most urgent issues concern common goods. The pressure on exploiting world resources is stronger when population increases. The “Malthusian Trap” contributed to compressing consumption during the first Industrial Revolution, by linking consumption to the productivity of land, in a stationary closed economy. It was bypassed by technical progress, import of foodstuff, and increasing productivity in agriculture. In the second globalization ten times more human beings extract higher standards of living from the same finite resources. Regulating access to and exploitation of those resources is inevitably a task for governments. Cultivating a globalist mindset towards those issues may provide a unifying objective. But lacking a coordinated effort, international competition to access third parties’ resources would produce conflict. China’s cooperation is crucial to the future of the global commons, particularly at a time when pandemics and climate change threaten the livelihood of all humanity. The globalism of crowds is the persuasion that humans should act consistently to manage common goods and perishable or finite natural resources. Sharing goals and developing common strategies are necessary steps to preserve common goods such as climate, health, finite resources, or the environment. It is a task for the West to persuade the peoples of Asia that democratic processes and fundamental digital freedoms must be added to the list of common goods. By acknowledging and pursuing that task, the West may avoid falling into the Thucydides Trap. Meanwhile, by managing natural resources, governments acquire legitimacy in the eyes of their constituencies. They receive democratic en-

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Introduction

dorsement for their ability to shield natural goods and services from the market rule. The third section of Chapter Five argues that a healthy state of democracy is critical for the defense of public goods. In fact, economic interests (a.k.a. privatizations) are the main threats to their existence; and when economic interests cannot achieve their goals within the democratic order, they employ un-democratic means. Democracy is therefore the rampart against appropriation of common goods by economic private interests. However, economic private interests are not the only enemy of public goods: Demography and resistance to change are two equally powerful adversaries. The old Malthusian argument about finite natural resources is looming behind the veil of political correctness. In the nineteenth century Malthus was overpowered by the leverage of technical progress. But technical progress is a statement of good intentions, not a conclusive refutation. Particularly, in the twenty-first century industrial society, with ten times the population of 1800 and much higher consumption, the increasing scarcity of a given resource is used as an excuse to justify its privatization. Technical progress may offer a substitute, lower utilization, or higher productivity of a given resource. But that change may be resisted also for non-economic motives. A depreciated plant or quarry, or an obsolete technology may be hard to replace because the innovative alternative is socially disruptive. In that case, substitution requires social engineering, the aim of which is to soften the consequences of disruption. Disruption may represent a threat to the habits or the standards of living of workers whose skills have become obsolete, or to the rent of investors in the older technology. Or, as in the case of phasing out coal, or introducing nuclear energy, the proposition is too cumbersome or complex for a local government to persuade its constituency. Aside from the cause of obstruction, the fact is that democracy, in the form of public deliberation in an open forum, is the only straight tool governments have to persuade their constituency to embrace disruptive technical change. A promise to support the transient disadvantages in the form of social engineering is a needed corollary and, for that, trust is indispensable. In December 2021, fulfilling a campaign promise, America’s President Biden called for a two-day “summit for Democracy.” The representatives of more than 100 governments participated in the virtual meeting. Some did not attend, and some were not invited. Although the initiative was certainly welcome, several commentators thought that after the attempted coup of January 6, 2021, the USA were not in a position to lecture the rest of the world on democracy.

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Some of the non-invited leaders said that Biden should work on securing the democratic process in his own country, rather than preaching to others. A commitment for the survival of democracy should not be mistaken for an ideological or strategic battle between the Anglo-Saxon liberal views, and the illiberal views of China and Russia, or the social-democratic approach of Northern Europe. Promotion of that kind of liberal democracy by the United States is not conducive to globalization, as it may be mistaken for an ideological war against other forms of government, or as an attempt to impose a certain vision of the world, instead of an effort to persuade other countries to work together on a common goal. Democracy is critical because it paves the ground for deliberation among parties who hold different positions, with the aim of converging towards a consensus, as broad as possible. But reaching a common solution at the global level may become impossible if, instead of encouraging gradual convergence, the process begins with an antagonistic stance. A distinction between globalism of power and globalism of crowds will be described more than once in this book. While a globalist mindset is indispensable for the governance of common goods which are global in nature, the globalism of power will not reach a productive outcome, because it does not contemplate the common ownership of natural resources. Globalism of power promotes the universality of the market rule. “Common goods” is not a socialist expression; however, it is used to indicate certain scarce resources that should be exempted from the rule of the market. Markets are supposed to ensure optimum allocation efficiency; but scarce natural resources should not be allocated to whomever, nor is efficiency the criterion for handling them. Allocation implies assignment to someone, and therefore exclusion of someone else, and efficiency implies the existence of an end to be accomplished. On the contrary, the purpose of managing common goods is to preserve them unassigned, for the whole world, present and future. If the goal is to persuade most of the world population to act together for the preservation of common goods, polarizing ideas and contentious definitions should be avoided: this is no time to align Brazil, India, China, the Muslim world, and Russia with the Western concept of democracy. The goal is establishing a deliberative process, not generating universal consensus on some culturally defined principles of governance. Nor is there space for a globalism which pretends to impose the market rule as universal, because common goods should be managed outside the realm of private property. What is needed is a collective acceptance that common goods are a global issue, and a consensus about what those common goods are. They should not be appropriated by a particular entity, be it a national government or a multinational corporation. They should not become a bone of contention between ideo-

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Introduction

logues. All we need is to establish consensus on the form of global governance of public goods. That is more urgent, and more specific, than finding consensus on a certain form of democracy, or a certain definition of globalism. Discussing how to deliberate collectively on common goods is the task at hand. Establishing agreement around one definition of democracy or globalism may be useful, but it is not the goal.

Chapter One Cotton is the spark which ignited the English Industrial Revolution. Section 1 of this chapter describes the increasing level of mechanization, and how machines were concentrating in large textile performing multiple steps. The cotton trade was supported by a global infrastructure of purchasing, logistics, marketing, and financing. Grown in the southern United States, cotton was picked by slave labor transported from Africa, processed by factories in Lancashire, then shipped to markets in Europe, Africa, and Asia. Friedrich Engels is the eyewitness of this section. Section 2 shows how the factory system was adopted by other countries and other industries throughout the Victorian Age. Globalization is transformed from a spontaneous sequence of entrepreneurial innovations to a government-driven process, leading to monopolistic concentration. The artillery monopolies of Krupp, Schneider-Creusot, and Armstrong are examples of the link between heavy industry and the national governments of Germany, France, and Britain. Multilateralism replaces the undisputed rule of Britannia. The Berlin Conference of 1884 provides a formal definition of “effective occupation,” thus institutionalizing the domain of conquered nations by Western colonial empires. Section 3 comments on the First Global War. According to J.L. Gaddis, Clausewitz-type wars are fought under the expectation of some national gain, whereas identitarian wars are fought to reinforce the legitimacy of national power. G. Ferrero suggests that European Central Empires entered WWI with the aim of containing the working-class movement born from the factory system. Other examples, beyond WWI, are the Thirty Years War and the Napoleonic Wars. In Chapter Five the Thucydides Trap will be proposed as a further variant of nonClausewitz war.

Section 1: Mechanization and the Factory System The Industrial Revolution originated in the late 1700s from the English cotton mills. Early advances in mechanization like the spinning jenny had already shown promise in the early part of the century. Why did the change occur in cotton rather than in domestic fibers such as linen, wool, or hemp which had been worn by Northern people for centuries? The answer lies in the convergence of three events taking place within a short time over four continents. They are: the decreasing influence of the East India Company over British policy, culminating in 1813 with the loss of monopoly over trade with India; a chain reaction of https://doi.org/10.1515/9783110744477-003

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technical inventions in the Lancashire textile district; and the rational and efficient organization of enslaved African workers in the cotton plantations of the southern United States, after the Santo Domingo Slave Revolt of 1791.³ Barred from the Spice Islands by the Dutch in the early seventeenth century, the East India Company (EIC) focused on export of Indian cotton cloth to third countries. Nonetheless, British domestic production of wool and linen had been increasingly protected against the Indian cloth with tariffs and bans since 1685. In the 1770s the mechanization of spinning in the Manchester area created an increasing demand for raw cotton. Fearing disruption in the trade of finished cloth, the EIC resisted the increasing demand of raw cotton, thus the Manchester entrepreneurs began to look elsewhere, particularly toward the New World. In 1813 Parliament terminated the EIC’s monopoly over trade with India, except for tea and opium. The Caribbean islands became a leading source of raw cotton for a short while, until the slave revolution of Santo Domingo in 1791 triggered the development of large-scale plantations in the southern United States. Contrary to smallscale production in India and the Caribbean, large plantations in the southern States were aptly managed and funded. The slave trade between western Africa and the southern plantations flourished in direct response to the demand for American cotton. Hence, the British Industrial Revolution is also the origin of the first globalized supply chain. Cotton is acknowledged as the spark which ignited the English Industrial Revolution. An increasing level of mechanization was met by the concentration of multiple steps (and of multiple tools performing the same step) in one large factory, thus encouraging division of labor on a large scale. The raw material had to be imported from New Orleans, thus generating the infrastructure and the business model for a free trade network of purchasing, transport, stocking, marketing, and financing. Cambridge historian Phyllis Deane acknowledges that cotton was the first industry to concentrate production in large industrial buildings, leveraging economies of scale and division of labor.⁴ It was also the first manufacturing industry to adopt the power of steam engines on a large scale.

 The following brief synopsis derives from two sources: Sven Beckert, Empire of Cotton: A Global History (New York: Vintage Books, 2015); Ronald Findlay and Kevin H. O’Rourke, Power and Plenty: Trade, War, and the World Economy in the Second Millennium (Princeton, NJ: Princeton University Press, 2007).  Phyllis Deane, The Industrial Revolution in Great Britain. The Fontana Economic History of Europe 4 (Glasgow: William Collins Sons & Co., 1963), 176.

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The international trade of cotton cloth had been ongoing for centuries. But that is true also for the wool market. Hence, the question “Why did the Industrial Revolution start with cotton and not with other textiles?” has necessarily one answer: because the need to manage an intercontinental supply chain provided the cotton entrepreneurs with the vision of a global market, which in turn justified organizing large-scale production, inventing labor-saving techniques, and financing expensive equipment. Such a global scope seems to contrast with the space and time density of the cotton cluster. Within a single generation, an entirely new production technology was created. All leading cotton inventions, with possibly two exceptions,⁵ originated within a radius of 50 miles from Manchester, over a period of 50 years. In fact, that is rather typical of technology clusters. English manufacturers trusted the transatlantic trade connecting three continents with their vital supply chain while, at the same time, developing multiple layers of innovation within their own backyard. Growth had been phenomenal: “Export from South Carolina, for example, ballooned from less than 10,000 pounds in 1790 to 6.4 million pounds in 1800.”⁶ By 1820 cotton represented 31 % of the United States’ total export in value. In 1860 it was about 60 %. Most of the cotton leaving the port of New Orleans was shipped to Liverpool, and from there transported to Manchester by canal. In 1861, the first year of the American Civil War, 77 % of raw cotton imported by England originated from the southern United States. Cotton was also the main British export item. In every year between 1800 and 1860 cotton fabric represented between 40 % and 50 % of British exports. Cloth was sold in India, Africa, Eastern Europe, and, in smaller amounts, in the United States. Most of the raw material was spun and woven around Manchester. The Industrial Revolution created both the factory system and the global supply chain. While, however, the factory system was adopted by industries in other nations during the nineteenth century, the cotton industry remained the only global supply chain. In fact, a global vision had been part of the cotton trade for a long time. The Glorious Revolution of 1688 established Parliament as the ruling power of England. It also appointed William III Prince of Orange Nassau, the new king. Thus, not only had England disposed of the Catholic James II, it also called to rule the country a key player in Dutch foreign policy. William III preserved the

 The cotton gin (USA) and the Jacquard loom (France).  Beckert, Empire of Cotton, 101.

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East India Company monopoly of the Indian trade, overcoming opposition from members of the Parliament. Meanwhile, the British focused on northern India while abandoning Indonesia, Ceylon, and southern India to the Dutch. From the north came Indian cotton: chintz from Bengal and calicoes from Calcutta. For over a century, under the Muslim Moghul Empire those two regions had dominated cotton production and commerce worldwide. The Moghuls had favored monetary circulation by imposing payment of land taxes in silver rupees. Peasants had to produce for the market to procure the currency. A tolerant policy towards religious minorities favored the inflow of Armenian traders, and the prosperity of Hindu peasants. According to reliable estimates, the Moghul Empire was the largest exporting country between 1650 and 1750. Crop productivity in some regions, such as Bengal, vastly exceeded the European average at the time. Invasion from Persia, Company tampering, and internecine power struggles caused the dissolution of the Moghul Empire, which was broken into pieces by the end of the eighteenth century. The Company took direct control over Bengal, and the Moghul Empire formally terminated in 1857. Shipbuilding is not often mentioned among the Asian inventions which Europeans adopted in pursuit of global dominance. And yet, starting from the 1760s the British East India Company began to systematically build merchant and war ships in Bengali. It also adopted the traditional Indian design of a single bridge flush deck ship. Contrary to sixteenth century galleons, a flush deck vessel, sometimes called frigate, has no raised forecastle or lowered quarterdeck. A single continuous deck, or in some cases a double deck, provided for a sturdier structure and a less exposed surface, thus ensuring smoother sailing in the rough southern oceans. Clippers, such as the Cutty Sark, are among the noblest examples of that long-lasting tradition. Both the Dutch and the English East India Companies traded Indian cloths in Europe. In the seventeenth century the less sophisticated calico and the higher priced Bengali chintz began replacing domestic fabrics among the middle classes of Europe. To protect domestic producers, in 1700 the English Parliament issued a ban on printed calicoes. As the ban was systematically ignored in 1720 Parliament issued a second ban, the Wollen Manufactures Act, making illegal not only importing but also selling Indian cotton, with the exception of raw cotton. Measured in silver ounces, the earnings of a weaver in Manchester were five times higher than those of his Calicut colleague. Even allowing for a different power of silver to purchase subsistence goods,⁷ it was impossible for a weaver

 The exchange rate of silver to gold was 5:1 in Asia and between 12:1 and 15:1 in Europe during

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from Manchester to match the Indian cloth prices. In India the act had the effect of reducing exports, and to shift its composition from valuable cloths to simple fabrics and raw cotton. In England the act maintained a high price of wool and provided incentives to reduce the content of specialized labor, through automation. The invention of new machinery, which made possible the employment of unspecialized labor, modified the competitive position of England. In 1774 Richard Arkwright, the most successful cotton entrepreneur, petitioned for a repeal of the ban. Three years earlier Arkwright had built the first large spinning factory, powered exclusively by water. Competition from India was no longer a threat, and domestic demand for weaving material could be met by domestic thread. The Industrial Revolution was under way. The ban on imported Indian cotton was conveniently replaced, however, by a ban outlawing the export of British textile machines. The new ban was instituted in 1786 and lasted until 1843. The Moghul cotton trade was declining even before the English occupation of Bengal. However, a growing number of European and Asian historians suggest that the Indian textile industry was not defeated by English competition, but rather by the English government: in the seventeenth century the quasi-monopsony confirmed by William of Orange; in the eighteenth, by the Parliament’s protectionist acts; and in the nineteenth, by the imposition of Lancashire cloth upon the Indian domestic market. Only after the 1870s was cotton manufacturing equipment installed again in India, this time by British entrepreneurs. To compete successfully against the Indian cotton manufacturers a second requirement had to be met: the availability of large quantities of raw cotton at low cost. The New World offered the necessary conditions: unlimited available land, humid and warm climate, and a population of entrepreneurial settlers. One essential input, however, was missing: agricultural workers. The commerce in slaves between western Africa and Central America began long before the cotton industrial revolution. A large portion of the original inhabitants of Hispaniola and Puerto Rico disappeared within two generations after the arrival of Columbus due to smallpox, measles, or whooping cough. They had little or no immunity to those newly imported diseases. Very soon the Spanish invaders realized that a new work force was needed. In 1518 Charles V, who reigned over el imperio donde nunca se pone el sol, authorized the direct trading of slaves between Africa and the Caribbean, without passing through Europe. That was the opening move of the transatlantic tri-

the seventeenth century. Silver was less valuable in Europe in part because of the large influx from South America, which had caused the famed sixteenth century price revolution.

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Figure 1: Great Britain total imports of raw cotton, and imports of cotton finished fabric from India. Source: Stephen N. Broadberry and Bishnupriya Gupta, Cotton Textiles and the Great Divergence: Lancashire, India and Shifting Competitive Advantage, 1600 – 1850, CEPR Discussion Papers 5183, 2005.

angular trade, a commercial flow that lasted for over 350 years. Mid-tonnage ships transported slaves from the West Africa coast to America; sugar, tobacco, or coffee from the American plantations to Europe, and manufactured goods from Europe to Africa, to trade them with more forced laborers. While the other goods traded changed with time and the seasons, the trade in people was constant. About 12 million people were forcibly transported to the New World between Charles V and the American Civil War. Taking into account the high mortality due to diseases, revolts, or suicide, it is calculated that at least 16 million people departed Africa. Considering an average load of 300 passengers, the slave traders crossed the Atlantic 150 times a year, on average, for three centuries. The triangle’s vertices were tightly connected: when the price of cotton was increasing in Liverpool, planters in Louisiana would plow new land, and traders would sail hundreds of new slaves to the New Orleans markets. In Mississippi, Alabama, Georgia, and Florida the expansion of cotton plantations caused the forced displacement of ancient native tribes west of the Mississippi river into

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Oklahoma. In 1830, President Jackson signed the Indian Removal Act, providing legitimacy to the land appropriation. The act prescribed exchange of land of similar size, or in-cash acquisition, but its results were disconcerting. The Chickashaw tribe, for example, had to wait 30 years to receive US$30 million from the federal government in exchange for their homeland. Mechanization also contributed to lower the cost of American raw cotton. In 1792 Ely Whitney, a Massachusetts engineer, invented the cotton gin, a mechanical device powered by a horse, capable of removing seeds from the cotton fiber. A similar device had existed for centuries in India. But until the early twentieth century it was powered by hand. According to its inventor, the gin (for engine) would perform the work of 50 laborers. Soon, the cotton gin building became a regular feature of most major plantations. The combined effect of slave labor, cheap land, large-scale cultivation, and mechanization contributed to make American cotton competitive in comparison with other sources. Particularly, Indian cotton was produced by small landowners or farmers, on small-scale farms and with labor-intensive techniques. As a result, export of American raw cotton rose from 20 million pounds in 1800, to 1 billion 800 million pounds in 1860. Bales of ginned cotton were boarded in New Orleans, New York, or Charleston and shipped to Liverpool, whence they would reach Manchester by way of canal. Traders complained that it took cotton more time to move from Liverpool to Manchester than to cross the Atlantic. To overcome that bottleneck, a new railway line parallel to the cannel was inaugurated in 1830, the same year of the Indian Removal Act. It was the first successful use of steam for commercial transportation. The Civil War interrupted the cotton trade. Manchester textile mills were so dependent on American cotton that by 1863 one fourth of the workers of Lancashire were unemployed, more than half a million people. Unemployed workers revolted in many cotton towns. To replace American cotton Liverpool merchants resorted to purchases in India, Egypt, and Brazil. When the Civil War ended, the value of land in Bombay collapsed and the price of cotton in Liverpool trebled overnight. The victory of the Union over the Confederates suddenly turned 4 million forced laborers into free individuals, and southern plantations took almost 20 years to reach the prewar production volume. Figure 2 shows the impact of war on the world’s most traded commodity. Since the price of cotton could change during the Atlantic passage, merchants and brokers began to issue forward contracts before the cotton shipments arrived. Market instability in cotton prices, particularly during the American Civil War, led to the development of a standard contract. Standard contracts could easily change hands, at any time before the delivery date. Thus, it became com-

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Figure 2: Price of raw cotton in England (shillings per pound). Source: Stephen N. Broadberry and Bishnupriya Gupta, Cotton Textiles and the Great Divergence: Lancashire, India and Shifting Competitive Advantage, 1600 – 1850, CEPR Discussion Papers 5183, 2005.

mon practice in Liverpool to trade future contracts, attracting speculators who had no actual interest in buying cotton. Cotton traders had met informally from the early nineteenth century. In 1841 they formed the Liverpool Cotton Brokers’ Association. By 1863 the Association had established institutional rules regarding trading cotton. In 2003 the Association became the International Cotton Association. The 1863 rules still form the basis for arbitration and dispute resolution in cotton trading worldwide.⁸ If Liverpool was the hub of cotton trading, Manchester was the manufacturing center. Sven Beckert opens his book Empire of Cotton by describing the 1860 annual meeting of the Manchester Chamber of Commerce: Instead of women on low stools spinning on small wooden wheels in their cottages or using a distaff and spinning bowl in front of their hut, in 1860 millions of mechanical spindles – powered by steam engines and operated by wage workers, many of them children – turned for up to fourteen hours a day, producing millions of pounds of yarn. Instead of households growing cotton and turning it into homespun thread and hand-loomed cloth [in Egypt or India], millions of slaves labored on plantations in the Americas, thousands of miles

 International Cotton Association, https://ica-ltd.org/about-ica/, accessed March 18, 2022.

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away from the hungry factories they supplied, factories that in turn were thousands of miles removed from eventual customers of the cloth. Instead of caravans carrying West African cloth across the Sahara on camels, steamships plied the world’s oceans, loaded with cotton from the American South or with British-made cotton fabrics. To the gatherers at the 1860 annual meeting at the Manchester Chamber of Commerce the future was nearly as unimaginable as the past. Manufacturers and merchants alike would have scoffed if told how radically the world of cotton would change in the following century. By 1860, the cotton capitalists who assembled to celebrate their accomplishments took as a fact of nature history’s first globally integrated cotton manufacturing complex, even though the world they had helped to create was of very recent vintage. […] In a remarkably brief period, enterprising entrepreneurs and powerful statesmen in Europe recast the world’s most significant manufacturing industry by combining imperial expansion and slave labor with new machines and wage workers. The very particular organization of trade, production, and consumption they created exploded the disparate worlds of cotton that had existed for millennia.⁹

That brilliant system optimized input factors by collecting the most convenient resource from every continent. But the cumulative instability generated by the sum of internal conflicts within each economy made the system more fragile in the long run. Hence, Beckert concludes: Ironically, their shocking success also awakened the very forces that eventually would marginalize them within the empire they had created. […] The empire of cotton was, from the beginning, a site of constant global struggle between slaves and planters, merchants and statesmen, farmers and merchants, workers, and factory owners.¹⁰

Polanyi compares the balancing act of free trade in the nineteenth century to a metaphysical conceit: International free trade involved an act of faith. Its implications were entirely extravagant. It meant that England would depend for its food supply upon overseas sources; would sacrifice its agriculture, if necessary, and enter on a new form of life under which she would be part and parcel of some vaguely conceived world unity of the future: that this planetary community would have to be made safe for Great Britain by the power of the Navy; and that the English nation would face the prospects of continuous industrial dislocations in the firm belief in its superior inventive and productive ability.¹¹

 Beckert, Empire of Cotton, xi.  Beckert, Empire of Cotton, xii.  Carl Polanyi, The Great Transformation (Boston: Beacon Press, 2001), 144.

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What is the secret ingredient that kept the balancing act in equilibrium? Beckert calls it a Network of Trust formed by a small number of trading hubs informally connected across the vast distances of transatlantic trade. Economic history is rich in examples where the network of hubs remains connected, and the market adopts explicit or implicit self-regulating principles. Participants establish a kind of social contract within a precisely defined marketplace or industry. Trust flows smoothly because the additional benefit deriving from knowledge exchange and workers’ mobility exceeds a firm’s losses caused by the free flow of information. Until knowledge expands, innovations multiply, and the size of the market keeps increasing. Internal trust is maintained among the subjects involved, and that nurtures further innovation: the process is unstoppable. What Polanyi describes as an act of faith is in fact the reciprocal trust fueled by overall growth of the ecosystem. That culture of transparency and mutual trust established within the Manchester cotton cluster allowed for the development of a global informal network that lasted until the American Civil War. But disappearance of one of the ingredients was enough to disrupt the fragile equilibrium of the informal network. In the subsequent period, a formal system had to replace trust with hard rules, and the ability to enforce them. Innovation and knowledge transfer played, therefore, a key role, enabling the market to expand. In 50 years, the English textile industry had transformed the world’s oldest manufacturing activity beyond recognition. For two thousand years spinning and weaving techniques were developed autonomously in the four corners of the globe, inventing surprisingly similar tools. Variants of the distaff were independently used in Nepal, India, China, northern and southern Europe, and in the Americas. The spinning wheel, the first textile machine, was invented in the Middle East or the Indus Valley in the first millennium AD and exported to China and Europe in the second millennium. In 1700 various spinning and weaving techniques were employed in England to make wool, hemp, and flax. Making cloth was a domestic activity and weavers worked on home-made tools of their own making. Spinning was considered a part-time activity, performed by women with portable tools during their spare time, or in between other occupations. In contrast, weaving was a full-time job, performed by men on complex equipment. It was well paid, until mechanization took place in the last quarter of the eighteenth century. Cotton was the first industry to concentrate production in large industrial buildings, leveraging economies of scale and division of labor. It was also the first manufacturing industry to adopt the power of steam engines on a large

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scale. The process took less than 50 years and took place in an area within 50 miles around Manchester. It all began with a false start. In 1733 John Kay, the son of a Lancashire wool manufacturer, invented the flying shuttle, a device that would allow weavers to “shoot” the weft through the entire width of the fabric with a single movement. Kay was way ahead of his time, and the invention did not spread. Kay eventually moved to France, where he received for some time a state pension. His invention became decisive 50 years later, in 1785, when it could be used in conjunction with a mechanical power loom. Automation in weaving benefited from the use of cotton whose stronger yarn was more amenable to machining. In 1774 Edmund Cartwright invented the power loom, which he patented the following year. The power loom was already a machine too big and complicated to be owned and operated at home by an individual weaver. On the other hand, the loom required less skill and strength. Displaced weavers repeatedly attempted to sabotage the new equipment, but the factory system was quickly taking over. In 1764 James Hargreaves, born in Oswaldtwistle, 24 miles north of Manchester, invented the multiple spinning machine called the spinning jenny, and applied for a 16-spindle patent in 1770. Spinning is the process of turning raw textile material into a thread. The patent was rejected because he had already built too many of his machines. Hargreaves’s spinning jenny was commonly used in the cotton industry until about 1810, when the spinning mule replaced it. As a development of the spinning jenny, in 1764 Richard Arkwright (born in Preston, 33 miles north of Manchester) invented the spinning frame (or water frame, as it was powered by water), with the help of the clockmaker John Kay. In 1769 Arkwright and Kay constructed a spinning machine embodying the ideas they had developed together. Arkwright patented it in 1769 without mentioning Kay. Kay learned of the patent from James Hargreaves, the inventor of the spinning jenny, and told Hargreaves that it was he, Kay, who was the real inventor. The water frame was the first powered and continuous textile machine. The shift from the putting-out system to the factory system is largely due to the water frame. In 1771 Arkwright built his first water powered textile mill in Cromford, 40 miles south of Manchester. In 1774 he successfully petitioned Parliament to repeal the calico ban. Having assembled a competitive technology for cotton weaving, there was no need to protect the English textile industry from Indian competition. In 1738 Lewis Paul had invented and patented a roller spinning machine for carding cotton. Arkwright improved on Paul’s machine and in 1775 obtained a patent for a new carding engine.

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Samuel Crompton was born in Bolton, 10 miles north of Manchester. In 1779 he invented the spinning mule that allowed for greater control over the weaving process. The spinning mule was a combination of Arkwright’s water frame and Hargreaves’s spinning jenny and was so named because it was a hybrid of both machines. The mule remained the most common spinning machine from 1790 until about 1900. It took Compton more than five years to perfect his invention, but he did not have the money to patent it. Therefore, he arranged for some cotton manufacturers to pay for its use. Among them was Richard Arkwright who took out his own patent on the spinning mule, even though he had no role in the invention. Crompton filed a complaint regarding the patent claim with the British Commons Committee. By 1812 more than 4 million spinning mules were in use and eventually Parliament agreed to a settlement of £5000 in his favor. After visiting Richard Arkwright’s cotton-spinning mills in Cromford, Edmund Cartwright, inventor of the power loom, opened a textile factory in Doncaster, 50 miles east of Manchester, and in 1787 began to use a steam engine to power his looms. In 1790 Grimshaw built a small steam-powered factory using Cartwright looms. However, according to Friedrich Engels, a steam engine had been used for supplying motive power for spinning since 1785.¹² Cartwright’s power loom was significantly improved upon by Bill Horrocks, a cotton manufacturer of Stockport (6 miles south of Manchester) who in 1813 invented the variable speed baton, allowing for faster collection of cloth at the back of the loom. His improved power loom became the industry standard tool, and after 1820 women began to systematically replace men as weavers in textile factories. Already by the mid-1820s young women and children formed the majority of the textile workforce in England, as well as in New England. In 1821 Cartwright was made a Fellow of the Royal Society. However, despite the availability of technology, the rate of adoption of power looms was slow: There were two phases in the hand-loom weavers’ decline. The first, up to 1830 or 1835, in which power was a creeping ancillary cause, although it bulked more largely in psychological terms (and was, in this sense, a lever in reducing wages); the second, in which power actually displaced hand products. It was in the first phase that the major reductions in wages (let us say, from 20 s. to 8 s.) took place […] Until the American Civil War of 1861– 65, entrepreneurs used the capital-intensive power looms to meet stable demand, while employing hand weavers to fill peak orders.¹³

 Frederick Engels, The Condition of the Working Class in England, in Collected Works of Karl Marx and Frederick Engels: Volume 4 (New York: International Publishers, 1975), 295 – 596.  Edward Palmer Thompson, The Making of the English Working Class (London, Pelican, 1968), 327.

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By 1850, 250,000 cotton power looms were operating in Britain. Of them, 177,000 were installed around Manchester. However, already in 1817 power looms were being built in the US by a Scottish mechanic, William Gilmour, who had migrated to Rhode Island. Gilmour made his design freely available to other American mechanics. In 1801, Jacquard exhibited his loom at the Exposition des produits de l’industrie française in Paris and won a bronze medal. The Jacquard loom was capable of automatically weaving design patterns. In 1805 it was declared public property and Jacquard received a royalty on each machine sold. Because of the use of perforated cards to program the loom, the Jacquard loom is considered among the ancestors of computers. The textile factory system produced a lasting impact on the workers of Lancashire. In 1800, 85,000 people lived in Manchester. Fifty years later the number was 400,000. Population in Leeds and Bradford, a few miles out, had also grown four or five times. Between 15 % and 25 % of textile factory workers were children or young boys under the age of 15. They were orphans living in workhouses¹⁴ or sent to the mill by families who were too poor to feed them. According to the 1841 British census 110,000 workers in the textile industry were less than 20 years of age. According to the 1851 census 70,000 were less than 15 years of age. With two Factory Acts the British Parliament attempted to regulate child work in the textile mills. The 1803 Factory Act set a limit of 12 hours to the daily working shift for children, further reserving time to attend church on Sundays. The act appointed two inspectors to monitor compliance with the provisions, but the following act, of 1833, reveals that inspectors were never hired. The second Factory Act confirmed the 12-hour shift limit (not exceeding 69 hours per week) for workers. Insufficient food, sleep deprivation, physical exhaustion, work injuries, and byssinosis (card-room asthma) were frequent causes of childhood diseases. Asthma was caused by a bacterium of the cotton dust raised in the card room. Girls usually fell sick within three years of work: after ten years in the card room their lungs could no longer absorb the oxygen required to support their bodies at work. One of the first non-government enquiries on the living conditions of cotton mill workers was conducted by Friedrich Engels when, at the age of 23, he arrived in Manchester from Bremen. His intention was to oversee a family investment in the cotton manufacturing firm Ermen and Engels at Salford (2 miles

 The Poor Laws system had been inaugurated in 1601 and reformed on several occasions, the last one in 1834. It provided food and lodging in exchange for mandatory labor, to indigent individuals hosted in workhouses managed by parishes or, after 1834, by the central government.

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north of Manchester). Instead, between 1843 and 1845 Engels collected material for his first book: The Condition of the Working Class in England, which was published when Engels was 25. Part of the material for the book came from John Wade’s History of the Middle and Working Classes, published in 1833. Similarly, subsequent writers have sometimes used material published by Engels, without mentioning their source. Engels’s book appeared in Germany in 1845. Today, it probably concerns more the economic historian than the political scientist. Primary sources are treated with high regard, and observations maintain an objective style. For instance, after an appalling description of living conditions in the Manchester slums, Engels concludes: Such is the Old Town of Manchester, though on re-reading my description, I am forced to admit that instead of being exaggerated, it is far from black enough to convey a true impression of the filth, ruin, and un-inhabitable-ness, the defiance of all considerations of cleanliness, ventilation, and health which characterize the construction of this single district, containing at least twenty to thirty thousand inhabitants. And such a district exists in the heart of the second city of England, the first manufacturing city of the world. If anyone wishes to see in how little space a human being can move, how little air – and such air! – he can breathe, how little of civilization he may share and yet live, it is only necessary to travel hither. True, this is the Old Town, and the people of Manchester emphasize the fact whenever anyone mentions to them the frightful condition of this Hell upon Earth; but what does that prove? Everything which here arouses horror and indignation is of recent origin, belongs to the industrial epoch. The couple of hundred houses, which belong to old Manchester, have been long since abandoned by their original inhabitants; the industrial epoch alone has crammed into them the swarms of workers whom they now shelter; the industrial epoch alone has built up every spot between these old houses to win a covering for the masses whom it has conjured hither from the agricultural districts and from Ireland; the industrial epoch alone enables the owners of these cattle sheds to rent them for high prices to human beings, to plunder the poverty of the workers, to undermine the health of thousands.¹⁵

Engels provides a first-hand account confirming Owen’s opinion about the degrading impact of mechanization on the material conditions of workers. Glossing Owen, Polanyi argues that their moral conditions were equally compromised: The organization of the whole of society on the principle of gain and profit must have farreaching effects. Owen formulated them in terms of human character. For the most obvious effect of the new institutional system was the destruction of the traditional character of settled populations and their transmutation into a new type of people migratory, nomadic, lacking in self-respect and discipline – crude, callous beings of whom both laborer and capitalists were an example. […] The Industrial Revolution was causing a social dislocation

 Engels, The Condition of the Working Class in England, 352.

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of stupendous proportions, and the problem of poverty was merely the economic aspect of this event. Owen justly pronounced that unless legislative interference and direction counteracted these devastating forces, great and permanent evils would follow. He did not, at that time, foresee that the self-protection of society for which he was calling would be incompatible with the functioning of the economic system itself.¹⁶

Having studied the conditions of the English industrial workers, Engels compared them to the preindustrial setting of Germany, where independent weavers were resisting the introduction of machinery. During an uprising of weavers in Silesia in June 1844 some mechanized looms were destroyed. Shortly thereafter, Engels published in the Owenite weekly magazine The New Moral World a description of a painting by Karl Wilhelm Huebner “which has made a more effectual Socialist agitation than a hundred pamphlets might have done.”

Figure 3: Karl Wilhelm Huebner, Die Schlesischen Weber, 1844, bpk / Deutsches Historisches Museum / Indra Desnica. [The painting] represents some Silesian weavers bringing linen cloth to the manufacturer, and contrasts very strikingly cold-hearted wealth on one side, and despairing poverty on

 Polanyi, The Great Transformation, 134, 135.

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the other. The well-fed manufacturer is represented with a face as red and unfeeling as brass, rejecting a piece of cloth which belongs to a woman; the woman, seeing no chance of selling the cloth, is sinking down and fainting, surrounded by her two little children; and hardly kept up by an old man; a clerk is looking over a piece, the owners of which are with painful anxiety waiting for the result; a young man shows to his desponding mother the scanty wages he has received for his labour; an old man, a girl, and a boy, are sitting on a stone bench, and waiting for their turn; and two men, each with a piece of rejected cloth on his back, are just leaving the room, one of whom is clenching his fist in rage, whilst the other, putting his hand on his neighbours’ arm, points up towards heaven, as if saying: be quiet, there is a judge to punish him. This whole scene is going on in a cold and unhomely-looking lobby, with a stone floor: only the manufacturer stands upon a piece of carpeting; whilst on the other side of the painting, behind a bar, a view is opened into a luxuriously furnished counting-house, with splendid curtains and looking-glasses, where some clerks are writing, undisturbed by what is passing behind them, and where the manufacturer’s son, a young, dandy-like gentleman, is leaning over the bar, with a horsewhip in his hand, smoking a cigar, and coolly looking at the distressed weavers.¹⁷

Having realized the usefulness of machinery in multiplying the fruits of labor, and the impossibility for the individual worker to own or work with them, common ownership was the only way to avoid the misery of workers. Like other utopians, in 1844 the young Engels believed it possible to build a communistic society from below, by assembling sparse social experiments. For that reason, he collected and published in England and Germany news on communities established in the United States by Rappites, Shakers, and Separatists, or about the social experiment established in Hampshire by Robert Owen. A Description of Recently Founded Communist Colonies Still in Existence was published in 1845, and three letters on the Rapid Progress of Communism in Germany appeared in the December 13, 1844 issue of The New Moral World. For instance, discussing the American communities Engels wrote: [I]t is obvious that with the great energy and endurance of this nation, community of goods will soon be introduced over a significant part of their country […] We see then that community of goods is by no means an impossibility but that on the contrary all these experiments have been entirely successful. We also see that the people who are living communally live better with less work, have more leisure for the development of their minds, and that they are better, more moral people than their neighbours who have retained private property. And all this has already been acknowledged by the Americans, British, French and Belgians and by a large number of Germans.¹⁸

 Friedrich Engels, Rapid Progress of Communism in Germany (December 13, 1844), in Collected Works of Karl Marx and Frederick Engels: Volume 4 (New York: International Publishers, 1975), 230.  Friedrich Engels, Description of Recently Founded Communist Colonies Still in Existence was published, unsigned, in the Deutsches Buergerbuch in 1845. In Karl Marx and Friedrich Engels,

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The utopia of a communist society growing through the aggregation of isolated experiments was definitely abandoned by Engels after 1848. In 1850 Marx and Engels published a series of articles that would later be collected under the title The Class Struggles in France, 1848 to 1850. In the 1895 preface to that volume, Engels wrote: […] here, for the first time, the proposition is formulated by which modern workers’ socialism is sharply differentiated […] from the confused community of goods of utopian and of primitive workers’ communism.¹⁹

The 1846 burst of a speculative railways bubble caused panic on the London Stock Exchange; several banks and commercial companies went bankrupt. The great potato disease of Ireland had started in the previous year. The coincidence of a financial meltdown and a famine produced a series of spontaneous popular revolts in France, Germany, Prussia, Hungary, Austria, and Italy. Described by romantic historians as “springtime of the peoples,” the year 1848 represented a turning point for the worker’s movement. The socialist leaders abandoned the utopia of self-managed communities because they realized that factories were not a peculiarity of the English economy, but rather a system of production about to spread across Europe and the United States. The self-coup of 1851 by Louis Napoleon, ending a short republican experiment, and the rising protectionism of national industries by central European countries were evidence of a new relationship between government and industry. Marx described the 1848 popular revolts as the failure of revolutions. The socialist movement realized that spontaneous revolts and self-organized communism were not conducive to the workers’ emancipation. In the early stages of industrialization Owen fully realized the disruptive impact of the factory system upon the nature of humans: The textile factory system produced a lasting impact on the workers of Lancashire. Robert Owen describes its impact on the life of Manchester workers in 1817: The general diffusion of manufactures throughout a country generates a new character in its inhabitants: and as this character is formed upon a principle quite unfavorable to individual and social happiness, it will produce the most lamentable and permanent evils, unless its tendency be counteracted by legislative interference and direction. Town and village laborers, Owen

Collected Works of Karl Marx and Frederick Engels: Volume 4 (New York: International Publishers, 1975), 214.  Friedrich Engels, Introduction to Karl Marx’s The Class Struggles in France, 1848 to 1850 (1895), in Collected Works of Karl Marx and Frederick Engels: Volume 27 (New York: International Publishers, 1975), 506.

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states, are at present in a situation infinitely more degraded and miserable than they were before the introduction of those manufactories, upon the success of which their bare subsistence now depends.²⁰

In 1817, however, Owen could still believe that local governments or self-governing communities might drive technical progress to benefit the common good. After the 1848 failed revolutions that relationship turned antagonistic. It became clear that the factory system was an international occurrence, and that governments across Europe had systematically taken the sides of factory owners against those of the working classes. Evidence from every nation appeared to be consistent. Hence, only an international coordination of the workers’ movement would bring a positive outcome. As the factory system was becoming international, so did the workers’ movement.

Section 2: The Satanic Mills Conquer the World Mechanization of the English textile industry produced the factory system and the first global supply chain. The supply chain consisted of a transportation and communication infrastructure supporting a network of commercial and financial relationships. The first successful use of steam power for commercial transportation was the Liverpool–Manchester railway. Built in 1830, it was the “last mile” of a long transatlantic supply chain which fed Lancashire cotton mills with raw cotton. Given the leading position of Great Britain in global trade and finance, it is not surprising that British communication and transportation infrastructures evolved from services ancillary to the cotton business, to stand-alone global industries. What might surprise, however, is how the new technologies spilled across the border, were embraced by several other countries, and became the foundations upon which those countries built their industrialization processes. Two short answers are science and government support. But, first, let’s see how the infrastructure industry took off in Britain. The turning point occurred at mid-century. Moved by steam power, machinery and the factory system migrated to other production activities such as metallurgy and coal mining, the transportation infrastructure’s building blocks. The popular hero of that saga was Isambard Kingdom Brunel, a brilliant and visionary engineer of the Victorian Age. His charisma was confirmed 150 years after his death, when the British Broadcasting Corporation (BBC) aired a program on Her  Owen’s quote is reported by Polanyi, The Great Transformation, 134.

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Majesty’s most famous subjects. A survey conducted after the series among its viewers named Brunel the second most popular British citizen, after Churchill and before Darwin, Newton, and Shakespeare. Brunel was chief engineer of the Great Western Railway connecting London to Bristol, to the coal mines of Wales, and to the port of Plymouth. The first leg, from Paddington Station²¹ to Bristol, was inaugurated in 1838, while the second leg to Plymouth was completed in the 1850s. Brunel also designed SS Great Britain, the first steel ocean liner to cross the Atlantic pushed by a screw propeller and fore-and-aft sails on five masts. In 1845 the Great Britain took 14 days to complete its first passage from Liverpool to New York. In Brunel’s mind the ship was the natural extension of his railway. Both were part of a seamless infrastructure allowing passengers to travel comfortably from London to New York in the shortest possible time. Bridges, however, were the most impressive architectural element of Brunel’s infrastructure. The best known are Clifton Suspension Bridge, which crosses the Avon Gorge with a single arc of 214 meters, inaugurated in 1864; and the Royal Albert Bridge, 660 meters long, opened in 1859 north of Plymouth. So mesmerizing was the bridge that, during the building’s critical phases, special trains were laid on to bring spectators from London. Making those constructions possible involved a dimensional shift akin to that of the factory system. But unlike textile mechanization, which was largely advanced through experiments, the large metal infrastructures required theoretical support in at least two areas: material science, namely progress in steel working techniques, and mathematics applied to structural calculus. Progress did not take place in a confined cluster. It was the result of international and interdisciplinary cooperation. Brunel, for example, was the son of a French engineer. And the first large metal bridge was built in Sunderland after a project of Thomas Paine, born a British subject, who became a naturalized American. Having moved back to Britain upon Thomas Jefferson’s suggestion, in 1788 Paine obtained a patent for a single arch metal bridge. According to Paine, the patent was based upon Nuove Ricerche sull’ Equilibrio delle Volte (New Studies upon Vaults’ Equilibrium) a treatise of statics published in 1785 by abbot Lorenzo Mascheroni. The first suspended bridge was built in 1824 in France by Marc Seguin, nephew of Joseph Montgolfier, inventor of the hot-air balloon. Seguin made extensive studies and experiments with steel cables, to identify the most suitable stranded wires. His results were applied extensively in the United States, particularly by

 Also designed by Brunel.

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Figure 4: The Royal Albert Bridge under construction in 1858. Source: https://en.wikipedia.org/wiki/File:Royal_albert_bridge_hist.jpg, accessed March 19, 2022.

the Prussian engineer Johann Roebling, who designed and built several suspension bridges, including New York’s Brooklyn Bridge. Progress in metallurgy and structural calculus produced not only railways, bridges, and stations, but also arcades, botanic gardens, markets, theaters, zoos, and other public buildings that have populated European and American cities since the second part of the nineteenth century. Nothing, however, captured the public imagination like a suspended bridge: More elaborate constructional applications of this apparently limited principle of elastic suspension were made, until fantastic spans were attained, and voids were bridged that had hitherto seemed outside the range of human powers. Often these bridges are set amidst landscapes of almost cosmic dimensions and constitute with them new wholes on a more than human scale.²²

 Sigfried Giedion, Space, Time and Architecture (Cambridge, MA: Harvard University Press, 1949), 112.

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To contemporary witnesses, those enterprises appeared Cyclopean: comparable to the Pyramids of Egypt, the palace of the Minoans in Knossos, or a Roman theater. That explains on one hand the heroic aura surrounding engineers like Brunel, Roebling, and Eiffel while, on the other, it justifies the appeal they had to governments, eager to associate their fate with such accomplishments, and generate popular consensus. It was a win-win relationship: Governments were quick to wrap themselves in the mantle of technical progress. But those large infrastructure projects were possible only through government’s substantial funding, particularly in countries that had to recover a 50-year delay on the English Industrial Revolution. Institutional funding and the role of international science marked a departure in the second half of the century from the culture of earlier innovators. The textile entrepreneurs had based their findings on empirical skills, repeated experiments, and the cross-fertilization of proficient practitioners living in a small area around Manchester. On the contrary, the new generation of entrepreneurs who developed the trading infrastructure availed themselves of the intellectual might of engineers and scientists of multiple nationalities. They also had access to the international financial markets and proceeded with their investments after protracted debates, rigorous experiments, and demonstrations. In fact, the second half of the century establishes the charismatic roles of the professional engineer, the material scientist, and the applied mathematician. Advances in the structural calculus of a bridge, a ship, or a locomotive boiler replace the creativity of hands-on entrepreneurs from the prior generation. International finance and science take front seat. The first transatlantic telegraph wire provides a characteristic example: the submarine cable was funded by the American king of paper mills, Cyrus Field, and manufactured by the British company Gutta Percha. Size and specifications of the cable caused a heated debate between Samuel Morse and Michael Faraday on one hand, and Lord Kelvin on the other. At issue was the ability to predict the motion of electrons in a confined space. The cable project was completed in 1858. The issue is still at the core of quantum physics. In 1859 ground was broken at Suez. The canal was first designed by Ingegner Luigi Negrelli (then an Austrian subject) and funded with French and Ottoman capital. Ten years later, the French Empress Eugenie, wife of Napoleon III, attended its inauguration. Mechanization of the cotton mills traveled physically through prototypes built by migrant artisans, carrying the machinery’s secrets in their head. On the contrary, technology in the infrastructure age was expressed in the international language of the scientific community and could travel by formalized drawings and calculations. As the factory system was migrating from England to the

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European and American countries, it was also adopted by a growing number of industries whose primary customer was the government. Scientific formalization and government involvement provided further impulse to the adoption of innovations, fostering the industrialization of countries outside Britain. In Britain, that passage coincided with a social transformation. Engineers and entrepreneurs became part of the establishment. The new entrepreneurs were often directly involved in government. An early example comes from the Arkwright dynasty. The first Richard (1732– 1792) patented the water loom. His son, also Richard (1755 – 1843), inherited several mills. He invested in railways, canals, and banking and became the richest British bourgeois of his times. The third Richard Arkwright (1781– 1832) was a Member of Parliament from 1813 to 1818, and from 1826 to 1830. The international financial crisis of 1873 forced the Egyptian government to sell its stake in the Suez Canal of 44 % to Britain. A loan from Rothschild to the British government made the deal possible. Lionel Rothschild, a baron of the Habsburg Empire, also became the first practicing Jew to sit in the British Parliament. Joseph Chamberlain is a third good individual example. One of his biographers describes him as the first industrialist to enter the highest sphere of British politics. A self-made entrepreneur, Chamberlain was never prime minister. But between 1880 and 1903 took numerous influential positions in the colonial administration, ardently promoting imperialism and import tariffs, and fiercely opposing laissez-faire capitalism. The new generation was also the agent of a marked cultural shift. The run-up entrepreneurs who had started the textile industrial revolution were daring innovators, motivated by the challenge of discovering new technology. The successes of the firms they founded was proof of their correct foresight, and prize to their risk-taking intuition. They often worked against societal norms, and even in disregard of legal and moral constraints. They believed that walking unconventional paths was the way to success. They were motivated by the challenge of affirming innovative, creative, disruptive ways of doing business and were by no means afraid of parting ways with the establishment. In the opinion of John Maynard Keynes, “material progress between 1750 and 1850 came from individual initiative and owed almost nothing to the directive influence of organized society as a whole.”²³

 John Maynard Keynes, The End of Laissez Faire (1926), The Collected Writings of John Maynard Keynes 9 (London: Royal Economic Society, 1978), 277.

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Entrepreneurs of the second phase exhibited a different culture. Phyllis Deane describes two kinds of railway entrepreneurs in England: In the 1830s, when every new railway line was a new trail blazed, the great pioneer engineers who took the crucial decisions were distinguished by their ingenuity, energy, and practical skill. In the 1840s it was the turn of the business tycoons, men who had the organizational skills needed to plan transport systems, link railways with canals, amalgamate competing companies […] This stage of development required a new kind of contractor. […] from their early stages the railways were seen as a public utility rather than a private monopoly.²⁴

In the following 50 years the industrial leadership of the world migrated across the Atlantic, from Britain to the United States, where the new phase has been described as the Age of Trusts and Monopolies. That phase lasted into the First World War, with rising trade barriers, labor disputes, and growing government intervention. The take-off generation, succeeding the creative pioneers, had rather different motivations and ethics. It also worked in different industries. That shift appears in British trade statistics: British exports ceased to be based essentially on textiles, and increasingly shifted to more expensive capital goods and raw materials – iron, steel, coal, ships, machinery. Textiles, which had formed 72 % of our manufactured exports in 1867– 69, fell to 51 % at the eve of WW1, while capital goods rose from 20 % to 39 %. The major change occurring quite rapidly after 1860.²⁵

The new entrepreneurs had lost the former’s heroic motivation and gained an instrumental approach to institutions and governments. Normalizing and institutionalizing the factory system were their primary activities. That task of “becoming established” involved a wide range of aspects. For instance, while in the first phase of industrialism science played quite a small role, the major advances of the second half of the nineteenth century were essentially scientific. They required […] an increasingly close and continuous link between industrialists, technologists and professional scientists, and scientific institutions. […] And by the end of the nineteenth century it was already clear […] that the output of technological progress was a function of the input of scientifically qualified manpower, equipment, and money into systematic research projects.²⁶

 Deane, The Industrial Revolution in Great Britain, 213.  Eric John Hobsbawm, Industry and Empire, The Pelican Economic History of Britain 3 (London: Penguin, 1968), 143.  Hobsbawm, Industry and Empire, 173 – 174.

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The first generation was lighthearted, liberal, if not libertarian; the generation that followed was prone to extract advantages by closing ranks with the state. Keynes provides evidence of the changing of times in academia: Cairnes in the introductory lecture on “Political Economy and Laissez-Faire” which he delivered at University College London in 1870 was perhaps the first orthodox economist to deliver a frontal attack upon laissez-faire in general. “The maxim of laissez-faire” he declared “has no scientific basis whatever but is at best a mere handy rule of practice.”²⁷

The culture of transparency and trust established within the Manchester cotton cluster allowed for the development of a global informal network that lasted until the Civil War: “It was a characteristic and unique feature of the English industrial revolution that it reached its climax in an economic system which was as near being the prototype of a free market, labor abundant economy as there ever has been.”²⁸ But “the more merchants succeeded in their project of extending the authority of the state, the less trade depended on the network of trust that they had forged.”²⁹ So, “by the end of the Seventies the free trade episode was at an end; an era of protectionism and colonial expansion”³⁰ had begun. A global supply chain founded on the mutual trust of a small number of enterprising individuals may be cohesive and resilient towards internal imbalances. However, a sudden change in external conditions may upset its fragile balance. In 1861 the network of trust established by the cotton industry was shaken by the American Civil War, which disbanded slave plantations and, for almost two decades, interrupted the abundant supply of cheap cotton. As a result, by 1863, half a million individuals were out of work in Lancashire, and unemployed workers rioted in the streets of several British cotton towns. In France, in the same year, the interruption of cotton shipments left a quarter-million cotton workers without a job.³¹ It took until 1879 for the southern former slave plantations to recover the production level of 1860. The American Civil War was as much a symptom as a cause of the decline of the liberal entrepreneurial culture. To the upcoming countries of Europe and Asia the United States’ example proved that the laissez-faire model of Britain was not the only viable way to organize industry. During and immediately after the Civil War, political unification also took place in Italy (1861) and Germa-

    

Keynes, The End of Laissez Faire, 283. Deane, The Industrial Revolution in Great Britain, 223. Beckert, Empire of Cotton, 236. Polanyi, The Great Transformation, 19. Beckert, Empire of Cotton, 247– 248.

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ny (1871). In Italy industry made little progress until the 1880s, but free market, currency emissions by several banks, and a devaluation of the Lira between 1866 and 1883 provided a barrier against imports and supported exports.³² The beggar thy neighbor policy remained a distinctive trait of governments until Italy joined the Euro in 2002. In 1868 Japan inaugurated the Meiji era of international opening and industrialization. Russia would follow at the end of the century. Japan, Russia, Germany, and the United States began to look for theories that would justify protectionism, domestically and in the colonies. The new players adopted markedly infant industry policies under the guidance of popular economists, like Friedrich List in America and Germany and, later, Sergei Witte in Russia. It is a telling sign of the times that the protectionist culture of the United States owes much to a German economist. In 1890 Alfred Marshall wrote: American manufacturers adopted List as their advocate; and the beginning of his fame, as well as of the systematic advocacy of protectionist doctrines in America, was in the wide circulation by them of a popular treaty (published in 1827) which he wrote for them.³³

A few lines below, Marshall added: “List overlooked the tendency of modern inter-communication to make the development of different nations synchronize.” That was Marshall’s language to describe globalization and its supposed leveling effect, which would render protectionism useless: a rather simplistic reasoning, shared by most liberal and some neoliberal economists. In the US, disruption brought by the Civil War upon the southern plantations and the abolition of slavery upset not only the cotton supply chain, but the entire free trade rationale, which was advocated by the agrarian southern states. Protectionism had existed since the Tariffs Acts of 1789 and 1816. It became rampant after the Civil War: with the victory of urban north, the United States embarked on a radical process of industrialization, favored by the government through high protective barriers:

 Between 1861 and 1890 up to six banks were authorized to issue notes in Italy, in partial competition among them, and with limited control by a central authority. https://www.banca ditalia.it/chi-siamo/storia/origini/index.html, accessed March 19, 2022.  Alfred Marshall, Principles of Economics, 8th edition (London: Macmillian, 1920), 767. The first edition was published in 1890.

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No other generation in America witnessed so rapid and revolutionary change as those which transformed the agrarian republic of Lincoln and Lee in the urban industrial empire of Theodore Roosevelt and Rockefeller.³⁴

In Britain, the impact of the Civil War accelerated consolidation of trade within the boundaries of the Empire. For the decade that followed it, India and Egypt became the default sources of raw cotton to Manchester. Phyllis Deane put it gently: “The spread of the industrial revolution in the rest of the world forced the original country to adopt more defensive commercial policies.”³⁵ The Habsburg monarchy was somehow an exception. Austria lost two major wars in 1859 and 1866. The increasing cost of resisting the dissolution of the empire impacted on government finances. As a result, after 1854 the Imperial-Royal State Railways were dissolved and the railways were liquidated, mostly to French investors. By then the weakest link in the chain, Austria was nevertheless still part of the global economy: the Vienna stock market crash triggered the New York panic of 1873, and the ensuing Long Depression. A financial bubble had been generated by the sudden growth of government demand due to the Civil War in the United States, and to the 1871 war between France and Prussia. The bubble was temporary absorbed through overinvestments in railways. For instance, in newly unified Germany capital invested in joint stock companies doubled in three years, between 1871 and 1873. In the spring of 1873, the bubble burst in Vienna. By September, the crisis had reached New York, where the stock exchange closed for ten days; then it bounced back to Europe. The ensuing Long Depression engulfed most European countries from 1873 to 1878, and some industries until 1890. Steel production for civil use had suddenly doubled; prices of cotton, steel, and wheat contracted by half. The crisis offered a political argument to introduce tariffs and other barriers, mostly to protect domestic heavy industries. In Japan, the Meiji Restoration of 1868 imported a Western-style political system and propelled the country into the industrial age. An asset price bubble followed between 1886 and 1891. The Long Depression consolidated three characteristics of the mature stage of globalization. First, by the late 1870s the colonial affair had grown from a trade adventure of a few maritime nations, to an institutional responsibility for every old and new state with industrial ambitions. Second, Western workers advanced their rights through universal male suffrage and international labor organizations. Third, the old generations of innovative entrepreneurs gave way to a

 Allan Nevins and Henry Steele Commager, The Pocket History of the United States (New York: Pocket Books, 1942), 261.  Deane, The Industrial Revolution in Great Britain, 224.

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self-conscious ruling class in control of large trusts, often monopolistic in their markets, and eager to assume direct government responsibilities. Those new patterns affected all major industrial countries. In the United States both the federal and state governments assumed an attitude of complacency towards the new war millionaires, a generation of industry captains and finance capitalists greedy for money and power, with rough tastes and no moral principles.³⁶ From the League of Nations statistical series, Kevin O’Rourke has computed changes in the average import duties of certain European countries between 1875 and 1915:³⁷ Denmark from 15 % to 14 %; Sweden from 3 – 5 % to 29 %; Italy from 8 – 10 % to 18 %; France from 12– 15 % to 20 %; Germany from 4– 6 % to 13 %. O’Rourke also found a positive correlation between growth and tariffs in 11 European countries after 1865. He suggests that the correlation should not be interpreted as a strict causation. In addition to making imported goods less competitive, higher tariffs signal a government’s willingness to favor their national industries with measures such as mandatory domestic provisions. That was particularly true of armaments, both because governments are the main customer, and because generals tend to nurture local suppliers. Science and technical progress also played a significant role in artillery. In 1869, the year of the Suez inauguration, the British mathematician Francis Bashforth published a seminal treatise on the trajectories of artillery projectiles. His calculations were based on ballistic experiments he conducted at the Royal Military Academy to measure the resistance of air. Progress in construction was apparent already in 1851 at the London Great Exhibition, hosted at Crystal Palace, whose fragile structure was aptly supported by a cast iron frame. Alfred Krupp, son of the Krupp company’s founder, had brought to London a gun forged from a single steel ingot. The use of steel was unheard of in the military, because since the 1400s all artillery pieces had been cast in bronze. Krupp also exhibited a steel ingot weighing 4300 pounds. The second heaviest ingot presented by the British firm Sheffield weighted half as much. With his ingot, Krupp won the gold medal, with the following jury motivation: The exhibition does not show from any other country a bar of cast and forged steel of such large dimensions and of equal beauty. The members of the jury do not remember to have seen anywhere a similar example.³⁸

 Nevins and Commager, Pocket History of the United States, ch. 13.  Kevin O’Rourke, Tariffs and Growth in the Late 19th Century, The Economic Journal, April 2000, 456 – 483. For a description of the League of Nations statistics, see Chapter Two, Section 3.  William Manchester, The Arms of Krupp (Boston: Little Brown and Co., 1964), 69.

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As soon as the London fair was over, Krupp sent the cannon as a present to Wilhelm, king of Prussia. Wilhelm mounted the gun in the hall of his Berlin residence just in time for the visit of Czar Nicholas I. A friendly relationship had begun. In 1866 Wilhelm von Hohenzollern and the Krupp cannons invaded and defeated Austria. In 1870 they defeated Napoleon III at Sedan, and in 1871 they bombed Paris into final surrender. It was not the first time Krupp had caused a commotion in Paris. At the 1855 World Fair, the steel ingot shown by the Krupp booth broke through the floor, precisely when the jury was walking by, and landed in the basement. The involuntary coup de theatre made such an impression that Credit Mobilier immediately extended to Krupp a loan for the construction of a factory in France, and Napoleon asked to test the gun. Krupp lent the gun but declined the loan, as he was famously protective of the firm’s trade secrets. After 3000 rounds Napoleon sent the gun back to Düsseldorf. Since 1848 the firm Schneider-Creusot had retained a monopoly on artillery supplies to the French Army. Its founder, Eugene Schneider, was the first president of the Comité des Forges, the iron and steel industry cartel in charge of maintaining prices, promoting exports, and nurturing relationships with the government. On and off, between 1849 and 1870, Schneider had also been a member of the National Assembly. William George Armstrong was the last member in the trio of European artillery makers. In 1855, four years after the London Great Exhibition, he presented to the Royal Army and Navy a cannon made from wrought iron wrapped around a steel inner gun barrel (called build-up construction). It was a lowtech version of Krupp’s forged gun, and yet superior to existing weapons. Armstrong’s gun was also provided with a breech loader. The build-up construction was quickly adopted, particularly for ships and stationary cannons. The forts of Malta, Gibraltar, and Singapore were equipped with 100-ton build-up guns produced by Armstrong. However, the army and the navy continued to use muzzle loaded cannons until 1880. The superiority of Krupp’s back-loaded design consisted of the use of a metal shell which contains the charge and expands during the explosion, creating an airtight compartment chamber, and ensuring hermetic seal of the breech loader. Armstrong produced smaller cannons of his own design and sold them to foreign countries, such as Japan, Russia, and the United States. Armstrong also led the Elswick Ordnance Company in Newcastle, the major navy shipyard and the only one capable of building a military ship complete with all its weapons. In 1846 Armstrong was elected Fellow of the Royal Society, and in 1887 he became a baron. In 1900 the Elswick shipyard employed 20,000 workers. Paris, London, and Berlin used one gun dealer each: their own domestic monopolist. Competition among Krupp, Armstrong, and Schneider existed only in

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overseas markets, and the governments of Russia, Austria-Hungary, the United States, and Japan were their shared customers. However, weapons were among a shrinking number of commodities freely traded. In fact, during the Long Depression governments on their way to industrialization increasingly applied theories that would justify protectionism in the metropolitan territory and in the colonies. The best-known theorist of government intervention to protect domestic infant industry was Friedrich List,³⁹ who claimed that the cost of a tariff should be regarded as an investment in a nation’s future productivity. While Germany and the United States adopted List’s recommendations, Russian industrialization was orchestrated by Sergei Witte, the ambitious railways administrator, minister of finance and prime minister of Tzar Nicholas II. Witte claimed that completion of the Trans-Siberian railway would grant Russia the role of intermediary between East Asia and Europe. Perhaps he was thinking of merging with the London–New York route opened by Brunel in the 1850s. He was also building an infrastructure to quickly displace armies between the Chinese and the German borders. Finances for a railway line, one fourth of the Earth’s circumference, had been procured through special taxes, forced labor, and large loans negotiated by Witte with investors in France, Britain, and the United States. His model of “industrialization from above” and his openly autocratic penchant make of Witte an unusual hybrid between a central planner and a railway baron, without the self-enrichment motive of the Putin oligarch. Wisely but vainly, Witte opposed the involvement of Russia in the First World War. In North America the infant industry was shielded from foreign competition from the outset, through the Tariff Acts of 1789 and 1816. Friedrich List’s American treaty appeared in 1827. At the beginning of the war, the 1861 Custom Law imposed tariffs at 18 % to 47 %, depending on products. Import duties were raised again at the end of the war, anticipating the protectionist trend caused in Europe by the Long Depression. No US government until 1913 was independent enough to confront the power of the trusts and lower import duties, or to impose a containment of industrial monopolies in the domestic market. Massive immigration and urbanization in New England, as well as in major European cities, created pauperism and public order issues. The protection offered by governments to domestic industries soon extended to industrial relations and labor negotiations. For instance, the great railway strike of 1877 lasted 45 days and ended with 60 workers killed by the US Army. However, one event more than any other reflects that period: the revolt that created the Paris Com-

 See footnote 33 above.

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mune of 1871, which followed the defeat of Napoleon III by Krupp’s cannons. Sometime during the Prussian siege, the people of Paris took to the streets to oppose the surrender of their own government. The revolt lasted more than two months, during which the city of Paris was self-governed. It was suffocated by the defeated French Army under the eyes of the victorious Prussians who had surrounded Paris but had agreed, as part of the truce, not to occupy it. The French Army killed 10,000 Communards in action, and 10,000 more in subsequent cleansing. Growing demand for labor, and concentration of workers in large factories and engineering projects, had boosted the organization and bargaining power of the working class. By the end of the Depression in 1886, all adult males could vote in Britain, France, Switzerland, Germany, Turkey, New Zealand, and the United States. The confederation of socialist and labor parties, known as the “Second International” was established in 1881. It included delegates from 20 countries, was dominated by the German Socialist party, and was dissolved in 1916, having failed to reach unanimity over a motion to condemn the war. Even among socialist parties, national divisions prevailed over the Internationalist’s ideals. The same occurred with regards to colonialism. At the Second International Socialist Congress in Stuttgart in 1907 the Western countries’ delegations argued that dominance over underdeveloped countries was unavoidable, and therefore colonial exploitation could not be prevented. The left wing of the Socialist International attempted to describe a “socialist colonial policy” and consensus was eventually reached on a utopian motion, arguing that “exploitation, forced labor, and extermination of the local populations” in developing countries are inevitable consequences of capitalism. Only the victory of socialism would make possible the utilization of natural resources in the interest of the whole of humankind.⁴⁰ Rational management of the common goods was a distant and unrealistic goal, whereas a global war and colonialism appeared more urgent issues within the workers’ movements of the time. And yet, they couldn’t agree on either. On the issue of colonialism, the socialist movement split between those, like Lenin, who argued that the International organization represented the aristocracy of the working class, not the broad masses of the proletariat. Colonialism enabled industrial countries to “bribe” their working class by offering a high standard of living, thus creating a vested interest for the survival of colonialism. A different opinion was carried by representatives of the German Social Democratic party,

 Julius Braunthal, History of the International, Volume 1: 1863 – 1914 (New York: Fredrik A. Praeger, 1967), 319.

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who argued that higher living standards were the result of equitable redistribution of gross domestic product, not necessarily of the exploitation of colonies’ resources. During the war It was generally the workers’ aristocracies who were at the forefront of anti-war and anti-imperialist struggles, thanks to their higher technical education and social awareness. Anyway, the international workers’ organization was incapable of finding a consensus over the approach towards the oncoming war. In other words, the war was successful in breaking the international workers’ movement. After 1917 the debate on war was superseded by the creation of the Soviet Union, which made taking sides in the ensuing conflicts a no-brainer for the socialist movement. However, the debate on colonization continued, chiefly through the writings of Rosa Luxemburg, who argued that by exporting capitalist organization in the former peripheries of the world market, western economies would have become the victims of their own success. This theme resurfaces with the emergence of Asian economies in the twenty-first century and will be discussed in the first section of Chapter Four, devoted to the World Trade Organization. The peoples of Africa and Asia would have described the last decades of the nineteenth century as the triumph of institutional colonialism, or formal imperialism. In 1884 Germany arranged the Berlin Conference, with the aim of establishing criteria of legitimacy for the permanent occupation of Third World countries by the industrial powers. Twelve European countries, plus the United States and the Ottoman Empire attended. Participants agreed on a definition of effective occupation: meanwhile, with characteristic lack of self-awareness, they abolished by decree slavery in all African and Islamic countries. Upon meeting the criteria of effective occupation every attendee was granted the right to occupy a territory by all other participants. The criteria were straightforward: existence of treaties with the local authorities; permanent establishment of an administration; and ability to impose respect of the law through a police force. The Berlin Conference had successfully replaced the power of markets (dominium) with the power of governments (imperium), formally recognizing a condition that already existed in practice. The movements of capital, people, and goods were occurring increasingly within the borders of national colonial domains, and less frequently across powers and their appendices. In the last two decades of the nineteenth century globalization had abandoned its all-encompassing nature: it was now fragmented among regions of influence. National industries were trading within the protected borders of formal empires. The Berlin Conference had provided the Victorian Age globalization with a formal framework to fragment into imperial blocks. A quarter-century later, at the outbreak of the First World War, the workers’ representatives at the Second International confirmed that such was indeed the state of facts.

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Section 3: The First Global War In 1913 cotton cloth was still Great Britain’s main export item (51 %), albeit less prominent than it was in 1850 (70 %). In large proportion, it was inexpensive cloth. On the contrary, Germany had increased the added value content of its exports, moving from exporting iron tools and cheap cotton to eastern Europe, to shipping chemicals, steel, transportation equipment, and electrical machinery to other industrial economies. But even within the textile industry, one half of German cotton exports in 1913 were sold to mature economies with high disposable income, against less than one third of British cotton exports.⁴¹ The bulk of British exports was by then shipped to the colonies. Thus Hobsbawm: British exports ceased to be based essentially on textiles, and increasingly shifted to more expensive capital goods and raw materials – iron, steel, coal, ships, machinery. Textiles, which had formed 72 % of our manufactured exports in 1867– 69, fell to 51 % at the eve of WW1, while capital goods rose from 20 % to 39 % […] The major change occurring quite rapidly after 1860.⁴²

By 1890 the United States were producing more steel than Britain and, by the new century, more than Britain and Germany combined. At the dawn of WWI, the USA were the largest world industrial power, Germany probably the second largest. Germany, however, was politically part of the Old World. During the first winter at war Alfred Hugenberg, then chairman of the board of the Krupp conglomerate, addressed a group of German industrialists: The consequences of the war will be unfavorable to employers and industry in many ways. One will probably have to count on a very increased sense of power on the part of the workers and labour unions, which will find expression in increased demands on the employer for legislation. It would, therefore, be well advised in order to avoid internal difficulties to distract the attention of the people, and to give fantasies concerning the extension of German territory, room to play.⁴³

War was a product of the Central Empires’ political obsolescence. While the challenge of Germany was to reconcile an advanced industrial economy within an ancien regime government, the main challenge for the American political leadership was “maintaining a political democracy under the influence of an un-dem-

 John C. Brown, Imperfect Competition and Anglo-German Trade Rivalry: Markets for Cotton Textiles before 1914, The Journal of Economic History, vol. 55, no. 3 (1995), 493 – 527.  Hobsbawm, Industry and Empire, 143.  https://www.britannica.com/place/Germany/World-War-I, accessed March 19, 2022.

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ocratic economy.”⁴⁴ The growth of an advanced economy had to be met by some form of political legitimation, particularly in the eyes of the large masses of industrial workers generated by that advanced economy. Where the political institutions were not designed to acknowledge mass consensus, alternative forms of consensus were needed. Guglielmo Ferrero was known for a 1200-page history of ancient Rome, which he described as “an anti-fascist history of Cesar written twenty years before fascism.”⁴⁵ In 1908 Ferrero was invited by President Theodore Roosevelt to visit the US. His arrival was reported by the New York Times in a full-page interview.⁴⁶ After that tour, Ferrero became a regular contributor to The Atlantic, the influential New England journal, and to The New York American. In January 1913 he wrote: For better or worse, representative institutions, in one form or another, have taken root in nearly all the countries of Europe and carry forward their work, even if slowly. Peace, therefore, according to the prophecies of the doctrinaire liberals of 1848, should reign throughout Europe by the will and authority of the people and despite of bellicose governments and rulers, ceaselessly in search of adventure […] Such was the expectation. What of the realization? On every hand we see governments and kings struggling against their people and against public opinion. It is the people who are fired with a desire for war, while their governments, together with their sovereigns, devoted to the preservation of peace, resist as long as they can the pressure of public opinion. […] Observing at close quarters the policy of European governments, it is easy to see that this warlike spirit would not be so strong and deep in the masses were it not pertinaciously fostered by the newspapers, and by the political parties they represent, by the wealthy classes and by the nobility. […] In all the countries of Europe it is the upper class, or a portion of the upper classes (and in this portion I include the moneyed classes, the aristocracy …) who strive in every way to excite the belligerent spirit of the artisans, and of the populace, even at the cost of bringing about a terrible war. […] The reason why this policy succeeds among the wealthy and the cultured, among businessmen, manufacturers, men of letters […] must be sought in the great political and social upheaval produced in European society by the spread of democratic and socialistic ideas among the working classes.⁴⁷

In describing Italy’s ambiguity at the war’s outset, Ferrero added: “The war had to support the government instead of being directed by it.” In November of 1914,

 Nevins and Commager, Pocket History of the United States, 261.  Ferrero described his book in an interview collected in 1939, and published in: Bogdan Raditza, Colloqui con Guglielmo Ferrero (Lugano: Edizioni Capolago, 1939), 37.  Unknown author, Every Problem Has Its Origin in Money, Interview with Guglielmo Ferrero, New York Times, November 22, 1908.  Guglielmo Ferrero, The Dangers of War in Europe, The Atlantic, January 1913, 1– 2 and 4– 5.

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while Krupp’s CEO was predicting the territorial ambitions of the German people, Ferrero published his first war correspondence: The European War, of which everyone has been talking for so many years, but for the most part without believing that it could occur […] that earthquake which perhaps will overturn from its foundations the civilization of the old world […] broke out within a single week.⁴⁸

In the same month, on November 15, Benito Mussolini founded the Popolo d’Italia, a radical daily paper financed by big landowners and industrial families such as the Agnellis and the Perrones. The newspaper was devoted to a single issue: Italy’s entry into the war. In the first volume of his memoirs, Elias Canetti, a nine-year-old boy in Vienna, describes the outbreak of the war. On August 1, 1914, the family was at the Baden Spa garden, and the band was playing. Someone handed a note, the director interrupted the music, banged his baton, and read aloud: “Germany has declared war on Russia.” The band launched into the Austrian imperial anthem, everyone stood up, even the people sitting on the benches got to their feet and sang along. No sooner it was over than it was followed by the German anthem “Hail to thee in victor’s laurels.” It was the same tune that I had known in England as “God save the king.” I sensed that the mood was anti-British. I don’t know whether it was out of old habit, perhaps it was also defiance, I sang the English words aloud at the top of my lungs, and my little brothers, in their innocence, did the same in their tiny little voices. Since we were in the thick of the crowd, no one could miss it. Suddenly, I saw faces wrapped with rage all about me and arms and hands hitting at me. My brothers too, even the youngest George got some of the punches that were meant for me, the nine-year old. […] I didn’t quite understand what I had done, but this first experience with a hostile crowd was all the more indelible. […] But the thing that made a much deeper impact on me was the hate-twisted faces.⁴⁹

According to Yale historian John Lewis Gaddis, the First World War was the result of domestic populism rather than of an international power struggle among European nations: When Clausewitz insisted that wars reflect policy, he set a standard from which exceptions […] – wars detached from discernible purposes – weren’t supposed to occur […]. The Great War, however, was a pre-Clausewitzian regression: would any of its regional participants had entered it if they had foreseen its costs? And yet, crowds throughout Europe welcomed war, in August 1914, with all the democratic spontaneity of the Athenian assembly […] Ath-

 Guglielmo Ferrero, The European Tragedy, The Atlantic, November 1914, 681.  Elias Canetti, The Memoirs (New York: Farrar, Straus and Giroux, 1977), 97.

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ens, the model for all subsequent democracies, defeated itself in the end because it bore deaths more easily than questions about the purposes of its wars.⁵⁰

Beside the First World War, Gaddis mentions two other examples of wars fought without national policy motives: the Napoleonic Wars and the Thirty Years War. The Thirty Years War ignited from the attempt to impose a uniform religious identity on the Habsburg Empire. The Napoleonic Wars consisted of an increasingly desperate attempt to legitimize the new dictatorial regime through the creation of a new national identity. That identity was affirmed by committing the entire country to a heroic universal task: disseminating the revolutionary principles across Europe. Despite the undisputable democratic nature of the French Revolution, Ferrero considers Napoleon a populist dictator. France is surrounded by traditional monarchies who are weary of the new democratic model of government which the French are struggling to adopt. Hence, Napoleon is fearful of being attacked by external enemies, while at the same time he needs to appeal to the revolutionary values to support his internal power. According to Ferrero, Napoleon finds only one way out of this tragic contradiction: involving the entire nation in a desperate struggle for the expansion to France’s neighbors of the new democratic values established by the Revolution. In that he creates a hybrid: a personal monarchic power supported by a democratic mass ideology. Thus, in his November 1914 article for The Atlantic Ferrero wrote: “The French Revolution had been forced to set all Europe on fire in order to defend itself. […] The French Revolution initiated in Europe the true war of the peoples.”⁵¹ To this day, the Revolution is the French people’s symbol; Bastille Day is the supreme national holiday. Modern mass wars evade the foreign policy motives of Clausewitz. They originate instead from a domestic quest for legitimacy. Napoleon’s victories provided legitimacy to the power of the new emperor, overriding the democratic conquest of the Bastille. Similarly, the First World War was meant to distract the working classes of the Central Empires from their democratic and socialist aspirations. What separates the Napoleonic Wars from the First Global War is the Industrial Revolution. While Napoleon involved huge masses of people, but relied on a limited industrial output, the First World War was a fight among national industrial complexes. WWI had therefore a twin purpose, deserving the active support “of the wealthy and the cultured, business-men, manufacturers, men of letters.”

 John L. Gaddis, On Grand Strategy (London: Penguin Books, 2018), 273.  Ferrero, The European Tragedy, 683.

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Its first purpose was to subtract the industrial working classes from the influence of the international socialist movement, by reinforcing instead their national identities. The second was to provide unlimited demand to the highly protected industrial domestic monopolies. The First World War resembles the Napoleonic Wars in three respects: it is not based on discernable foreign policy purposes; it is a mass war, in that it involves the material resources of an entire nation; and it is identitarian, in that its purpose is to reinforce the identification between popular values and national executive powers. Propaganda plays a key role, both in the initial motivation and in maintaining popular consensus during the unending catastrophe. The fact that the Napoleonic armies fought for universal values while WWI soldiers were motivated by nationalistic ideologies is but sad historic evidence of the crowd’s ingenuousness. Gaddis’s observation stems primarily from the American viewpoint. It took President Wilson until 1917 to enter the war. The US had little interest in further expanding towards new markets: it was already the most powerful industrial nation, with almost complete control of the American markets, from Cape Horn to Alaska. American companies in 1910 had little need to export to overseas markets. Furthermore, through the Civil War Americans had already experienced the unbearable human price of a modern war, fought with automatic weapons across trenches or by long lines of soldiers on foot. Clausewitz’s political motivation, namely that the decision to go to war is the result of a rational calculation of material national advantages, is already lost with the Napoleonic epics and the American Civil War. WWI concludes the Victorian globalization, by replacing the globalism of early textile entrepreneurs and the industry workers’ internationalism with protectionism, national monopolies, and aristocratic militarism. Globalism weakens national powers because it offers a broader identity of such scope as to make it almost uncontrollable. Nationalism, on the contrary, provides an identity which is controllable within the realm of organized government’s bureaucracies and institutions of state. A nationalist war becomes therefore a means to re-establish control over the crowd. It is the ultimate means for a modern industrial state to control its working classes. Ferrero makes that clear wit reference to both Napoleon and to the First World War. Ferrero closes his Atlantic November 1914 paper with a shivering premonition: If the prestige of the Hohenzollerns and of the German army should collapse because of the horror and destruction of this war which they have willed, Europe will finally find peace and concord in a reasonable equilibrium of forces and desires. […] The chief point that this war ought to decide is whether Germany also wishes to become democratic and peace-

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ful, or whether instead she wishes to isolate herself still in Europe, like a formidable camp, sustained by force and by an autocratic and hierarchical spirit. On this alternative depends the future of Europe and the destiny of our civilization.⁵²

Thirty years later, in the turmoil of a Second Global War, Ferrero updates his prophecy: The greater part of Europe found itself hanging in mid-air between monarchy, which was no longer possible, and democracy, which was not yet possible. And in desperation it turned toward revolutionary (namely fascist) governments.⁵³

The building of an industrial economy seems to require a transition to new forms of government legitimacy. The growth of a working class, amassed in swelling urban centers and large factories, calls for some form of mass representation as a way to ensure consensus. Ferrero keeps his faith in the pacifying effect of democracy. Where democratic representation has grown in sync with the industrialization process, a peaceful coexistence is ensured even as growth and income fluctuate. Despite an attempted populist coup in 2021, the United States provides repeated evidence to that claim: a democratic sentiment with deep roots might have good chances to survive the idiosyncrasies of de-globalization. On the contrary, where the political system has not adjusted to the need for popular representation, a slow-down has to be met by some other form of consensus. For a number of reasons, nationalism is often the preferred option: it has the advantage of providing a simple – because circular – explanation: if globalization was the cause of the slow-down, its opposite – nationalism – will provide the solution. The missing step in that axiom lies in that the slow-down is not caused by the advance of globalization, but by its decline. It is an ironic paradox that the young offspring of a German capitalist family traveled to Manchester to learn the secrets of Anglo-Saxon liberalism and returned home to Bremen carrying the seeds of scientific socialism. Young Engels was the living nemesis of Huebner’s painting on the cover of this book.⁵⁴ It should not come as a surprise that he liked it so much. But there is more to it. Technology migration is the ultimate unintended consequence of the relationship between governments and corporations in a liberal  Ferrero, The European Tragedy, 688.  Guglielmo Ferrero, The Principles of Power: The Great Political Crises of History (New York: G.P. Putnam’s Sons, 1942), 186.  The painting Die schlesischen Weber has been described – in Engels’s words – in the first section of this chapter.

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society. A liberal industrial state allows domestic companies to export innovative technology in the originating phase of expansion but may be unable to prevent its migration through the global supply chain in the subsequent phase of consolidation. Technology creation, retention, and transfer are not phenomena unique to liberal economies; however, more controlling governments have been, and would be, far more careful about the retention of strategic technology. The risk of losing control while transferring technology was well known in the Ancient Regime. In fact, governments of ancient towns would actively prevent its diffusion: the Venetian republic kept its glassblowers at close quarters in the island of Murano. After discovering the Chinese secret of porcelain, the alchemist Johann Friedrich Böttger lost his freedom; during most of his life he was locked-in by his boss Augustus the Strong, a compulsive porcelain collector. Literature on the relationships between government and technology is vast and diversified. A survey would be monumental, and well beyond the scope of this book. But the balance of power between global monopolies and domestic governments is a factor in explaining the migration of technology. It determines the extent to which governments can control the flow of technology.⁵⁵ A cognitive distortion is also at play: a government’s assessment of the risk generated by technology migration may be biased by the position of dominance of the country and its industries in the global landscape. Historic examples show that governments of global leaders initially underestimate that risk. Later, they lack the power to coerce their multinational corporations towards the defense of domestic interests. The opposite happens in a recipient country. The government supports the creation of domestic champions, who can replicate the foreign technology. Because of that protection, the government has the upper hand in the relationship, to the point where another paradox emerges: companies in receiving countries have a chance to become world leaders thanks to the protection granted by governments to those new industries. That difference between a liberal government promoting creativity, and a regime that plans and controls technology investments may be observed in both episodes of globalization. In the first one, recalled in Section 2 of this chapter, the United States and Germany enacted protectionist measures, while the United Kingdom maintained a more open, laissez-faire stance. In the second episode, described in Chapter Four, the United States lost its industrial supremacy to

 See for instance Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth. 100-Day Reviews under Executive Order 14017, June 2021, A Report by The White House.

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Asia through the global supply chain – a process of deliberate technology transfer. Meanwhile, the Chinese government carefully plans its technology advances and goals. The textile revolution took place in the most liberal state between the eighteenth and nineteenth centuries. It was giving birth to novel ways of organizing labor: the mechanized factory system. A flexible social structure was needed to operate the factories. Similarly, the Information Age began in California, the most open-minded state of the Union. Accepted wisdom claims that societies where innovative technologies could most easily spread are those where governments will not mitigate the inevitable process of social disruption. Invention could have happened in other social environments as well. But diffusion, to the point of generating a new organization of production activities, required a society with high degrees of flexibility and social mobility. Conversely, an autocratic government will enact measures to promote access to new technology and protect its own infant industries. That protective government will also prevent the radicalization of domestic social relations, favoring a controlled adoption of the socially disruptive technologies. In the end, the seeds of scientific socialism which Engels carried from Manchester to Bremen blossomed in Central Europe. More than a paradox, it was a metaphor of how different societies react to the disruptive power of new technology. But it took the collapse of the first globalization for the metaphor to demonstrate its consistency.

Chapter Two According to Ferrero, Polanyi, and Canetti the First Global War was the product of Central Europe’s political obsolescence. Or, more precisely, of the inability to govern a dynamic and globalized industrial society with the legitimating principles of the Ancient Regime. The war was successful in militarizing the national crowds, and in breaking the solidarity within the international workers’ movement. But the price of that ephemeral success was defeat and dissolution of the Central Empires, as the transition to democratic governments took a radical turn. A second consequence of the war was the collapse of economic globalization. The first section of this chapter describes how an alliance of winning liberal countries attempted to achieve two contrasting objectives through a single peace treaty. The first goal was to impose punitive damages that would cripple the economy of the former Central Empires. The second goal was to avoid the collapse of prewar globalization. However, the two goals proved incompatible. In the second section of the chapter, four cosmopolitan witnesses describe the social and economic consequences of the defeat. They analyze the struggle between market and society, and between crowds and power within those countries. The final section shows how liberal globalism attempted to rebuild the world order after the devastating collapse of the first globalization, with two independent initiatives: the creation of the League of Nations by American president Woodrow Wilson, and the design of a supranational authority of the global market by the Austrian Friedrich von Hayek. The First Global War did not kill globalization immediately. It was followed by the collapse of four empires, the explosion of four revolutions, a sequel of epidemics, famines, financial meltdowns, dictatorships, genocides, and finally a Second World War, more global and ruthless than the previous one. That war ended with two nuclear explosions. Wrapping one’s mind around such devastation still gives cold shivers, one century later: Few other ages of mankind were as apocalyptic as those three decades. The Austro-Hungarian, Ottoman, Russian, and German empires were not only defeated, but altogether erased from the map of Eurasia. Two hundred and fifty million Europeans moved, overnight, from an autocratic regime to a republic. Their governments were replaced by the USSR, the Hungarian republic of Councils, the Weimar Republic, the social-democratic government of Vienna, and half a dozen smaller states. War is a zero-sum game: for every winner there are one or many losers. WWI had caused 20 million casualties. Fifty million more died of the Spanish flu in https://doi.org/10.1515/9783110744477-004

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the two waves of 1918 and 1919. Half a million died by starvation from the postwar blockade of German ports. Five or six million peasants perished during a famine that hit the Volga region between 1919 and 1922. War is the opposite of globalization, where each additional participant to the network increases the benefit of all. The Central Empires persuaded their subjects to wage war. How could those subjects be convinced? Were the governments of the Central Empires genuinely confident that they would prevail? A minor episode may provide a measure of such confidence. In 1914 the German government arranged a shipment of weapons in support of the Mexican government. The ship Ypiranga sailed from Hamburg loaded with 15,770 crates containing 250,000 rifles, numerous machine guns and abundant ammunition. Its destination was Veracruz. The United States had declared an embargo of weapons to Mexico, in order not to feed the civil war waged by Emiliano Zapata and Pancho Villa. However, the Yipiranga bypassed the embargo and delivered its cargo. Three years later Arthur Zimmermann, the German foreign minister, sent an encrypted telegram to the Mexican government, offering financial and military aid, should Mexico declare war on the United States. In return, after the victory, Germany would grant to Mexico the annexation of Texas, New Mexico, and Arizona. The telegram was seized by British services, decoded, and published. The British were monitoring all transatlantic communication, and it is quite bizarre that the German government would convey such a proposal to Mexico, albeit coded, through the submarine cables of Western Union. It was even less plausible that they would ask Mexico to wage war against their most powerful neighbor, offering future territorial gains in exchange. German behavior might be explained either with a most delusory vision of the world, or with a most desperate bluff, revealing profound lack of confidence in a future victory. At any rate the plan failed, Mexico remained neutral, and two months later, in April 2017, the United States declared war on Germany. In November 1918 Kaiser Wilhelm abdicated and exiled himself in a Dutch village, where he spent the rest of his life. The aftermath of the war was dense with political decisions, such as the Versailles conference and peace treaty, and the establishment of the League of Nations. Those events affected globalization sometimes in opposite directions. Recalling those facts from the slippery decline of a second globalization, it is tempting to question if a different handling of events might have avoided some of the drama of the ensuing 30 years.

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Section 1: The Treaty of Versailles A peace treaty to end the war was crafted in the first six months of 1919 by four winners that could not communicate among themselves. US president Woodrow Wilson and British prime minister Lloyd George spoke only English; Italian prime minister Vittorio Emanuele Orlando, who once described himself “proud to be a mafioso,” spoke only Italian and French. France was the only country sharing a long border with Germany, and Clemenceau, the French prime minister, the only member of the quartet speaking both English and French. It was easy for him to impose punitive terms upon Germany, under the assumption that France’s national interest was to weaken as much as possible its pugnacious neighbor. Furthermore, the armistice had been negotiated between Germany and President Wilson. It consisted of 14 points, none of which the other three gentlemen felt any commitment to abide by.⁵⁶ The Treaty of Versailles was deemed too soft by Foch, commander of the French Army. With remarkable foresight he described it “not a peace, but a twenty years’ truce.” At the opposite end, John Maynard Keynes called the treaty a “Carthaginian peace,” with reference to the destruction of that city by the Romans during the Punic wars. Keynes objected to the Treaty of Versailles on three grounds: it was impossible for Germany to satisfy the economic conditions imposed upon it; the Treaty was incompatible with international jurisprudence and in violation of Wilson’s Fourteen Points; and, finally, economic sanctions carried recessionary consequences on the world economy, and raised additional barriers to international commerce. The observations contained in Economic Consequences of the Peace may seem prophetic for a book written in 1919. They are not, if compared with other mature expressions of the European intellectual milieu of those years. The inevitable decline of an epoch was recorded with the feeling of impotence of a tragedy unfolding in slow motion. The trajectories of peoples and nations were in full sight, and yet seemed preordained, as if no one had the power to shift their course. Here is how Keynes described the atmosphere at Versailles: Paris was a nightmare, and every one there was morbid. A sense of impending catastrophe overhung the frivolous scene; the futility and smallness of man before the great events con-

 “For Clemenceau made no pretence of considering himself bound by the Fourteen Points and left chiefly to others such concoctions as were necessary from time to time to save the scruples or the face of the President”; John Maynard Keynes, The Economic Consequences of the Peace, The Collected Writing of John Maynard Keynes 2 (London: Macmillan, 1971), 22.

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fronting him; the mingled significance and unreality of the decisions; levity, blindness, insolence, confused cries from without – all the elements of ancient tragedy were there.⁵⁷

Keynes thought that good faith was a necessary condition towards negotiating a lasting peace: It was the task of the peace conference to honour engagements and to satisfy Justice; but not less to re-establish life and to heal wounds. These tasks were dictated as much by prudence as by magnanimity which the wisdom of antiquity approved in victors.⁵⁸

Clemenceau, on the contrary, had the sole objective of inflicting the worst possible damage on the German economy and industries. His attitude was doubly vengeful. After the 1870 debacle, the French deemed it indispensable to hold their neighbor in the weakest possible standing. In addition, the border regions of Alsace and Loraine or Elsass-Lothringen had been a bone of contention between the Habsburg and the Carolingian dynasties over the ages. The region acquired further strategic value in the nineteenth century because of the vast deposits of coal and iron, conveniently close to one another. That proximity provided a strategic advantage highly desirable by any industrial economy of that age. Finally, Clemenceau, “père de la victoire,” was “by far the most eminent member of the Council of Four,” according to Keynes. He was determined not relinquish the good moral reasons of France, who did not choose to go to war, but had been unexpectedly attacked; on whose territory war had been waged, with immense destruction of cities and industrial plants, and with the total sacrifice of an entire generation of men. To those moral reasons Keynes would add a more mundane and urgent motive. While the British government was not relying upon German reparations to balance its budget, France and Italy were counting on war indemnities to avoid bankruptcy: We in Great Britain had not based our financial arrangements on the expectations of an indemnity […] there was an expectation of balancing the budget by normal methods. But this was not the case with France or Italy […] these countries were heading for national bankruptcy. This fact could only be concealed by holding out the expectation of vast receipt from the enemy.⁵⁹

 Keynes, Economic Consequences of the Peace, 2– 3.  Keynes, Economic Consequences of the Peace, 16.  Keynes, Economic Consequences of the Peace, 93.

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In an auction-like style, every participant of the Conference was holding on to his request to obtain more, and no one desired to be the first to admit that Germany might not have the means to reimburse everyone’s war costs: As soon as it was admitted that it was in fact impossible to make Germany pay the expenses of both sides, and that the unloading of their liabilities upon the enemy was not practicable, the positions of the Ministers of Finance of France and Italy became untenable. Thus, a scientific consideration of Germany’s capacity to pay was from the outset out of court. […] The financial position of France and Italy was so bad that it was impossible to make them listen to reason on the subject of the German indemnity, unless one could at the same time point out to them some alternative mode to escape from their troubles.⁶⁰

The result was an endless list of vexing conditions, which burden nobody cared to compound. In fact, none of the participants wanted to abandon the friendly contest over who would get the best jewel of the German economy, triggering a zero-sum fairground shooting game. Keynes describes the imposition of some unilateral custom duties as “senseless greed over-reaching itself.” For instance, France, Belgium, and Luxembourg obtained the right to impose import duties on goods produced by Germany, while ensuring the non-reciprocity of their measure: Germany was prevented from applying similar measures to them. While the positions of Orlando and Clemenceau can be explained by their desire to cure their countries’ bankruptcy, the uncompromising attitude of Lloyd George had its roots in domestic politics. Having become prime minister in 1916, he called for early elections at the end of the war in order to obtain a new mandate by waving the flag of victory. He won the elections a few days before leaving for Versailles, carrying the electoral commitment to have Germany pay the full cost of the war, and the Kaiser hanged. Considering that both men were members of the same Liberal Party, the opinion Keynes carried of Lloyd George is rather harsh: This was the atmosphere in which the Prime Minister left for Paris […] He had pledged himself and his government to make demands of a helpless enemy inconsistent with solemn engagements on our part, on the faith of which this enemy had laid down its arms. There are few episodes in history which posterity will have less reason to condone – a war ostensibly waged in defense of the sanctity of international engagements, ending in a definite breach of one of the most sacred possible of such engagements on the part of the victorious champions of these ideals.⁶¹

 Keynes, Economic Consequences of the Peace, 94.  Keynes, Economic Consequences of the Peace, 91.

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On the other hand, Keynes realized that President Wilson was in a delicate predicament, trying to impose the Allies’ commitment to the Fourteen Points of the truce he himself had negotiated with the Germans: The blind passions of anti-German resentment with which the public of all Allied countries were still inspired […] The cry would simply be that for various sinister and selfish reasons the President wished “to let the Hun off.”⁶²

The Fourteen Points of the truce were largely ignored in the treaty. Keynes was seldom generous with the president. However, he did not call him a hypocrite: It was only at a later stage that general popular demand for an indemnity covering the full cost of the war, made it politically desirable to practice dishonesty and to try to discover in the written word what was not there.⁶³

Besides ignoring Wilson’s Fourteen Points, the treaty also contained clauses in open violation of international norms: The cumulative effect […] is to deprive Germany […] of everything she possesses outside her own frontiers […]. Not only are her overseas investments taken and her connections destroyed, but the same process of extirpation is applied in the territories of her former allies and of her immediate neighbors by land.⁶⁴

Finally, Keynes predicted that the conditions imposed upon Germany would have a recessionary impact on the world economy: The treaty strikes at organization, and by the destruction of organization impairs yet further the reduced resources of the whole community. The economic frontiers which are to be established between the coal and the iron upon which modern industrialism is founded will not only diminish the production of useful commodities but may possibly occupy an immense quantity of human labor in dragging iron or coal, as the case may be, over many useless miles to satisfy the dictates of a political treaty.⁶⁵

Keynes was fully aware that Europe was placing Germany in a corner; but he did not imagine that a political time-bomb was being assembled. On the contrary, he thought that “it is only the extreme immoderation and indeed technical impos-

   

Keynes, Keynes, Keynes, Keynes,

Economic Economic Economic Economic

Consequences Consequences Consequences Consequences

of of of of

the the the the

Peace, 30. Peace, 73. Peace, 49. Peace, 63.

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sibility of the treaty’s demand which may save the situation in the long run.”⁶⁶ But towards the end of the book, Keynes admitted that he commanded neither the analytical tools nor the historic precedents to accurately predict the consequences of Versailles: [W]e are without experience of the psychology of a white race under conditions little short of servitude. It is however generally supposed that if the whole of a man’s surplus production is taken from him, his efficiency and his industry are diminished.⁶⁷

Economic serfdom was not the only issue. Among the conditions imposed upon Germany by the treaty, the prohibition to organize a military service was particularly humiliating for a people that, according to Canetti, identified itself with the army: “Hitler would never have achieved his purpose had not the Treaty of Versailles disbanded the German Army.” In fact, after 1923, the prohibition on universal military service robbed the Germans of their most essential closed crowd. […] The prohibition of universal military service was the birth of National Socialism […] The party came to the rescue of the army, and the party had no limit set to its recruitment from within the nation. Every single German – man, woman or child, soldier or civilian – could become a National Socialist. […] Hitler used the slogan The Diktat of Versailles with unparalleled and un-wearing monotony.⁶⁸

In 1935, in open violation of the treaty, Hitler reinstated the mandatory conscription of young Germans. Keynes reflects on the distance between governments and people, and its impact over the future of Europe: To what a different future Europe might have looked forward if either Mr. Lloyd George or Mr. Wilson had apprehended that the most serious of the problems which claimed their attention were not political or territorial but financial and economic, and that the perils of the future lay not in frontiers of sovereignties but in food, coal and transport.⁶⁹

But the detachment of winners from reality was even deeper: “The fundamental economic problems of a Europe starving and disintegrating before their eyes, was the one question in which it was impossible to arouse the interest of the four.”⁷⁰ Finally, Keynes reflects that,

    

Keynes, Economic Consequences of the Peace, 51. Keynes, Economic Consequences of the Peace, 131. Elias Canetti, Crowds and Power (New York: Farrar, Straus and Giroux, 1984), 181. Keynes, Economic Consequences of the Peace, 92. Keynes, Economic Consequences of the Peace, 143.

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some of the catastrophes of the past history, which have thrown back human progress for centuries, have been due to the reactions following on the sudden termination […] of temporarily favourable conditions which have permitted the growth of population beyond what could be provided for when the favourable conditions were at an end.⁷¹

He then proceeds to describe the end of a global economy, and lists the three factors characterizing the phase of de-globalization: first, the absolute reduction in Europe’s internal productivity; second, the breakdown of transport and exchange by means of which its products may be convened where they are most wanted; and third the inability of Europe to purchase its usual supplies from overseas. His description seems to be written for the benefit of British and American subjects, who were largely unaware of the desperate conditions on the Old Continent. In the introduction to The Economic Consequences Keynes wrote: In England the outward aspect of life does not yet teach us to feel or realize in the least that an age is over […] but perhaps it is only in England – and America – that it is possible to be so unconscious. In continental Europe the earth heaves and no one is aware of the rumblings. There it is not just a matter of extravagance or “labor troubles,” but of life and death, of starvation and existence, and of the fearful convulsions of a dying civilization.⁷²

It is customary among economists who cannot find a balance to the increasing disequilibria within the time window of their own generation to throw the burden of the solution onto the next one. Keynes was no exception, although he characteristically closed his book looking for a solution resting on consensus: “The true voice of the new generation has not yet spoken, and silent opinion is not yet formed. To the formation of the general opinion of the future I dedicate this book.”⁷³

Section 2: Ferrero, Canetti, and Polanyi The last phase of globalization was characterized by the growth of industrial monopolies, the concentration of financial power, and the increasing protection of domestic industries. In the United States, the first law that began to clip the power of financial trusts since the Civil War was signed by Woodrow Wilson in 1912. During the 1880s negotiations with Austria-Hungary for a customs union, Bismarck would not even consider discussing the reduction of German

 Keynes, Economic Consequences of the Peace, 146 – 148.  Keynes, Economic Consequences of the Peace, 2.  Keynes, Economic Consequences of the Peace, 189; emphasis added.

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customs duties. Protectionism was promoted by corporations’ overwhelming influence over government institutions, political parties, and public opinion. On the other side, expanding voting rights (albeit limited to the male population) and the growth of workers’ representative organizations raised the political awareness, or class consciousness, of industrial and agricultural workers. Economies were becoming introverted, and societies polarized. The sclerosis of globalization advanced during a span of 30 years but hardened towards the beginning of the new century. Historians and eyewitnesses mention three years: 1870, 1900, 1914. Up to and including the American Civil War transport prices kept falling and European countries maintained low-impact customs policies. After 1870 infrastructure investments grew rapidly. Employment and productivity increased faster than the price of foodstuffs. In order to protect their agricultural sector against cheap overseas imports, some European countries began to increase import duties. That did not stop globalization: prices of raw materials and foodstuffs continued to converge internationally. Until about 1900 efficiency and rationalization of the global logistic network and exchange rate stability offset the increasing protectionist barriers raised by European countries to shelter their domestic agriculture. But population movements clearly indicated an imbalance, like a canary in the coalmine. In the 50 years between 1820 and the Civil War, about 5 million Europeans moved to the United States. Between 1870 and 1920 the number of new immigrants was 20 million: “In the third quarter of the nineteenth century, European intercontinental emigration averaged around 300,000 per year. The numbers more than doubled in the next two decades and rose to more than one million per annum after 1900.”⁷⁴ The World War put an end to the globalization age. Keynes wrote: What an extraordinary episode in the economic progress of man that age was, which came to an end in August 1914.⁷⁵

As Germany exhausted the hope for a blitzkrieg, and the Allies failed to win the counteroffensive, the front froze along interminable kilometers of trenches. In a long war of attrition, it soon became clear that victory would come to those who could carry to the front more food, materials, and ordnance. Exports decreased from all belligerent countries, while imports increased for all except Germany, which was blocked among her enemies. The end of the war made a devastating impact on international trade. Under a war economy, non-European countries had multiplied their production of food Findlay and O’Rourke, Power and Plenty, 407.  Keynes, Economic Consequences of the Peace, 6.

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stuffs, whose prices collapsed worldwide in 1919. Heavy industry in the belligerent countries had to convert back to peacetime products, by shutting down excess capacity. The belligerent nations involved in the war attempted to recover their previous positions in export markets. They were met by competing new industries which had meanwhile grown in developing economies. In order to defend their domestic markets both new and old economies resorted to protective tariffs and other defensive measures. Defeat caused the dismemberment of the Central Empires’ administrative structures and the establishment of new national governments. Those new nations were shaken by revolutions, economic crises, financial instability, the collapse of consensus, the sprouting of dictatorial regimes, and finally the militarization of crowds into a new global war. As Keynes had foreseen, the fragmentation of production across the former Central Empires generated duplication, intermediation, and bureaucratic obstacles previously nonexistent. The scale of productive plants shrank, the integration of supply chains was disrupted, and productivity decreased. The League of Nations called for a series of international conferences, with the aim of removing barriers, but with negligible effect: most governments proclaimed the intention of lowering customs duties and pursuing equitable trade policies. However, “never before in history, trade barriers went up so fast, and discrimination in purchases was so rampant.”⁷⁶ According to a British diplomat “European countries were slowly committing suicide.”⁷⁷ Adjustment to the peacetime economy was particularly painful for workers in the former Central Empires, where further reduction of supplies and income resulted in famine, epidemics, and uprisings. Revolutions in Russia, Germany, Hungary, and Vienna brought to power socialist governments isolated from the international world of finance, and with no experience managing bankrupted states. In Latin America the collapse of foodstuff prices brought populist governments to power, while multiple peasant uprisings erupted in Burma, China, Congo, India, Java, Nigeria, Romania, Russia, Togo, Ukraine, and Vietnam, to name a few. The most common means of extracting surplus from peasant economies was the imposition by colonial powers of a money levy. Following the collapse of foodstuff prices, peasants could no longer pay the levy. The inevitable

 League of Nations, Commercial Policy in the Interwar Period: International Proposals and National Policies (Geneva, 1941).  Clive Morrison-Bell, quoted in: Quinn Slobodian, Globalists: The End of Empires and the Birth of Neoliberalism (Cambridge, MA: Harvard University Press, 2018), 38.

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uprisings were put down with brutal repression on the part of colonial governments. Events in some countries unfolded quickly: at the end of 1920 armed workers occupied for a few weeks the factories of Northern Italy. One year later the fascists “marched on Rome” and King Vittorio Emanuele appointed Mussolini to be the new prime minister. Other countries took until the depression in 1929 to react. Extended voting rights, the renewed activity of workers’ organizations, and the war trauma radicalized the labor confrontation and contributed to increasing its cost. The sudden increase in consumption at the end of the war deepened the distance between winners and losers. When the crisis finally burst in 1929 prices collapsed and unemployment soared. Response to the crisis was weak or nonexistent: governments of the new nation-states were unprepared; international organizations were weak and focused on obsolete targets. The foreign policies of Britain and the United States were isolationist. On the surface, the First World War was the consequence of a short-circuit: in countries where governments’ protection of infant industries had turned them into impregnable monopolies, a failure in the separation of powers made possible dangerous liaisons, such as that between heavy industry and the military. However, Keynes underlines a second motive, the growing assertiveness of workers’ organized representation. By militarizing the crowds, the people’s war had provided a temporary respite from social unrest. By the end of the war, however, the militarized crowds returned to the factory, and the matter grew worse. The root cause of collapse was not the lack of checks and balances but, in Keynes’s own words, the obsolescence of a civilization. Canetti, Polanyi, and Ferrero explored that collapse through global lenses. They were multicultural by training and multinational by survival instinct. Guglielmo Ferrero was born in Naples in 1871 and was educated in Turin, where he married the daughter of anthropologist Cesare Lombroso. After extensive contributions to the French and American press, in 1930 Ferrero flew from Italy and accepted the chair of contemporary history at the University of Geneva, where he taught until his death in 1942. Karl Polanyi was born in 1886 in Vienna from a Hungarian family, was educated in Austria, escaped Nazism in London, worked in New York and died in Canada in 1964. Elias Canetti was born in Bulgaria in 1905 from a Jewish family of Spanish origin. He grew up in Austria and Switzerland and settled in London. He died in Zurich in 1994. Canetti, Polanyi, and Ferrero observed with personal passion as well as professional interest the unfolding of globalization, the collapse of the Central Empires in 1918, and the overtaking of Britannia by America as “ruler of the waves.”

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Their personal lives moved from affluent and highly educated families to the disruptive violence of war, fascism, and a status of permanent refugees. They experienced the fracture of the globalized nineteenth century in their daily lives, and reflected on it, outgrowing their respective disciplines, and the political views of their days. They were passionate yet objective eyewitnesses. For instance, Ferrero explained: Reading books and visiting libraries are not the only sources of my work. I have lived in a most extraordinary historic time, and witnessed the collapse of a civilization which, within 20 years, fell from perfect order to the most frightening chaos.⁷⁸

On July 15, 1927 the people of Vienna torched the courthouse. In an attempt to contain the revolt, police killed 90 people. Canetti wrote in his memoirs: Fifty-three years have passed, yet I still feel in my bones the fever of that day […] Aside from my father’s death, that was the day that had the strongest influence on my life.⁷⁹

Elsewhere he wrote: “Crowds are an enigma that hounded me throughout the best part of my life.” Those authors wrote to explain the collapse of Western civilization into the First World War. However, none of their books falls within the discipline they practiced. Ferrero, a historian, wrote about legitimation theory. Polanyi, a trained lawyer, wrote at the intersection of sociology and economics. The Nobel laureate in literature Elias Canetti wrote a treaty of cultural anthropology. Those books share a definition of the problem and mark out a realm where the answer might be sought. The answer will not be found in the fields of economics, sociology, anthropology, or other academic disciplines, but in a treatise on human nature. In that, they embrace the so-called crisis literature that marked the switch from idealism to cynicism among many European and American writers between the two world wars. But they also complement a tradition of critical observers of human motives in times of transition. All three look for answers within their own idea of human being. Their common concern, put in its simplest terms, is power. Ferrero writes about the legitimacy of power. Canetti writes about the relationship between power and the crowd. And Polanyi investigates, with the broadest mindset, the relationship between power and markets: The function of power is to insure that measure of conformity which is needed for the survival of the group: as David Hume showed, its ultimate source is opinion. And who could

 Raditza, Colloqui con Guglielmo Ferrero, 81 (all translations of Raditza are my own).  Elias Canetti, The Torch in My Ear, in The Memoirs of Elias Canetti (New York: Farrar, Straus and Giroux, 1999), 249.

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help holding opinions of some sort or another? Economic value ensures the usefulness of the goods produced. […] Its source is human want. And how could we be expected not to prefer one thing to another? Any opinion or desire, no matter what society we live in, will make us participants in the creation of power and the constituting of value. No freedom to do otherwise is conceivable.⁸⁰

Ferrero describes an age when the function of power consisted of striking a balance between minimum necessary order and maximum available freedom: I was born in 1871 and until I was 43, I lived through the happiest time of human history, when a constructive mindset, awoken in 1814 and 1815, managed to channel and corral the human folly, without limiting man within narrow and rigid channels […] but leaving enough freedom and plasticity to allow freedom of action for his creative energy […] When the 1914 explosion occurred, I felt more sadness than surprise.⁸¹

The originality of those writers was the result of a quest for general principles, which would trespass the scope of individual disciplines, and the border between individual experiences and abstract reasoning. They were both witnesses reporting facts and emotions, and enquirers of those facts, carrying orderly logical reasoning to the extreme and most abstract conclusions. Their stupor was caused by the inability to reconcile the folly of the world with their assumption about the intrinsic goodness of human nature. The drama unfolding in front of their eyes was irreconcilable with a positive understanding of humans as naturally inclined towards their own betterment. Thus, Polanyi would generalize on the inconsistency: While the various shades of anti-democrats each have their own story of the world catastrophe, the democrats have yet to produce their own.⁸²

Canetti and Polanyi meditate at length before providing their explanation of how Western civilization moved from the golden age to collapse. Their fundamental essays appear after the facts. Ferrero instead offers a live commentary through his collaboration with American journals. For instance, one year before the war Ferrero wrote in The Atlantic: The international balance of power, which it must ever be remembered, is in Europe the result of weary centuries of effort and struggle, may at any moment be threatened by

 Karl Polanyi, Economy and Society, Selected Writings (Cambridge: Polity Press, 2018), 209 and 197– 198.  Raditza, Colloqui con Guglielmo Ferrero, 80.  Polanyi, Economy and Society, 177.

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one of those “heat waves” which pass over nations and which, even if they do not bring about a general war, oblige governments to increase military expenditure to a ruinous extent.⁸³

In the November 1914 issue, describing the opening salvos of WWI to his American readers, Ferrero wrote: The European War – that earthquake which perhaps will overturn from its foundations the civilization of the old world [And a few pages later he adds] The philosophy of the Eighteenth Century, which was directly responsible for the (French) Revolution, is optimistic. It is the first philosophy which has dared affirm that human nature is not perverse but good […] Hence the love of peace, the dreams of universal brotherhood, the proposals for concord, the spirit of cosmopolitanism, the attempts at international arbitration; hence the vast humanitarian propaganda of the socialist groups and all the democratic parties.⁸⁴

Thirty years later, Karl Polanyi endorsed Ferrero’s verdict: The very first line of The Great Transformation, his most influential book, reads: “Nineteenth-century civilization has collapsed.” A few pages later he adds: “What satanic mill ground men into masses?”⁸⁵ Those are the same masses of Crowds and Power, published by Nobel laureate Elias Canetti in 1962, but written over a 30-year period. After the Second Global War, during the Marshall Plan reconstruction, Canetti could revert to a more hopeful tone: Every member of a nation always sees himself, or his picture of himself, in a fixed relationship to the particular symbol which has become the most important for his nation. In its periodic reappearance, when the moment demands it, lies the continuity of national feeling. A nation’s consciousness of itself changes when, and only when, its symbol changes. It is less immutable than one supposes, a fact which offers some hope for the continued existence of mankind.⁸⁶

The collapse of globalization following WWI reverberated on the self-awareness of Asia, where the declining influence of the West was filled by attempts to affirm national identities. Writing in the 1950s, the Indian diplomat Kavalam Madhava Panikkar noted that, by disrupting the image of Europe, the First World War accelerated the quest for independence in Asia:

   

Ferrero, Dangers of War in Europe, 3. Ferrero, European Tragedy, 681 and 683. Polanyi, The Great Transformation, 35. Canetti, Crowds and Power, 170 – 171.

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In India before 1914 the movement had been confined to the intellectuals. In 1919 it became a mass movement of immense proportions. The situation was similar in every nation of Asia. Events unfolded with a fury that few had predicted, and nobody would have thought so imminent. The War, given its global dimension, was itself a worldwide revolution; an unbridgeable gulf had appeared between the days preceding August 1914 and those after November 11th 1918. Nobody anymore thought that the Europeans were superior or infallible.⁸⁷

Nationalistic leaders began to emerge. In 1927 Mao Zedong instituted the soviet of Hunan, which had a short life. In 1937 the party of Mahatma Gandhi won India’s national elections. Gandhi began the non-cooperation mass movement by appealing to the Muslims of India, enraged by the Western partition of the former Ottoman Empire at Versailles. The crowd provides a shelter from defeat and uncertainty to the most fragile and vulnerable individuals. Hence, defeated nationalities needed crowds more than winners, and colonies more than the metropolitan territories. Canetti explains that behavior in the first few lines of Crowds and Power: There is nothing that man fears more than the touch of the unknown […] The promptness with which apology is offered for an unintentional contact, the tension with which it is awaited, our violent and sometimes even physical reaction when it is not forthcoming, the antipathy and hatred we feel for the offender, even when we cannot be certain who it is – the whole knot of shifting and intensely sensitive reactions to an alien touch – proves that we are dealing here with a human propensity as deep-seated as it is alert and insidious […] It is only in a crowd that man can become free of this fear of being touched. That is the only situation in which the fear changes into its opposite.⁸⁸

Globalization offers a sense of belonging; it dispels the fear of being touched, while at the same time providing the individual with a comforting feeling of not being alone, the assurance of being part of an infinite crowd: a large empire, or the entirety of mankind. Perhaps during the first globalization few individuals consciously experienced that conceptual identity.⁸⁹ But with the breakdown of the Central Empires those collective identities were suddenly rejected or canceled. That grew the need for new identities, which in the absence of more fulfilling and meaningful solutions, found immediate expression in the crowd.

 Kavalam Madhava Panikkar, Asia and Western Dominance (London, George Allen & Unwin, 1953), 275.  Canetti, Crowds and Power, 15.  During the second globalization, which will be described later, social networks expand the number of individuals who count themselves as members of the global crowd: still intangible, yet perceptible with senses, at least through the media.

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Which crowd? The one close at hand was often a national crowd. Canetti explains how crowds may cluster around different national symbols, and how that generates antagonism: Most attempts to find out what nations really are, have suffered from an intrinsic defect: they have been attempts to define the general concept of nationality. People have said that a nation is this or that, apparently believing that all that mattered was to find the right definition; once found, this would be applicable to all nations equally. […] Apart from this seemingly objective approach, there is another which consists of being interested in one nation only – one’s own – and indifferent to all the rest. Its components are an unshakeable belief in the superiority of this one nation: prophetic visions of unique greatness, and a peculiar mixture of moral and feral pretensions. […] They want the same thing, but in themselves they are different. They want aggrandizement and substantiate their claim with the fact of their increase. There is no nation, it seems, which has not been promised the whole earth, and none which is not bound to inherit it in the course of nature. All the other nations who hear of this, feel threatened. And this fear blinds them to everything, except the threat […] They wage long wars against one another, and a considerable proportion of each nation takes an active part in these wars. What they are fighting for is proclaimed often enough, but what they are fighting as is unknown.⁹⁰

Those “heat waves which pass over nations” mentioned by Ferrero may replace with a strong feeling of nationality the identity vacuum left by the collapse of globalization and the Central Empires.⁹¹ The crowd might be an army, a party rally, or workers on strike. Participation in these crowds is direct as opposed to the remote gatherings of delegates at the Socialist International or the League of Nations. Tangible crowds are simple to explain and understand. Being part of one dispels the fear of being touched by the unknown. Nationalisms and revolutions provide finite containers where smaller masses may converge, abandoning the fear of one another. In Canetti’s taxonomy “the natural crowd is the open crowd”:⁹² Open is to be understood here in the fullest sense of the word; it means open everywhere and in any direction. “The open crowd exists as long as it grows. It disintegrates as soon as it stops growing.” National crowds are, however, closed crowds: In contrast to the open crowd which can grow indefinitely, and which is of universal interest because it may spring up everywhere, there is the closed crowd. The closed crowd renounces growth and puts the stress on permanence. The first thing to be noticed here is that it has a boundary. It establishes itself by accepting its limitations. It creates a space for itself which it will fill. […] Once the space is completely filled, no one else is allowed

 Canetti, Crowds and Power, 169.  Ferrero, Dangers of War in Europe, 3.  Canetti, Crowds and Power, 16.

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in. The boundary prevents disorderly increase, but it also makes it more difficult for the crowd to disperse, and so postpones its dissolution. […] It is protected from outside influences which could become hostile and dangerous and sets its hope on repetition. It is the expectation of reassembly which enables its members to accept each dispersal.⁹³

Clearly, it is tempting to describe the globalized crowd as open, and national crowds as closed. Globalization weakens national sentiment because it offers an identity that trespasses national boundaries. Nationalism, on the other hand, offers to the hierarchical organization of the nation-state a crowd whose identity it can control. Globalization accepts diversity of opinions, and practices inclusion and peer-to-peer relationships. Nationalism aims at the hierarchical control of opinions and practices exclusion, by definition. When embraced by authoritarian governments, as is often the case, nationalism imposes homogeneous views and limits access to pluralistic information. To form a homogeneous public opinion, sources have to be controlled. The highest homogeneity is provided by absolute control of the known universe. For that reason “there is no nation, which has not been promised the whole earth, and none which is not bound to inherit it in the course of nature.”⁹⁴ A national war aiming at conquering the world is the most radical expedient to gain control of the crowd. Ferrero explains it quite clearly with reference to the Napoleonic Wars as well as to the First Word War: The chief point that this war ought to decide is whether Germany also wishes to become democratic and peaceful, or whether instead she wishes to isolate herself still in Europe, like a formidable camp, sustained by force and by an autocratic and hierarchical spirit.⁹⁵

The “fearful convulsion of a dying civilization” (Keynes) that shakes Europe at the end of the war represents “a worldwide revolution” (Panikkar) which is going to “overturn from its foundations the civilization of the old world” (Ferrero). “Nineteenth-century civilization has collapsed” (Polanyi) leaving, however, “some hope for the continued existence of mankind” (Canetti).⁹⁶ Those hyperbolic declarations by otherwise restrained writers convey a fear of irrecoverable loss. There seems to be no need to define exactly what might be lost, because everyone knows it; there is a sense of cozy, unspoken complicity

 Canetti, Crowds and Power, 17.  Canetti, Crowds and Power, 169.  Ferrero, European Tragedy, 688.  Keynes, Economic Consequences of the Peace, 189; Panikkar, Asia and Western Dominance, 275; Ferrero, European Tragedy, 681; Polanyi, The Great Transformation, 35; Canetti, Crowds and Power, 171.

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about the meaning of “nineteenth-century civilization.” Every well-traveled individual in Europe and overseas is expected to recognize that expression. That very complicity is part of “it”: it seems so widely and comfortably shared, because its meaning is universally acknowledged. And the fear of losing that common value is strong, as no one in Europe considers the possibility that a similar episode of globalization might be followed by another one. In Europe, the sentiment of permanent loss prevails even among the war winners. In America, there is a deliberate attempt to keep globalization alive. That globalization might be, or actually should be revived, will be argued by the American president, Woodrow Wilson, and by Friedrich von Hayek, whose activities were sponsored by the Rockefeller Foundation. The attempt will be turned down by the American Senate out of isolationism, a sense of superiority, and the fear of immigrants. Nineteenth-century Europeans were confident that mankind would benefit from the peaceful coexistence of progress and power. Confidence in the general diffusion of progress should have been sufficient to garner popular consensus. War, however, embrittled that consensus. Governments in industrial countries had to provide some explanation, a cover-up, or a way out. Politicians made excuses, created scapegoats, invented enemies, fed nationalism and fake news. It was a difficult exercise, as the confidence in progress was no longer plausible. Britain was no exception: The Victorian Economy in Britain crashed in ruins between the two world wars […] The collapse of all that Britons had taken for granted since the days of Robert Peel was so sudden, catastrophic, and irreversible that it stunned the incredulous contemporaries. […] Economic decline, something that economists argued about before 1914, now became a palpable fact.⁹⁷

Reactions to the postwar collapse are visible across the spectrum of European arts; from the music of Shostakovich and Prokofiev to the paintings of Boccioni and Balla. The transition from Art Nouveau to Art Deco coincides with the discovery of design, the confluence of rationality and aesthetics in industrial production. The rationalist style became a new global standard in architecture, from Shanghai to New York and from Berlin to Mumbai. Performing and visual arts reacted faster than liberal arts, where emotions have to be filtered, understood, and rationalized. Der Process by Franz Kafka was written in 1915, before the war; but it was published only posthumously in 1925.

 Hobsbawm, Industry and Empire, 207.

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The reaction of European intelligentsia to the war consisted of a fast move forward: speed, movement, relativity. It may be pure coincidence that the first globalization ends with the merging of space and time into a theory of relativity. But it is a meaningful coincidence, as it concerns, at the same time, science and the arts. In the foreword to his book Space, Time and Architecture Sigfried Giedion wrote in 1941: I have attempted to establish, both by argument and by objective evidence, that in spite of the seeming confusion there is nevertheless a true, if hidden, unity, a secret synthesis, in our present civilization. To point out why this synthesis has not become a conscious and active reality has been one of my chief aims.⁹⁸

According to Giedion, the pivotal moment of the secret synthesis is the discovery of indissolubility of space and time. The theory of relativity requires two simultaneous adjustments: scale and the principle of causality. We can perceive relativity only at very large or very small (by human reference) scales of matter. Furthermore, at those scales we are uncertain about the direction of the flow between cause and effect. Physicists used to call it semicausality. Elsewhere in his book, Gieidon describes the impact of Eiffel’s tower on the prevailing Parisian aesthetics in the 1890s: “an optical revolution shattered the static viewpoint of the Renaissance, and suddenly the hidden emotional content of the tower was revealed.”⁹⁹ At a confused time, when forward looking was mixed with inner soul searching, few were attempting explanations of a general nature. European civilization had fallen into Plato’s cavern. Remaining outside required an ability to observe the world from a global perspective which did not exist anymore, except in a few emerging islands: Geneva, London, or New York. Those were the global viewpoints chosen by nomads and refugees looking for general explanations, like Polanyi, Canetti, or Ferrero. Ferrero traced the course of power legitimation from the Napoleonic Wars, pursued under the pretext of globalizing the Revolution’s principles. Talleyrand had been his muse. Looking beyond the capitalistic pretension of turning markets into the absolute rule of social relations, Polanyi investigated the relationship between industry and democracy. Canetti wrote a general treaty about crowds’ behavior and power dynamics in a mass society. The affectionate portrait sketched by neoGenevan Ferrero of his compatriot Jean Jacques Rousseau might describe their approach:  Giedion, Space, Time, and Architecture, vi.  Giedion, Space, Time, and Architecture, 219.

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The Contract Social is not an attack against the aristo-monarchic system that dominated Europe, but a pamphlet on Geneva politics. The genius of Rousseau was a strange mixture of contradictory virtues. Believer and skeptic, poet and jurist, dialectician with a periodic tendency toward lyricism, realist and dreamer, timid and rebellious, desirous of tranquility, of peace, of protection, yet always at war with society and its ideas, he could not resist the temptation to find a universal and eternal formula for legitimacy. To make for himself finally the greatest of all discoveries, one that would enable us to create the perfect government, and then retire from our duties as citizens to have a good time and enjoy the blessing of peace […] He glides from the local to the universal, from the particular to the general, from political pamphlet to philosophical treatise almost without noticing it. […] He resisted, at almost every step, the revolutionary spirit of his doctrine. He never made up his mind between the two interpretations of the social contract – the historical and the philosophical […] Sometimes it flashes out in a sentence, like the following from the eighteenth chapter: “When it happens that the people institute a hereditary government, whether monarchic in the form of a single family, or aristocratic in the form of a class of citizens, it is not an engagement into which it enters: it is a provisional form that it gives to the administration, until it decides to give it another.” It would be impossible to state more clearly that there is but one principle of legitimacy – the will of the people. […] But it is only a flash: the horizon is revealed for an instant, and then darkness blots it out. Rousseau does not insist.¹⁰⁰

Section 3: Keynes and von Hayek Polanyi, Canetti, and Ferrero thought that democracies’ engagement for the common good was needed to guard the future of democracy. In both WWI and WWII the Anglo-Saxon democracies, allied with the USSR, fulfilled that mission by rescuing the world and themselves from the threat of nationalistic regimes, whose armies “had been promised the whole Earth.” In 1941 Polanyi wrote: “The survival of democratic methods depends upon the measure of their success in tackling the global tasks of the time.”¹⁰¹ What he meant then was that democracies were fighting a defensive war for their own existence on a global scale. Eighty years later, that sentence carries a similar meaning. Since the Cold War, the self-proclaimed global task of democracies has expanded to spreading democratic methods to other countries and cultures. After the fall of the Berlin Wall, democracies have (at least in principle) further extended their mission to other issues, such as human rights, containment of epidemics, and climate change. It seems that, over the past century, Western democracies have consistently added to the list of global common goods they would like to regulate, pro-

 Ferrero, Principles of Power, 63.  Polanyi, Economy and Society, 180.

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mote, or protect. In the near future that list might be extended to include novel items such as the fair distribution of vaccines, climate change, interpretability of machine learning algorithms, or online privacy. We take for granted that democracies will come to the rescue whenever new global threats surface. We make that assumption based on the experience of two world wars. But will the assumption hold one more time? The question is legitimate because the involvement of democracies in global common goods has mixed reviews. Western nation-states have been the main colonizers and the main beneficiaries of globalization. At the same time, democracy is the most refined form of power legitimacy; it was established after millennia of brutality, human degradation, and violent social struggle. Democracy is a global common good, which deserves defending over and above national self-interests. But should the rest of the world trust Western civilization as the custodian of such good? Or are Western democracies simply protecting their own standards of living and their export markets, threatened by former colonies seeking to un-bundle and decouple after centuries of exploitation? The answer is: both. Until recently, democracy was used as a pretext to protect the postcolonial global order. But well-functioning democratic institutions offer the most fertile ground for social progress and the defense of common goods. In 1919 President Wilson proposed the establishment of a League of Nations, an institution which would regulate on a global scale the relationships among countries. Its specific functions were to lower barriers to international trade and verify compliance to the peace agreements. Although President Wilson was its main proponent, the United States never joined the League. A common mission connects the League of Nations to the World Trade Organization (WTO) declared “broken” in 2020 by President Trump. The century-long thread connects five NGOs (non-governmental organizations): the League of Nations, the International Chamber of Commerce (ICC), the United Nations (UN), the General Agreement on Tariffs and Trade (GATT), and the World Trade Organization (WTO). The cities where those organizations were based were London, Geneva, and New York, the same emerging islands of globalism where Polanyi, Canetti, and Ferrero took shelter. In the case of the five global institutions, two individuals maintained that thread: Friedrich von Hayek and his mentor Ludwig von Mises, together with a group of economists known as the Austrian Economists and, later, neoliberals. However, the globalism of Hayek and Mises is not the same as that of Polanyi, Canetti, and Ferrero. Mises and Hayek were raised in the Habsburg culture, as had been the case with the Hungarian Polanyi, and the Bulgarian Canetti. Polanyi and Canetti did not express nostalgia for the former Empire, as their birthplaces were peripheral,

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and their cultural identity influenced by their Jewish origin. Instead, Friedrich August von Hayek and Ludwig Heinrich von Mises came from families close to the administration of the kaiserliche und königliche Doppelmonarchie, or imperial and royal dual monarchy. Mises’s grandfather was ennobled by Emperor Franz Joseph I in 1881. Both of Hayek’s grandparents were scholars employed in the Austrian educational apparatus. Having pursued a degree in law Mises took employment at the Vienna Chamber of Commerce, which he left 25 years later as secretary-general. His seminars were attended by several economists of the forthcoming “Austrian School.” During the war Mises was an artillery officer, and a consultant to the ministry of war. Between 1932 and 1934 he advised Prime Minister Dolfuss on economic matters. Dolfuss was a fascist, albeit he disliked Hitler. After a short passage from Geneva in 1940, Mises became a visiting professor at the Graduate School of Business Administration of New York University, a position he kept until retirement. His stipend was paid by the Foundation for Economic Education, a libertarian think-tank. Hayek was a disciple of Mises, who helped him to set up the Austrian Institute for Business Cycle Research. The Institute was funded from 1931 on by the Rockefeller Foundation to study the economies of the dissolved Habsburg Empire. Hayek’s solution to the end of the empire was to bind the new states through international agreements and institutions: “In a metaphor to which Hayek frequently returned, the goal was to tie the Ulysses of the democratic postcolonial states to the mast of the world economy through frameworks of government and law.”¹⁰² In the same year, Hayek was invited to the London School of Economics. There he taught economics until 1950, when he moved to the United States. Hayek was a leading figure in neoliberal economics. He advised Ronald Reagan and Margaret Thatcher on privatization reforms. In 1974 he was awarded the Nobel Memorial Prize for Economic Sciences, and in 1991 the Medal of Freedom by G.W. Bush. Hayek’s best-selling book, The Road to Serfdom, is a defense of individualism and economic liberalism, and an attack on social democracy, a dangerous precursor to the absolutist state. The Road to Serfdom sold 2 million copies and was translated into 20 languages. An abridged version of the book was published in 1965 by the Reader’s Digest and distributed as a pamphlet by General Motors.

 Slobodian, Globalists, 273.

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The spirit of the time may be grasped through a description of a diatribe between Hayek and a group of Keynesian economists. The apparent cause of disagreement was the quantitative theory of money. In 1931 Hayek published in the journal Economica a negative review of Keynes’s Treatise on Money. At the bottom of his own copy of the review, Keynes wrote: Hayek has not read my book with the measure of “good will” which an author is entitled to expect of a reader. Until he can do so, he will not see what I mean or know whether I am right. He evidently has a passion that leads him to pick on me, but I am left wondering what this passion is.¹⁰³

Hayek’s role as anti-Keynes had been inspired by Lionel Robbins, his sponsor at the London School of Economics. On his inauguration, Hayek gave four lectures which he collected in a book titled Prices and Production. The book discusses the influence of monetary policy on relative prices. The effects of changes in the quantity of money on investments are central to the Hayek–Keynes quarrel. While in the Treatise on Money Keynes affirms that governments can influence the propensity to invest through fiscal and monetary policies, Hayek’s core concept is that increases in the quantity of money do not affect investments. Instead, they tend to create inflation. The two positions originate from opposite views on the impact of interest rate changes: while Hayek claimed that crises are caused by governments’ excessive reductions of the interest rate, Keynes contends that they are caused by the fact that governments cannot reduce them enough.¹⁰⁴ In 1932 Piero Sraffa, who had just fled Italy following Keynes’s invitation to Cambridge, published a merciless review of Prices and Production. Here are some passages from Sraffa’s review in the Economic Journal: For however peculiar, and probably unprecedented, their conclusions may be, there is one respect in which the lectures collected in this volume fully uphold the tradition which modern writers on money are rapidly establishing, that of unintelligibility. From the beginning it is clear that a methodical criticism could not leave a brick standing in the logical structure built up by Dr. Hayek […] Dr. Hayek builds up a terrific steam-hammer in order to crack a nut – and then he does not crack it […] A maze of contradictions makes the reader so com-

 Quoted in Gilberto Tadeu Lima, Capital Controversy in the Birth of Macro Theory: The Keynes-Hayek Exchange in Retrospect, Revista Brasileira de Economia, vol. 53, no. 3 (July/September 2000), 243.  Central banks’ handling of the financial crisis in 2008 and 2020 vindicate Keynes’s position.

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pletely dizzy, that when he reaches the discussion of money, he may out of despair be prepared to believe anything.¹⁰⁵

Robbins and Keynes were dueling by proxy, through an Italian refugee friend of Antonio Gramsci and an Austrian refugee nostalgic for the ancien regime. Besides personal rivalry, the monetary controversy was specious: the real target of Hayek’s criticism was not Keynes’s monetary theory, but his argument for an active role of governments. Thirty-five years later, another memorial Nobel laureate, John Hicks, wrote: When the definitive history of economic analysis during the 1930s comes to be written, a leading character in the drama (it was quite a drama) will be Professor Hayek. Hayek’s economic writings […] are almost unknown to the modern student; it is hardly remembered that there was a time when the new theories of Hayek were the principal rival of the new theories of Keynes.¹⁰⁶

Such a colorful exchange might be dismissed as a personal feud between academicians. In fact, the controversy was riddled with political implications. After the episode of hyperinflation experienced in the Weimar Republic in 1923, the Great Depression had further reduced Americans’ and Europeans’ confidence in the ability of their governments to manage the economy. While Western countries were stagnating, the Soviet Union experienced rapid economic growth and industrial transformation. The Union of Soviet Socialist Republics had avoided the crisis, built gigantic plants, and maintained full employment. Both Friedrich von Hayek and John Maynard Keynes searched for alternative solutions that might diffuse social tension within the stagnating Western economies. Keynes thought that the government’s ability to preserve the working class’s trust was indispensable for the success of any economic policy. Hayek, on the contrary, aimed at persuading governments to avoid any attempt to interfere with the free swings of markets. Coming from the dismembered Habsburg Empire, Hayek promoted a free market globalist position, while the surviving British Commonwealth enabled Keynes to maintain an interventionist approach. Hayek was coming from the meltdown of Mittel Europa, the events of the Weimar Republic, the Republic of Councils in Hungary, and a 15-year experiment with social democracy in Red Vienna. Keynes was aware of the need to tame the nationalistic ambitions of Cen-

 Piero Sraffa, Dr. Hayek on Money and Capital, The Economic Journal, vol. 42, no. 165 (March 1, 1932), 42 and 45.  Quoted in Lima, Capital Controversy in the Birth of Macro Theory, note 1.

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tral European countries, but the moderate position of British Trade Unions and the Labour Party gave him confidence in the government’s ability to diffuse social confrontation. In the interwar period the British Empire was managing its own soft landing: a system of “Imperial Tariff Preferences” allowed the management and stabilization of prices of consumer goods between the United Kingdom and the Commonwealth. On other hand, democratic reforms, such as universal male suffrage (1918), public housing (1919), and unemployment benefits (1920) maintained the working-class consensus. On those reforms, the Labour Party lent direct or indirect support to Conservative governments which controlled Parliament for most of the 1920s. Meanwhile, having survived the dissolution of its homologues, the British Empire provided an insulating cushion between the United Kingdom and the restless world economy. Hayek had identified the prewar British Empire as the polar star of the first age of globalization from 1870 to 1914. However, after the war, that was no longer the case: The belief that the British had betrayed economic universalism since 1931 under the class pressure of organized labor and the intellectual seductions of Keynesianism led them [the neoliberals] to think hard about what a new organizing principle and an organizing force should be.¹⁰⁷

Sraffa and Hicks wrote that Hayek’s financial recipe did not amount to a consistent economic theory. On the contrary, to most economists Keynes was the source of a paradigm shift, which had enabled Britain to overcome the Great Depression, and was still relevant into the financial crisis of 2008 and the Covid rescue plans. In his quest to maintain stable international relations, Hayek developed a globalist idea of trade, which led to the creation of the GATT and the WTO, while Keynes was addressing international financial stability, which led to the creation of the Bretton Woods institutions: the International Monetary Fund and the World Bank. During the Cold War, American conservatives labeled Keynes a Marxist, a homosexual, and a spy for the Soviet Union. But in an article published on Keynes’s hundredth birthday, Paul Samuelson, the first American economist to win the Nobel Memorial Prize, wrote: Actually, Keynes was an elitist exponent of the middle classes. Like Bertrand Russell, he recognized even before Stalin’s hegemony the totalitarian inefficiencies of a system run in the name of the working class. An optimist who lived at a time when the world economy

 Slobodian, Globalists, 98.

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was running so badly that clever gimmicks could still work wonders, Keynes’s object was to save capitalism from itself.¹⁰⁸

Conversely, US public opinion would not consider Mises or Hayek radicals. Yet, on July 15, 1927, when the workers of Vienna set the Court of Justice ablaze and the army killed 90 people, Mises was radiant: he was in Vienna at the time and wrote to a friend: “Friday’s putsch has cleansed the atmosphere like a thunderstorm. The social-democratic party has used all means of power and yet lost the game.”¹⁰⁹ That was the same day that Canetti would remember as the one that “aside from my father’s death, had the strongest influence on my life.” In the book Liberalism, published the same year, Mises wrote: It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.¹¹⁰

Democracy for Mises was not a value per se, but a means to maintain social order: “Its function is to make peace, to avoid violent revolutions […] In 1927 democracy had ceased to fulfil its primary function. It did not prevent revolution. In that case, Mises believed, it was perfectly legitimate to suspend it and enforce order by other means.”¹¹¹ In an essay titled The Essence of Fascism Polanyi wrote in 1935: In Central Europe, if not in the whole Europe, universal suffrage increased enormously the impact of the industrial working class on economic and social legislation, and, whenever a major crisis arose, Parliaments elected on popular vote invariably tended towards Socialist solutions. The steady progress of the Socialist Movement, once representative Democracy is allowed to stand, is the dominating historical experience of the Continent in the post-war period. It is the main source of the conviction on the Continent that, if only the authority of

 Paul A. Samuelson, The House that Keynes Built, New York Times, May 29, 1983, https:// www.nytimes.com/1983/05/29/business/the-house-that-keynes-built.html, accessed March 19, 2022.  Slobodian, Globalists, 44.  Ludwig von Mises, Liberalism: In the Classical Tradition (German edition, 1927; latest English edition Irvington, NY: The Foundation for Economic Education, 1985, translation by Ralph Raico; online edition The Mises Institute, 2000), Chapter 1, section 10: The Argument of Fascism.  Slobodian, Globalists, 45.

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representative institutions is left unimpaired, Socialism must come. Thus, if Socialism is not to be, democracy must go. This is the raison d’etre of the Fascist movements in Europe.¹¹²

Polanyi and Mises had crossed paths in Vienna. In a 1924 paper, Polanyi claimed that Mises would not acknowledge the difference between a relationship of power and a relationship of mutual recognition: ¹¹³ In Mises’s mind, any relationship among two parties could only end with the dominance of one over the other. The last of the Fourteen Points in the armistice negotiated between President Wilson and the German government foresaw the establishment of a League of Nations. It was the only point to which the Treaty abided; but the United States never took part in the League, because an isolationist majority in the US Congress struck it down. The Treaty of Versailles also excluded Germany from initially taking part in it, so it only became a member between 1926 and 1933, when Hitler withdrew. The Soviet Union joined in the following year. The League’s functions were to lower barriers to international trade and verify compliance to the peace agreements, also in relation to the transnational shipment of weapons. The League collected an ample set of standardized data for most countries, both about weapons and other trades. That is today the most comprehensive information on international trade between the two wars. A Yearbook of the Trade in Arms, Ammunitions, and Implements of War was published from 1924 to 1938. A second statistical yearbook was published by the League of Nations from 1926 to 1944. It contains “data of great interest to governments and business-men.”¹¹⁴ For each member country, the book provides demographics, agriculture and mining annual production, import and export flows in volume and local currency, trade balances, national accounting figures, central and commercial bank deposits, government bond issuances, retail and wholesale prices, and logistics data such as maritime commercial tonnage and length of railway networks. The standardized statistics in the yearbook were instrumental for: the creation of a new kind of global vision […] Creating statistics was globalizing, in the sense of producing a single world picture and changing the mentality of the economist themselves. As the data from one country fit into those from another […] they see the world as a developing economic organism.¹¹⁵

 Polanyi, Economy and Society, 87.  Polanyi, Economy and Society, 54.  From the 1926 preface to the Statistical Yearbook: https://wayback.archive-it.org/6321/ 20160901163315/http://digital.library.northwestern.edu/league/stat.html, accessed March 19, 2022.  Slobodian, Globalists, 70.

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The League of Nations survived until the first meeting of the United Nations (UN) in 1945. Because neither the United States, nor the Soviet Union or Germany were members, the League was a club of European winning nations, with limited influence. In the 1920s, standardization of statistics projected the illusion of a functioning global economy, but figures could not lie: the Wall Street Crash of 1929 cut world trade in half, and the prices of most foodstuffs fell by two thirds. The collapse of international trade was in part the consequence of steeper trade barriers, and of currency devaluations promoted by economies competing in a race to the bottom. The International Chamber of Commerce (ICC) was established to compensate for the absence of the United States from the League of Nations. Membership to the Chamber by corporations and banks did not require government approval. The ICC preparatory meeting took place in Atlantic City, New Jersey, in 1919. It was chaired by a number of Viennese professors, among them Hayek’s grandfather. Mises became the ICC Austrian delegate in 1925. Two years later, in 1927, the League and the Chamber organized the first joint World Economic Conference in Geneva. Companies and governments from 50 countries attended the conference, including Germany, the USSR, and the USA. It was the first case of cooperation between the pacifist League and the globalist Chamber. By assembling standardized data from all major economies, Mises and Hayek conveyed the vision of a globalized market, and pleaded to governments and corporations on the need to dismantle the barriers which prevented that vision from becoming a reality. The inefficient fragmentation of the Habsburg and German Empires among mutually dependent nations proved their point. However, small states and less developed economies were weary of abandoning the barriers they had erected to protect their domestic companies and workers. Their voters would not permit it. For that reason, in Hayek’s view, a supranational organization was needed to quell the popular request for government intervention. Small states and developing countries were not the only apostles of government intervention. The diatribe on interest rates between Keynes and Hayek shows that, in order to maintain popular consensus, some large mature democracies also implemented trade, fiscal, and monetary policies that would protect the purchasing power of wages. Hayek’s criticism of Keynes’s policies did not originate from the global market argument. Rather, it served the need to show consistency with the opposition to government interference, and the need to discredit the example of non-market economies, such as the USSR. The fact that Keynes was a liberal and not a socialist is one reason why Hayek’s attacks were so awkward. Keynes showed that a capitalist economy should sustain its own working class in times of crisis and transition. He clearly foresaw the dan-

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gerous consequences of not doing so. It was Keynes’s position that governments should choose to promote social stability and communicate their intentions unequivocally. Hayek, on the contrary, would recommend governments dismantle social security nets, and cover their inaction with the pretext of superior transnational entities in charge of advancing globalization. The sudden collapse of world trade in 1929 was partly the consequence of a conversion to the postwar economy, and partly the effect of new protectionist barriers and of currencies’ devaluations, whether deliberate, in an attempt to isolate national economies from the slump, or imposed by the Versailles Treaty to weaken the former Central Empires. After the crash, the Rockefeller Foundation and the League of Nations promoted international conferences and sponsored research about the global nature of the cycle. As part of that effort, in 1931 the Rockefeller Foundation provided a grant of US$20,000 to the Austria Business Cycle Research Institute directed by Hayek.¹¹⁶ The simultaneous swing of all major countries during the Great Depression shows that the global economy was still interconnected. On the other hand, the introverted reaction of individual states accelerated its disintegration; connections ceased to function. The solution offered by neoliberals was a supranational federation among states which would retain control of civil society but relinquish to the federation authority over their domestic production factors. “Hayek and Robbins hoped that their solution would satisfy mass demand for self-representation while preserving the international division of labor and the free search of profitable markets.”¹¹⁷ Neoliberals considered the Victorian Age globalization as the normal status of the world economy, and the collapse of global trade as a temporary downturn. According to Hayek and his colleagues, downturns are the consequence of national governments intervening in the markets of capital, labor, and commodities. Refraining from those interventions would suffice to recover that ancient status. For instance, according to Wilhelm Roepke: The task in front of us is, in fact, a re-integration, i. e. the recreation of a happier condition of European economic relationships that had already existed in the past and has been progressively destroyed in the storm of the world crisis since 1931.¹¹⁸

 Slobodian, Globalists, 69. That sum corresponds to 350,000 US dollars in 2021.  Slobodian, Globalists, 95.  Slobodian, Globalists, 186.

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Slobodian glosses: “The world economy, which had been unitary until 1914, needed to be reconstituted. Any talk of integration could only be talk of a means to return to that lost golden age.”¹¹⁹ The modern interpretation of that view has been defined elsewhere as neoliberal corporate globalization. It was promoted by the McKinsey Global Institute and the Davos World Economic Forum, and has been enacted by the World Trade Organization until the financial crisis of 2008.¹²⁰ The neoliberal project contained a globalist aspiration and an anti-democratic bias. Those two aspects of neoliberalism are hardly separable. In its initial phase, globalization is a positive utopia: material conditions may worsen temporarily as a result of technologies that disrupt older forms of production organization. But progress carries the promise of improved conditions for the masses. At a later stage, those technologies migrate to other less developed economies, external competition surfaces, and the protectionist argument becomes fashionable among those workers left behind by technology and / or globalization. Keeping markets open may run counter to the natural instincts and the voting propensity of a conspicuous share of citizens, particularly in weaker economies threatened by foreign monopolies, or dominated by trusts strong enough to prevent government intervention. Therefore, international organizations such as the League of Nations and the International Chamber of Commerce in the 1920s, or the World Trade Organization in the 1990s, were entrusted with the responsibility of keeping markets open when the global utopia loses its appeal, because standards of living previously reached are threatened by international competition. This section began by questioning the wisdom of trusting democracies with the protection of common goods, first among them democracy itself. The examples of Hayek and Mises’s preposterous use of democratic values has shown, so far, that an instrumental use of democracy offers no guarantee of its survival. Chapter Four will describe the second act of the neoliberal experiment with democracy. The evolution from the International Chamber of Commerce of the 1930s to the World Trade Organization of the 1990s will provide a more complete picture. However, in order to make sense of that comparison between two ages, it is first necessary to describe how the world economy emerged from the darkest 30 years of modern history, to launch into a second phenomenal age of globalization. That is the subject of Chapter Three.

 Slobodian, Globalists, 186.  See Chapter Four.

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Democracies evolve, and democracy is a work in progress. Those are two reasons for optimism. Democratic practices have grown broader and more effective throughout history. In several democratic countries democracy is more stable and robust; where checks and balances have been installed, they seem to work well. Democracies also seem to function more reliably: the number of individuals taking part in the democratic process has increased through time, and their representation has become more nuanced. The other reason for optimism is that the democratic process is perhaps the most studied of all forms of power legitimation. The debate around democratic practices is alive and profound. Therefore, the expectation of further progress is grounded both on actual empirical evidence, and on the future results of ongoing research and experimentation.

Chapter Three To contemporary observers, the late nineteenth century globalization […] must have seemed the natural order of things, but the Great War showed how false such an assumption was. Not only was trade disrupted during the conflict itself, but the interwar era which followed saw a proliferation of tariff and non-tariff barriers to trade in the richest countries in the world, and this was in turn followed by inward looking antitrade policies in developing countries which lasted until the 1970s or 1980s.¹²¹

The long shadow of de-globalization enveloped the years between the two world wars and extended further into the Cold War. Not until 1972 did international trade reach the value where it would have stood, had the nineteenth-century trend continued. In other words, it took 60 years for trade to resume “the natural order of things.” That order was short lived: one year later, for the first time after four centuries, Asia managed to impose upon the West its monopoly over a single commodity: as a result of the OPEC embargo oil prices quadrupled. For Muslim countries that was reminiscence from a distant past: in 1453 Muhammad II conquered Constantinople and made it his capital, with the new name Istanbul. However, the Ottomans’ trade advantage proved ephemeral: 50 years later Vasco da Gama dropped anchor in Calcutta and opened the India route by sea, thus breaking the Arab-Ottoman monopoly over Asian-European trades. Seventy-five years later, in 1571, a European fleet defeated the Ottoman sails at Lepanto, setting off the retreat from the Mediterranean, a sea Muslims had dominated for centuries. The oil shock of 1973 was the first in a row of falling dominos. It raised public awareness about dependency on exhaustible natural resources. That fueled an inflationary spike, which challenged the sustainability of the postwar boom on multiple grounds; economic, environmental, and ethical. Oil companies and Great Game lovers became entangled in a wave of conflicts that have shaken the Middle East for half a century. And it led to a shift in the terms of trade, which led to a shift of the economic epicenter from the Atlantic to the Pacific. Although a critical supply, oil was but a symptom of broader instabilities within the process of economic and technology growth. The US government lowered the federal speed limit to 55 miles per hour, and set new standards for energy consumption. A disorderly policy of oil price containment created long lines at the gas pumps.

 Findlay and O’Rourke, Power and Plenty, 535 and 506. https://doi.org/10.1515/9783110744477-005

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For a few years, citizens in mature economies became aware of their fragility. In 1972 the Club of Rome published The Limits to Growth. ¹²² A team of MIT researchers, by extrapolating consumption, growth, and demography, produced the first global prediction on the depletion of natural resources. The OPEC embargo raised the price of oil, thus triggering a decade of global inflation. On the other hand, the quadrupling of oil revenues generated a spike in investments in the Global South and ignited a process of emancipation and integration which spread to other commodities. In 1974 the United Nations issued the NIEO (New International Economic Order) resolution and a Charter of Economic Rights and Duties of the States. ¹²³ The president of Tanzania, Julius Nyerere described NIEO as “the trade union of poor nations.” Its intention was to create a more balanced relationship among sovereign states, allowing the developing economies to trade on a level playing field with advanced industrial countries and multinational corporations. Natural resources were largely produced by developing economies, hence The Limits to Growth drove support to the OPEC and NIEO claims for more equitable terms of trade. But the NIEO declaration and the Club of Rome reports were soon forgotten. The West was concerned with the impact of the oil shock on domestic issues: inflation, recession, unemployment, and the investment boom funded by petrodollar revenues. In the battle to control inflation, the Federal Reserve raised federal funds interest rates to 20 % in 1980. It took until 1993 to bring them back below 5 %. Energy saving and sustainability remained government priorities until the election of Ronald Reagan in 1980. But during the first three years of Reagan’s mandate the Environmental Protection Agency reduced its budget by one half, and its personnel by one fifth. It took Reagan (US president between 1981 and 1989) and Margaret Thatcher (UK prime minister between 1979 and 1990) the entire decade to absorb the new terms of trade and break the inflationary spiral of salaries. Friedrich von Hayek (Chapter Two, Section 3) was acknowledged as having inspired both Reagan and Thatcher. He received a Nobel Prize and the Fields Medal. By the end of the decade the tables had been turned: in 1987 Reagan and Gorbachev signed the Intermediate-Range Nuclear Forces Treaty, and in 1989 the Berlin Wall fell. The new Western economic model included a reduction of

 Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, and William W. Behrens III, The Limits to Growth (Falls Church, VA: Potomac Associates, 1972).  https://digitallibrary.un.org/record/616826?ln=en, accessed March 19, 2022. Declaration adopted by the General Assembly without vote.

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government social services, a shrinking of the middle classes’ real income, and the de-localization of manufacturing to Asia. By unveiling the conflict between growth and natural resources, Club of Rome scientists and NIEO bureaucrats appealed to the global responsibility of governments and corporations. OPEC, on the contrary, leveraged the force of market monopoly to modify consumers’ behavior. While the appeals failed, blackmail succeeded. Subsequent events at the WTO¹²⁴ would conform to that perverse logic: developing economies were more likely to succeed through confrontation with mature economies, rather than through dialogue about the handling of limited resources. Far from demonstrating the effectiveness of the market mechanism, that case encouraged the use of distortive market practices as a weapon. The protectionist lesson offered by List to latecomers in the 1870s, would not be lost on the newcomers of Asia and Latin America in the 1980s. Markets are sensitive organs; and the less competitive they are, the more vulnerable to distortions. Nevertheless, the short season of environmentalism generated by the first oil shock planted the seeds of a globalist vision that would bloom 20 years later, through the progressive Web culture embraced by crowds participating in the Battle of Seattle and by the generation of Greta Thunberg (Chapter Four, Section 1). That globalist vision should not be mistaken for the globalism of Hayek, as portrayed by the Davos Economic Forum and the McKinsey Global Institute. The globalist divide does not separate countries according to their stage of economic development. Instead, it is a division between corporations organizing labor and natural resources along global supply chains, and the communities and regions providing those resources. These may be Western workers left without a job because their factories moved to Asia; or they may be urbanized peasants with a new alienating job in overcrowded sweatshops in Asia. They may be Western farmers whose governments’ subsidies are no longer enough to sustain international price competition; or native people in the Amazonia forest, displaced by the deforestation practices of Brazilian mega-farms. At opposite ends of the industrialization process, both groups form what was once called the reserve army of labor, or dual labor market. The new phase of globalization muted the voices of NIEO and the Club of Rome. Its depth and width were comparable to the previous Victorian globalization. A new technological revolution was looming. It would eventually re-shape trade patterns, supply chains, and economic growth across the globe. The impact of that revolution affected more humans and resources than the Club of Rome

 Chapter Four, Section 1.

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might have predicted at the time. Deforestation, fossil fuel extraction, climate change, migration flows, the growth of Asian economies, and the Western middle classes’ shrinking incomes reached proportions that were unimaginable in the 1970s. In the years immediately after the end of WWII the main agents of trade growth were exports from Western economies, but after the oil shock, Asia took the lead. Besides Japan – which had industrialized before the war – the fastest export growth in the 1980s came from the Asian Tigers (South Korea, Taiwan, Hong Kong, and Singapore). In the 1990s, the Tigers were joined by the BRICS (Brazil, Russia, India, and China). The BRICS are more populous than the Tigers, and the cost of labor was lower. An abundant workforce at low cost triggered a massive transfer of low-tech manufacturing activities from mature economies to the newcomers. Between 1970 and 2000 the share of manufacturing goods over total export rose in Latin America from 20 % to 56 %, and in Southeast Asia from 48 % to 77 %.¹²⁵ Industrial components entangled by complex supply chains formed the bulk of cross-border trade. Industrial processes were sliced up into a high number of steps. Each step or part was outsourced to a different country, depending on minute cost-saving calculations. The number of times a given part would be shipped across borders might be surprising, although that count would be hard to capture statistically. Initially, components would be produced by a local Asian subsidiary of a Western company, or a joint venture. However, after a while, those same parts might be sub-contracted to locally owned facilities. As a result of increased manufacturing activity, a middle class of consumers began to grow in India and China. By the turn of the century the manufacturing of complete products had replaced components, and internal demand began to grow faster than export. Hence the Tigers and the BRICS evolved from contract manufacturers supplying parts to Western and Japanese supply chains, to producers of finished goods for their own internal markets. That process was termed decoupling. After the recession, the Asian economies became less dependent on Western markets, and more geared towards their own, or other developing markets. According to the Fortune Global 500 ranking, 210 of the world’s 500 biggest companies by revenue were Asian in 2018. Asia’s share of the top-performing firms globally had also increased from 19 % to 30 % over the previous two decades. In the 2021 Fortune Global 500 for the first time China listed more companies than the US: 124 versus 121; 133 versus 121 if Taiwan is counted as part of China.

 Findlay and O’Rourke, Power and Plenty, 515.

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“The American Century has at last given way to a new reality” was the comment on Fortune’s own Internet site.¹²⁶ The industrial might of Asia had been in plain sight for a while: Japanese, Korean, Taiwanese, Indian, and Chinese conglomerates were world leaders in traditional and technology industries, from steel to chips. Since 2000, however, small and medium-sized companies have joined the large chaebols, keiretsu, and state-owned enterprises. A McKinsey Global Institute paper looked more broadly at the 5000 largest global firms: In 1997 Asia accounted for only 36 percent of them, but by 2017 that share was up to 47 percent. What’s more, the countries represented in this group have drastically changed. China accounts for the biggest increase by far. But India has also seen significant growth. […] By contrast, half of Japan’s largest firms have dropped off.¹²⁷

The drive behind growth was no longer the purchasing power of 700 million Western consumers. It was the increasing disposable income of 3 billion Asian consumers. Twentieth-century globalization was turning into twenty-first-century regionalization. A parallel decoupling also took place in culture, trade, and finance. In 2013 the People’s Republic of China (PRC) invested US$70 billion in the Belt and Road Initiative, or New Silk Road. Funds were used to build logistics hubs and communication networks in developing and mature countries, but also to acquire political influence. The impact of those initiatives began to appear within the World Trade Organization (WTO) at the Doha round of 2003. That meeting marked the end of the age when Western Europe, North America, and Japan would set the agenda and dominate the debate. At the 2003 meetings India and Brazil managed to catalyze a group of emerging economies, the G20-T (also called the G21), and turned the meeting into a North–South contest. Decision power in international institutions is usually distributed according to the size of the national economy, or to the amount contributed by partners to the institution’s balance sheet. Instead, at the WTO every member state casts one vote. The WTO saga is described in Chapter Four, Section 1. Suffice to say, here, that “for the first time, developing countries had real ammunition and leverage with which to go on the offensive against the rich countries – particularly the US and the EU – and target their agricultural and trade policies.”¹²⁸

 https://qlik.fortune.com/global500/, accessed March 19, 2022.  Oliver Tonby, Jonathan Woetze, Wonsik Choi, Jeaongmin Seong, and Patti Wang, Asia’s Future Is Now, McKinsey Global Institute, July 2019.  Kristen Hopewell, Breaking the WTO: How Emerging Powers Disrupted the Neoliberal Project (Stanford, CA: Stanford University Press, 2016), 83.

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Decoupling also generated self-awareness. The diffusion of Asian cultures through social networks and global media shaped a new collective identity. “Asia” was no longer a geographic expression. Asian self-awareness and the discovery of common and homogeneous cultural traits have led to a pan-Asian identity that questions the image of the West, and Asia’s relationship to it. Cities like Beijing, Dubai, Hong Kong, Tokyo, Shanghai, Delhi, Seoul, Bangkok, Jakarta, and Singapore are now centers reflecting and generating global culture, although preserving their uniqueness. Until the Covid pandemic hit, nine out of the ten busiest air routes were between those Asian cities. Passengers departing or arriving to Asia were 415 million per year, and some were there to stay: According to the United Nations 2015 International Migration Report, between 2000 and 2015 Asia added more migrants to its own population than did any other region, with 26 million international settlers across the region (ahead of Europe’s 20 million).¹²⁹

Since 2016, decoupling has grown two new dimensions: technology and political economy. The opposing vetoes between the USA and China on Internet content and 5G telecommunication created new reasons for separation, which involved both hardware and software, technology and content. As for political economy, there is a looming diatribe about the merits of Western and Eastern cultures of government. The fundamental divide lies in the causal direction of the relationship between democracy and growth. According to Parag Khanna, an influential scholar on contemporary Asia, if economic growth is the foundation on which liberal democracy is built, the West’s chronically slow growth foretold today’s populism – despite its illogical and counterproductive arguments and consequences.¹³⁰

But democracy is not founded on growth. That is a false alternative based on a wrong assumption. The term “liberal democracy” includes two concepts: a competitive market and a democratic society. Having to choose between growth and democracy, the Asian / Confucian cultures opt for the former. If there can’t be democracy without growth, it follows that growth is necessary, while democracy is optional. Un-democratic regimes in South Korea, Taiwan, Singapore, and more recently the People’s Republic of China have promoted that narrative all along: prosperity will buy freedom, and freedom will eventually allow political representation.

 Parag Khanna, The Future Is Asian (New York: Simon and Schuster, 2019), 333.  Khanna, The Future Is Asian, 283.

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But the history of the West works in reverse: the causal direction flows from democracy to growth: social democracy ensures that markets are competitive which, in turn, is a precondition of economic growth. Only in the List variation, the driver of innovation is replaced by industrial concentration: as a result, market competitiveness is low, and democracy becomes “nice to have.” That was indeed the model adopted by the Asian Tigers. This chapter provides a summary of how the growth of information technology and the digital economy migrated from its place of origin in Silicon Valley to the shores of Southeast Asia, giving birth to the second globalization. The first section recalls the origin of solid-state electronics. The second section describes the growth of communication infrastructures enabled by solid-state electronics: mobile connectivity, the Internet, and machine learning. The third section describes some theories about the diffusion of innovation in the digital age. Chapter Four will then explore how the shift of the economic fulcrum from the Atlantic to the Pacific has affected global equilibria.

Section 1: Solid-State Electronics The second globalization originated over a period of 50 years in an area with a diameter of about 50 miles that later became known as Silicon Valley. That name describes both a geographical space and an industrial hub. The space and time are comparable to those of the textile revolution in Lancashire, which produced the factory system and the first globalization. Solid-state electronics, or semiconductors, was the spark that ignited this industrial revolution. Semiconductors take their name from an electrical property of their base component, silicon dioxide (or silica), which may or may not conduct electrons by varying its temperature or adding dopants to its surface. Silica is a common material, but the production of semiconductor components is one of the most refined and complex technologies. Besides electronic components, silica is employed to build solar panels, power lasers, flat screens used in smartphones, computers and television sets, anodes in rechargeable batteries, and a variety of other components. In its precursory years, the semiconductor industry benefited from the ideas of three Individuals: William Shockley, J.C.R. Licklider, and Frederick Terman. They were working, respectively, at Bell Labs, ARPA (the Pentagon Advanced Research Projects Agency), and the University of Stanford. That might represent a departure from the Lancashire cotton hub, which 150 years earlier developed all technology from the direct experience of weavers, craftsmen, and self-made entrepreneurs. However, of the three innovators, only Licklider was pursuing the goals of a formal program set by a public institution (ARPA). The other

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two acted upon their individual capacity as researcher (William Shockley) or college administrator (Frederick Terman). In other words, their contribution to the genesis of Silicon Valley went well beyond the institutional scope of their positions. Frederick Terman was the Dean of Engineering at Stanford. Of the early entrepreneurs in Silicon Valley several had been his students, among them the founders of Hewlett Packard. In 1951 Terman created the Stanford Industrial Park, a joint initiative between the city of Palo Alto and the University of Stanford, which attracted and hosted research laboratories from major East Coast corporations. Terman personally invested in some of his students’ startups, pioneering the Silicon Valley venture capital industry. DARPA (the Defense Advanced Research Projects Agency) was established in 1958 to pursue high-end, high-risk defense projects. In 1962 Joseph Carl Robnett Licklider became the first administrator of the Information Processing Techniques Office, which played a vital role in the future of the Internet. Licklider first conceived the idea of a network of computers and devised the technique for sharing computing time among multiple users. He is also credited with funding the computer science departments at some major American universities, such as MIT, Stanford, UCLA, and UC Berkeley. A team of researchers at Bell Labs also played a crucial role in the creation of Silicon Valley: John Bardeen, William Shockley, and Walter Brattain had worked since the end of the war on semiconductor materials, with the goal of replacing vacuum tubes with solid-state components. In 1951 Shockley patented the first practically functioning semiconductor, the bipolar junction transistor, which could be used both as an amplifier and as a switcher. Shockley moved in the same year to the San Francisco Bay Area (where he was born); in 1956 he established the Shockley Semiconductor Laboratory – the first organization dedicated to design and build silicon semiconductor devices. But already the following year eight Shockley employees (the Traitorous Eight) left the company and established Fairchild Semiconductors. Fairchild was immediately successful: its first customer in 1958 was IBM. One of the Traitorous recalls: I remember the day that we finally got the floor tile laid in the back main room on which we were going to put all our lab equipment. And that night, Noyce and the rest of the guys came out and got barefoot and rolled their pants up and were swabbing the floors. I wish I had a picture of that.¹³¹

 Oral History of Julius Blank (Mountain View, CA: Computer History Museum, 2008), http:// archive.computerhistory.org/resources/text/Oral_History/Blank_Julius/Blank_Julius_1.oral_his tory.2008.102658264.pdf, accessed March 20, 2022.

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Noyce will be one of the two funders of Intel. Fairchild became the prototype of all future semiconductor firms. Within a few years many of the Traitorous Eight had left also that company: in 1961, Jay Last, Jean Hoerni, and Sheldon Roberts resigned from Fairchild Semiconductor to create Amelco, a division of Teledyne; in 1968 Robert Noyce and Gordon Moore co-founded Intel; in 1972 Eugene Kleiner established Kleiner Perkins Caufield and Byers, a primary venture capital company; in 1968 Victor Grinch left Fairchild to teach electrical engineering first at UC Berkeley, then at Stanford. Later in life he founded two companies: Escort Memory Systems (1985) and Arkos (1993). Julius Blank remained with Fairchild until 1969. He created the manufacturing facilities (called fabs) in Mountain View, San Rafael, Portland, Toronto, Hong Kong, Korea, Italy, England, Sweden, France, West Germany, Australia, and Mexico. Fairchild was the world leader in semiconductors and the model of Silicon Valley companies. It not only offered stock options to valuable employees, had no job titles, and practiced informal working relationships; it also started a habit that became typical of the Valley, a remarkably high turnover of employees. Engineers moved rapidly from one company to the next, thus carrying with them experience and know-how that would provide startups with the mix of knowledge they needed to become immediately productive; they could hit the ground running. Silicon Valley companies would tolerate the continuous turnover of brains and ideas because the overall advantages from the growth of the ecosystem overcame the temporary inconvenience to their own organization: the total was larger than the sum of the parts. Nevertheless, market growth and technology change were so fast that specialized labor was constantly in short supply. Employees would welcome periodic slumps as a rare opportunity to take a vacation. Companies were constantly competing for the best brains, and no employer desired to earn the reputation of confronting workers, who could immediately find a better job elsewhere. Fairchild followed the strategy of going global early by organizing from the very first days a comprehensive international network. Quick global expansion was critical because the customer base for semiconductor components included a large number of appliances manufacturers based in other developed economies and, increasingly, in Asia. After the oil shock of 1973, Japan, Taiwan, and Korea became strong exporters of consumer appliances and electronics. Those were ideal applications for solid-state components. The advantage of solidstate over vacuum tubes was overwhelming in terms of cost, reliability, energy requirements, heat dissipation, and miniaturization. Southeast Asia and Europe were large markets for Fairchild, but they could also become competitors. Quick-

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ly establishing production facilities close to the customer was necessary to supply components that might be easily integrated in the final products. It was also a preemptive move against future competition. Once a new product was debugged, Silicon Valley manufacturers would seek to conquer as much of the global market share as quickly as possible. Regis McKenna, the legendary marketing guru at Apple Computers used to say that the goal is not to sell products, but to control markets. Producers of semiconductors, as their cotton colleagues in Manchester 200 years earlier, depended for their prosperity on building a global network. Building a textile mill or a semiconductor fab required huge initial investment. The plant infrastructure was expensive, as were the individual machineries. But the benefits of scale were conspicuous and increasing with the progress of technology. Process standardization would greatly improve yields and profitability. Therefore, in a few years semiconductor fabs began to specialize along function-specific components. Product design and set-up costs were quite significant, and economies of scale in production almost exponential. The ability to sell mass-produced components depended on the component’s reliability and performance, but also on the ability to prevent the proliferation of custom designs. Matching the applications’ specific requirements with standard components was the task of application engineers working near the customer to match product requirements, while preventing the emergence of local competitors. Occupying the whole market segment became the dominant strategy of most semiconductor companies. For those whose components became standard, the next pre-emptive step was to invest in exorbitant overcapacity, as a signal of readiness to dump prices. That would discourage competitors from engaging in a price war. Such was, for instance, the case of Samsung in the DRAM market. As a result, during the 1980s and 1990s dozens of new fabs (at a cost of US$1 billion apiece) mushroomed in half a dozen semiconductor clusters in the United States, Asia, and Europe. Semiconductor salaries were considerably above average, and stock options would attract the most enterprising engineers, particularly in Silicon Valley. Therefore, immigration of high-skilled workers was massive. For example, the Asian-American population in Santa Clara County (where most of Silicon Valley lies) rose from 43,000 in 1970 to 430,000 in 2000, in a total population of 1,680,000. As a reaction to laws restricting labor circulation in the Trump era, several studies have attempted to quantify the contribution of immigrants to the high-tech industry. First-generation immigrants figure prominently in patent inventors, patent citations, and company founders, compared to native citizens.

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Many of those migrants were qualified engineers who would return home, after 10 or 20 years of accumulated experience.¹³² In the medium term, therefore, high labor mobility and global manufacturing networks were also nurturing relocations at first, and outright competition subsequently, especially in China, Taiwan, India, Singapore, and Malaysia. Studies on the Asian communities in Silicon Valley revealed that the semiconductor cluster did not differ from other specialized industry districts: immigrants would work in specific engineering tasks according to the country of origin. For instance, product testing was chosen by engineers from Central and East Asia (Pakistan, Iraq, Iran); Taiwanese specialized in printed circuits, motherboards, and assembly; Koreans, in memory chips. Reverse migration was often facilitated by the parent company itself, directing the quick turnover of restless employees towards the global network of direct subsidiaries first, and independent contractors later. The Taiwanese foundries developed a peculiar form of subcontracting which would become a hot point of contention between the United States and the People’s Republic of China in the 2020s. The “reverse brain-drain” of Asian workforce was a key ingredient in the American de-industrialization of the following years. For the first few decades, semiconductor innovation and creativity remained within Silicon Valley. In 1961 the US Patent and Trademark Office (PTO) awarded a patent on integrated circuits to Robert Noyce. Jack Kilby, a Texas Instruments engineer, is also credited with the invention. Noyce was a co-founder of Fairchild Semiconductor in 1957 and of Intel in 1968. In 1971 an international team of Intel engineers formed by Federico Faggin, Marcian Hoff, Stanley Mazor, and Masatoshi Shima designed the MCS-4 Micro Computer SA, a “single chip 4-bit microprocessor.” It was the first, commercially available, programmable integrated circuit. MCS-4 could independently perform a sequence of computational functions. Microprocessors enabled the miniaturization of electronic devices, allowing solid-state electronics to migrate from desk computers and industrial process controllers to all sorts of mobile, portable, and later hand-held devices. Intel provides a contrarian example of international development, having pursued localized mass production instead of going global. In 1973 Intel was the leading producer of Dynamic Random-Access Memories, or DRAMs. But within 12 years from the introduction of its first microprocessor, Intel made a strategic  AnnaLee Saxenian and Yuh Hsu Jinn, The Silicon Valley–Hsinchu Connection: Technical Communities and Industrial Upgrading, Industrial and Corporate Change, vol. 10, no. 4 (2001), 893 – 920; AnnaLee Saxenian, Motoyama Yasuyuki, and Quann Xiaohong, Local and Global Networks of Immigrant Professionals in Silicon Valley (San Francisco: Public Policy Institute of California, 2002).

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U-turn: it decided to exit the overcrowded DRAM memory market and focus exclusively on microprocessors. That decision allowed Intel to acquire a quasi-monopoly position in processors for personal computers (PCs), by focusing resources on improving manufacturing and product performances. PC and software manufacturers would design their machines around the Intel processors, rather than Intel bending processors’ design to meet customer requirements. The Intel–Microsoft alliance became the leading industry standard. Fifty years after its foundation, in 2018 Intel was still number 46 on the list of Fortune 500 US companies, and the second-largest semiconductor manufacturer, behind Samsung. And yet, as of 2019 Intel had only three sites outside the United States: in Ireland, Israel, and China. Personal computers, the first mass-produced digital devices, are the archetype of Silicon Valley. The first accessible home computer, the Atari 8800, was introduced in 1975. It was sold as a self-assembly kit and could be purchased for US$399 without keyboard or display. The New Mexico Atari factory was inundated with orders. BASIC, written by Bill Gates and Paul Allen, became the main language for the Atari, and remained the leading product of Microsoft until MS DOS, written for the IBM PC in 1981. Two years after Atari, Apple introduced Apple II at a basic price of $1298, without floppy drive or monitor. By 1981 the personal computer had become pervasive. Cost reduction, performance enhancement, and compact configuration are the reasons for the PC’s success: they all depend on advances in semiconductor technology. In 1984 came Macintosh, a computer for the rest of us. Macintosh was the first Apple product equipped with an Intel microprocessor. Over a period of 20 years personal computers took over every desk at home and in the office. Nevertheless, still in 1997 Allan Greenspan, legendary chairman of the Federal Reserve, noted that the investment in technology was not visible in the US statistics on labor productivity: Even if the most recent, tentative indications that productivity growth may be speeding up were to turn out to be less than we had hoped, it is possible that the big increases in efficiency growing out of the introduction of computers and communications systems may still lie ahead. Past innovations, such as the advent of electricity or the invention of the gasoline-powered motor, required the development of considerable infrastructure before their full potential could be realized.¹³³

 Speech by Alan Greenspan at the University of Connecticut, October 14, 1997, http://ad vance.uconn.edu/1997/971020/grnspch.htm, accessed March 20, 2022.

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In that same year, 1997, Wi-Fi was offered for the first time on Apple computers. In 1998 Google was founded. The convergence of wireless communication and computing was finally happening over the Internet, creating the infrastructure that would support total mobility. Productivity of labor in the United States provides a measure of its impact: output per hour worked in non-farm activities grew at an average annual rate of 1.6 % between 1988 and 1997; that rate became 2.9 % between 1998 and 2007.¹³⁴

Section 2: Mobile Phones, the Internet, and Artificial Intelligence Greenspan’s productivity prediction materialized when mobile connectivity, the World Wide Web, and Artificial Intelligence (AI) converged. AI is the umbrella name for a group of software technologies that include machine learning, big data, data mining, and pattern recognition. The adoption rate of those new technologies accelerated as globalization widened, because an increasing number of consumers with disposable income boosted demand in Asia and other emerging economies, while continuous advances in manufacturing technology improved the price/performance balance of semiconductor components. Convergence of the three technologies triggered a loop that multiplied available applications and raised labor productivity, as shown in the previous section. Those causes were interconnected: increased density of semiconductors allowed miniaturization, therefore enabling new applications. New applications were quickly available to consumers thanks to global massive investments in production facilities or fabs, particularly in Korea, Japan, Taiwan, and China. American, Japanese, and European investors funded specialized equipment manufacturers and materials suppliers, establishing a global network of services. Demand for well-educated and well-paid workers increased and was at least partially satisfied through reverse brain-drain, as Asian engineers returned home from Silicon Valley with up-to-date knowledge. New fabs and imported know-how contributed to the growth of middle-class clusters in India, China, and the rest of South East Asia. Parag Khanna wrote in 2019: We are entering the third wave of modern Asian growth that began with postwar Japan and South Korea, followed by Greater China […] and now propelled by South and Southeast

 US Bureau of Labor Statistics, Non-farm Labor Productivity, Labor Productivity and Costs, https://www.bls.gov/lpc/tables.htm, accessed March 20, 2022.

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Asia. Each wave corresponds to a new set of countries […] and each represents an even larger share of Asia’s enormous population […] Now […] Southeast Asia takes the mantle of “factory of the world” – a process driven by Japanese, Korean and Chinese firms outsourcing to the region.¹³⁵

Governments in Asia and the West were quick to build infrastructures needed to support the Information Age. Webs of fiber optics were laid under the oceans and reached every town and every house apartment. Antennas for mobile communication soon became part of the landscape. The “last mile” was covered at first by telephone wire, then through fiber optics, and finally through wireless routers. Within a few years every public space provided Wi-Fi connectivity free of charge; airports, shopping centers, restaurants, schools, factories, hotels, town squares, parks, buses, trains. But the sudden net connectivity was the result of 30 years of development around three independent technologies, which grew in different clusters, out of one common building block: the Silicon Valley semiconductors. The history of those developments is briefly recalled in the next few pages.

Mobility The mobile phone was invented in 1973 at Motorola. Ten years later, in 1983, Motorola launched the first commercial application, but it took 30 years for the mobile phone to evolve into a smartphone. In 1990 Apple founded General Magic, with the purpose of creating a personal digital assistant that could fit in the pocket. Sony, Motorola, Matsushita, Philips, and AT&T Corporation were partners and investors. At the time, General Magic was called “the Fairchild of the 1990s”: It developed some key technologies, such as USB ports, small touch screens, compact email messages, and a variety of software applications that would become part of the Internet. Many future Silicon Valley leaders worked at the company. However, the concept of miniaturizing a personal computer was overcome in the race to the market by its opposite: adding computing features to a mobile phone. The smart phone defeated the pocket computer, and General Magic was liquidated in 1992. In the same year Frank Canova Jr. of IBM took out a patent on the first smartphone: its brand name was Simon Personal Communicator. However, IBM did not turn it into a product. In 1996 Nokia (from Finland) and Hewlett Packard (HP) (USA) also made devices that provided mobile communication: the Communicator and the HP OmniGo 700LX. The joint product was marketed by HP with  Khanna, The Future Is Asian, 148 – 149.

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the slogan “Your mobile business centre,” and by Nokia as “The office in your back pocket.” Two years later Lawrence Page and Sergey Brin published a paper with the title “What can you do with a Web in your Pocket?”, introducing a novel search engine called Google. In 2000 Ericsson (from Sweden) launched the R380 Smartphone, combining the functions of a mobile GSM (Global System for Mobile communication) phone with a personal digital assistant (PDA). The R380 was probably also the first mobile phone interfacing through a touchscreen (as General Magic) and an open operating system (Linux), and the first device marketed as a “smartphone.” It took another seven years for Apple to launch its first i-Phone. Then, finally, the market took off. By 2014 there were 7 billion mobile phones worldwide, most of them made in China or South Korea. The mobile phone was invented in the USA and the first communications were based on a network of satellites installed by Motorola. However, the land-based mobile network in its prevailing form is largely a European creation. A possible reason for the early development of mobile phones in Europe was the delay of Europeans in adopting pagers, the first generation of portable messaging devices. Government, however, provides for a powerful explanation. The European telecom companies were able to turn that delay into a market advantage by establishing their own common standard, creating a de facto barrier to entry towards US manufacturers. That was possible because European telephone companies were mostly state-owned monopolies, and the European Union played a key role in coordinating them. In 1987, Europe produced the first agreed GSM Technical Specification. GSM was an opportunity for European technology to catch up with Silicon Valley, with some help from national governments. The EU big four countries threw their political weight behind GSM through the “Bonn Minister’s Declaration,” and a GSM Memorandum of Understanding was signed in September of that year. The Memorandum induced mobile operators from across Europe to invest in new GSM networks. In as little as 37 weeks all European countries and companies were aligned on GSM. The agreement was praised as an uncommon example of European unity and speed. What was less publicized is that the Memorandum prescribed GSM as a mandatory standard for all telephone operators. It was an agreement among European manufacturers, telecom operators, and federated governments to protect their own markets. The competing communication standard was at the time CDMA (Code Division Multiple Access), used only by the USA and the Soviet Union. The European Union plan was successful: in 2005 GSM had 1.5 billion users, and in 2008 3 billion users. However, GSM survival was limited to 2G and 3G generations. The newer devices abandoned traditional telephony standards and since 2009 have been gradually embracing Internet Protocol (IP), the communi-

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cation standard of the World Wide Web. That shift cemented the convergence between Internet and wireless communication under US supervision. It also showed that smartphones were now performing many of the functions of portable computers. But a counteroffensive was still possible: Skype, the first video chat application using laptop computers, was established in 2003 by a team of Swedish, Danish, and Estonian researchers. However, Skype was eventually acquired by Microsoft in 2011. A phone on steroids won the race against a miniaturized computer. But the Web communication infrastructure prevailed over the telephone wire. Enter Asia: 5G, the latest iteration of communication standards, witnesses the dominance of China as the leading Internet services provider (Ali Baba and Baidu), communication hardware provider (Huawei) and, together with Korea, smartphone manufacturer: the largest smartphone producer is Samsung from Korea, which is also the world’s largest manufacturer of semiconductor components. Apple (substantially made in China) and Huawei (the world’s largest communication network) are the dominant players in the age of 4G and 5G smartphone generations. In 2019 China produced on average 150 million cellphones per month, about 35 % of world demand. Meanwhile, the world’s largest producer of personal computers in 2020 were the Taiwanese Quanta and the Chinese Lenovo. Governments have been instrumental in creating the communication infrastructure, whether in Europe, Asia, or America. The World Wide Web would not exist without the public funds provided to ARPA and CERN (see below). GSM standards were stipulated through intergovernmental agreements. They were agreed upon quickly because most telephone companies at the time were state-owned monopolies. Things changed after 2010: the new 4G protocol merged the telephone and the Internet network, for both people and home automation. The convergence of phone and Internet was extended in 2020 to industrial equipment through 5G. 5G is the protocol used by self-driving cars to communicate among themselves; it is used by jet engines to reserve time at the shop for their own maintenance; it is used by ships to dock without human interference. The main supplier of 5G equipment is the Chinese company Huawei. New communication generations will replace the existing ones. As of 2021, 193 countries are communicating through the International Telecommunication Union (ITU), a public–private platform supported by the United Nations. It took 30 years for the mobile phone to become a smartphone, and another 15 years for the smartphone to move from national telecom communication protocols to the Internet Protocol. Yet, network equipment remains a government affair, at least between China and the USA: in 2019 the Trump government declared that Huawei, controlled by the Chinese Communist Party, poses a national secur-

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ity threat to the United States. Smartphones may be ubiquitous, but the data they provide is too valuable for governments to leave it alone, and it is particularly valuable to authoritarian governments.

The Internet In 1969 ARPA (the US military Advanced Research Projects Agency) created ARPAnet, a network connecting four university computers. ARPAnet was the first network to implement the TCP/IP protocol suite and a packet switching technique. Packet switching is a process of disassembling a long message into smaller bites. Each packet travels independently through the network, thus optimizing the network’s efficiency. TCP/IP is the Internet standard protocol defining how the knots in a network talk to one another. Both technologies were originally designed to secure communication within the armed forces, and became the technical foundation of the Internet. In 1983 the Ethernet standard protocol was approved by the IEEE (Institute of Electrical and Electronics Engineers, or “I triple E”) to allow multiple packages of information to travel simultaneously through the same cable. Comparable standards were later approved by IEEE to homogenize wireless communication. CISCO was founded in 1984 by two Stanford engineers and quickly became the global leader in networking equipment, by selling modems, routers, and other technology based on the universally adopted Internet Protocols defined by IEEE. In 2000, at the peak of the dot-com bubble, CISCO was the most valuable public company with a market capitalization of about US$500 billion. Competitors had a much smaller market share. However, the crisis of 2000 – 2008 reduced Cisco’s financial weight by a factor of three. Meanwhile, communication standards evolved, and new hardware was designed accordingly. In the early 2010s the quasi-monopolistic position of CISCO was taken over by the Chinese telecommunication equipment giant Huawei. During the Trump presidency the US government erected protective barriers to prevent Huawei’s access to the American market. However, the World Wide Web has a French precursor; its name is Minitel. It was conceived by the French national telephone company PTT (Postes, Télégraphes et Téléphones), as a replacement for expensive and bulky paper telephone directories. Within two years, giving away Minitel electronic units was cheaper than taking telephone directories to every home. At that time, France was the only country with networks suitable for handling packet switching data. Minitel was a videotext online service accessible through telephone lines and was the world’s most successful online service prior to the World Wide Web.

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The service began experimentally in 1980 in Brittany and was introduced commercially throughout France in 1982 by the government-owned PTT. Users could make online purchases, book train reservations, check stock prices, search the phone directory, have a mailbox, and chat in a similar way to what is now made possible by the Internet. In the late 1990s 26 million people used Minitel and its 26,000 applications. In February 2009, 16 years after the advent of the World Wide Web (WWW), the Minitel network still had 10 million monthly connections. But the rapid development of the WWW standard, and its wireless compatibility forced France Télécom to retire the Minitel service in 2012. Meanwhile, in 1990 Tim Berners-Lee, a CERN engineer in Geneva, described a hypertext project called World Wide Web in which text documents could be viewed by Web browsers. The Web was originally developed to offer automated information sharing between physicists in universities and institutes around the world, taking part in CERN experiments. The first Web server in America came online in December 1991, at the particle physics laboratory of the Stanford Linear Accelerator Center (SLAC) in Silicon Valley. Convergence of the CERN invention with the CISCO telecommunication technology based on IEEE protocols and standard software (which could run on PC and Apple platforms) turned the point-to-point communications among physicists into a network of websites accessible by every user. Berners-Lee had transformed the ARPA Internet into the World Wide Web. In 1992 CERN made available the open-source code at no cost. A decade of breathtaking growth followed: in 1993 e-Bay is established as the first Internet ecommerce site. Amazon is founded in 1994. Ask Jeeves, the first question answering e-service, is founded in 1996, with other search engines. Electronic payment is offered in 1997 by Mobile Pay, and the following year by PayPal. Google is launched in 1998. Tencent is also founded in 1998. Alibaba is founded in 1999. Also, in 1999 the expression Internet of Things is used for the first time at MIT. Pandora radio over the Internet is founded in 2000; Baidu is also founded in 2000; Wikipedia is founded in 2001; Skype in 2003; Facebook in 2004; YouTube in 2005 (Google bought it in November 2006 for US$1.65 billion). In 2011 the first cryptocurrency Bitcoin is launched. In 2014 comes Apple Pay – and by 2016 has 500 million users. By 2018, around 83 % of all payments in China were made via mobile payment services. The smartphone had made money and credit cards redundant. With 4G and 5G the latest generations of mobile phones replaced telecom connectivity protocols with Internet communication protocol, not only to send and receive data packets, but also for voice and data. Wireless communication became an all-IP standard; the convergence of Internet and mobile was now complete.

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General Magic and Minitel were brilliant precursors. Why did they not last? The short answer is: they lacked the Web sense of community and collaborative culture. Minitel was a government undertaking at a time when most European telecoms were state monopolies. It did reach 26 million homes, each of them linked through a fixed telephone line with France Telecom. By Internet standards, Minitel was a one-way, introverted network hierarchically controlled by a central government agency. General Magic, on the other hand, had the vision of mobility and global reach, but marketed itself as the single source of code, content, and applications. It was a closed community running over a captive infrastructure. With hindsight, it is easy to identify the missing key ingredient: an interactive community – open, global, self-regulated, and freely accessible everywhere by individuals and companies, with self-monitored exchange of information. Linux was the first open-source operating system, published in 1994 by the Finn Linus Torvalds. Within a decade Android, a modified release of Linux, became the most common software platform for mobile applications. Between General Magic and Minitel on one side, and Linux / Android on the opposite side, lies a culture shift, which is reflected in the revenue model. The former were proprietary environments, attempting to satisfy 100 % of the user’s needs by selling a complete set of solutions as a package. The latter was an open platform available to everyone for a small fee. In exchange, users would provide free data about themselves. Online services made the initial success of the World Wide Web. They were the product of a community effort. Contributors provided free information based on common standards available through a non-hierarchical (peer-to-peer), bi-directional relationship. Contributions had to be light and quick, in order to reduce the amount of time and energy consumed by the contributors and to save users’ time. Contributors required a motive, the belief of taking part in a fast-growing community building a unique public good: free knowledge, accessible, amendable, and reliable. Access to content had to be freely available and guaranteed against exclusion, appropriation, and censorship. Culture was the fundamental ingredient in the early stages of the Internet. The relationship between individuals across the network was at peer level, based on reciprocal trust. In fact, the network was our network. Reliability of information was ensured by its distributed and public nature. Social media have replicated that culture, but with a perverse twist: the open culture of the first few years was gradually and selectively appropriated by subcultures. Groups carved out by social media led to a tribal mentality, where the experience of an open community (Canetti would describe it as an open crowd) was gradually replaced by closed groups, niche news, and conspiracy theories. Furthermore,

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the idea of self-monitored information through distributed public records was exploited by gigantic Ponzi schemes such as cryptocurrencies, and stolen elections through big data technologies such as blockchain and machine learning. The Internet springtime ended gradually between 2000 and 2008, concurrently with the decline of globalization. Three black swan events mark the timeframe: the bursting of the 2000 dot-com bubble, the World Trade Center destruction of 9/ 11, and the global financial crisis of 2008. Within that period (2000 to 2008) the Internet culture mutated, from a peerto-peer exchange of information, knowledge, and content, to a trading post of commodities, fake news, scams, and human services. One application of particular social consequence appeared in the labor market. Mobility enabled the gig economy, where a trusted third party guarantees a transaction, by certifying its outcome remotely. The best-known examples are Uber and Airbnb, established in 2008 – 2009. In those cases, an asset (car or apartment) is needed to perform the service. But the asset may just be a bicycle. In many other cases the sale of occasional services through the Internet has replaced a permanent work contract with occasional performances on demand. In mature economies that trend has added to the outsourcing of manufacturing jobs, which began in the 1980s. On-demand work arbitrage existed before the digital age. Through mobility it has achieved higher granularity, so that demand for work services can now access a wide pool of workers, and be switched on and off with a message. Micro-services can be provided through Deliveroo, Uber, sex websites, or any form of entertainment platforms, where a fiduciary relationship is established through a remote third-party matchmaker. The downside of replacing piecemeal work with a stable employment contract has been a dramatic increase in employment instability leading ultimately to a reduction in the size of the active labor force. The motive for accessing the Internet has evolved from a peer-to-peer exchange of public goods through an inclusive global network, to a market for temporary services provided by an under-employed workforce of mostly young people. But the transformation did not end there. The Covid-19 pandemic of 2020 – 2021 has provided the opportunity for further evolution of the Internet culture. Throughout lockdowns the Internet provided the indispensable communication tool to go on with life, by enabling essential activities such as work, study, socializing, finance, food shopping, and healthcare. For all of its shortcomings, the Internet has proved indispensable for the Covid generation to avoid isolation and continue to weave the social fabric.

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Artificial Intelligence In the 1950s computer technology was raw: Arthur Samuel developed a chess game program for an IBM computer built on vacuum tubes. In the same years, Bell Labs invented the transistor. The first customer for Fairchild Semiconductors’ silicon components was IBM. Micro-electronics was the hardware solution to a pressing problem, namely the high temperature generated by handling sequences of process steps at high speed. In 1966 Samuel became a research professor at the computer science department of Stanford; both IBM and Bell Laboratories funded its research. Artificial Intelligence (AI) is a broad term indicating the ability of a machine to perform a task by jostling within a set of rules, instead of executing a step-bystep sequence of precise instructions. Board games (chess, checkers, Go) have periodically resurfaced in the history of AI, because they are well-defined closed models (all variables are known), which humans have refined for centuries, sometimes millennia. The results of those experiences are documented and readily available. Hence, board games provide a well-known environment for machine simulation, and a test bed against which progress may be measured. They are to computer sciences what saccharomyces and drosophila are to biology. After a couple of false starts in the 1970s and 1980s, AI established itself as an independent discipline and a branch of business. Higher computing capability has allowed data manipulation by trial and error through a process known as machine learning (ML). ML is based on the idea that systems can learn from data, identify patterns through experimentation, and make decisions based on those experiences. ML is fed with a set of rules, and has access to data, which the machine may use to establish the best pattern to solving a problem or answering a question. The ability to query the Internet further accelerated the evolution of ML by expanding the amount of available information. Early examples of scientific problems where large volumes of data have been analyzed using ML are stellar recognition through sky mapping with radio telescopes,¹³⁶ and the analysis of gene expression through microarrays and Next Generation Sequencing. More recently, Automated DNA sequencing made possible the rapid deployment of Covid-19 synthetic vaccines. Besides the scientific domain, the most valuable applications of AI are in financial trading and anal-

 The NASA project seti@home collected data analyzed through a network of personal computers made available online when not used by their owners. The project lasted for 20 years and used computers to which they were given access by over 1 million volunteers.

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ysis, market targeting through social media and electronic transactions using “blockchain,” or other forms of high-volume traceability. In 2009 the cognitive science laboratory of the University of Toronto, led by Geoff Hinton, created a speech recognition machine based on neural networks.¹³⁷ A Deep Neural Network (DNN) is a system of connections vaguely resembling the communication among neurons in a biologic brain. The neurons network can identify and classify information similarly to a human brain; it develops its own taxonomy and updates it constantly by trial and error. The system learns from its own mistakes and refines its classification rules and criteria. The process is surprisingly effective; surprise originates from the use of decisions that are not foreseeable; they sometimes depart substantially from what a human would expect, and are sometimes inexplicable, or not interpretable. A robot that learns by itself how to quickly assemble an industrial component differs from a Deep Neural Network in that, the former finds an optimum sequence and then repeats it indefinitely, whereas the latter is capable of improvement, by adopting logics that may or may not be familiar to us.¹³⁸ Board games seem to be recurrent in the growth of AI. In 2014 Google acquired the startup company Deep Mind, which had developed a program capable of playing the ancient game Go. The software AlphaGo stored the moves of one hundred thousand Go matches. After beating 18-time world champion Lee Sedol, three to null, AlphaGo was replaced with a new piece of software, called AlphaGoZero. The new program was equipped with the rulebook only, but no examples of previous matches. It was supposed to decide its moves by learning from itself. After 40 days of self-learning, AlphaGoZero was able to beat AlphaGo nine times out of ten, using unheard-of strategies. According to Deep Mind,¹³⁹ AlphaGoZero was more powerful than its predecessor because it was not constrained by human experience. AlphaGoZero could build its own knowledge from a clean sheet, simply by playing against itself. A seminal paper written in 2001 by Leo Breiman provides a meaningful generalization. Its title is Statistical Modeling: The Two Cultures. ¹⁴⁰ The two cultures of statistical modeling are (1) the traditional way of analyzing data by designing a model representing a theory about the expected behavior of the data, and (2) algorithmic modeling, based on approximation through iteration or other auto-

 Amy Webb, The Big Nine (New York: Hachette, 2019), 42.  Webb, Big Nine, 147.  https://deepmind.com/blog/article/alpha-go-zero-starting-scratch, accessed March 20, 2022.  Leo Breiman, Statistical Modeling: The Two Cultures, Statistical Science, vol. 16, no. 3 (2001), 199 – 231.

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mated processes. Algorithmic modeling is the core of machine learning. Being the result of an automated process, the algorithm inside the “box” where computation occurs is not predefined, and might be quite complex. For instance, it may contain feedback loops that make it un-intelligible. The analysis in this culture considers what is inside the box complex and unknown, as was the case for AlphaGoZero. What happens inside the box is not relevant for the outcome, because the validation of the algorithm is tested only indirectly by measuring its predictive accuracy on a sample of the processed data. Paraphrasing, it may be said that the black box produces machine learning or predictions, whereas the model produces human learning, or knowledge. The former answers to the question what? The latter to the question why? Since Breiman’s paper was published, the algorithm culture has largely replaced the more theoretical model culture: statisticians have by and large accepted the machine learning revolution. Many textbooks of experimental sciences discuss ML methods alongside more traditional statistical methods. The use of opaque algorithms has been experimentally validated, as for instance in the AlphaGoZero event. In experimental sciences and in clinical trials models and black boxes go hand in hand: it is standard practice to divide available data into two sets, one is fed to the black box, while the other is used to test a model designed according to prevailing theories. If output of the black box is similar to the model, say within a 10 % margin, the model is deemed useful, and its assumptions confirmed. Hence, the black box is not only used to make a prediction about the data set, but also to evaluate the predictive capacity of a human-made model. If results differ wildly, because some of the model’s assumptions do not reflect the behavior of that set of data, the model is deemed unfit. But if the black box and the model produce similar results, the model assumptions may be used to explain the behavior of data. The simulation may be repeated to refine the model and arrive at a more detailed theory. In the above example, the black box is used as a virtual laboratory. A computer is used to simulate an experiment, and the experiment to falsify a model. But the conditions of the experiment within the black box are not necessarily controlled or known. “The analysis in this culture considers the inside of the box complex and unknown” writes Breiman.¹⁴¹ The black box may be transparent and repeatable if the interaction of all the variables in the model are known, as in a board game. But in a discipline where some of the interactions are unde-

 Breiman, Statistical Modeling, 199.

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fined, such as economics or medicine, reality might be unable to replicate the sequence of steps occurring in the black box.¹⁴² The issue of transparency in black boxes has been the subject of self-reflection within the discipline. It has also been viewed as a potential threat to democracy by the so-called “Big Nine” corporations. And, as such, it should be a matter of government concern. A branch of ML is dedicated to the study of black box transparency. Interpretable Machine Learning: A Guide for Making Black Box Models Explainable is the title of a book by Cristoph Molnar published in 2019. By understanding what happens within the black box we may be able to answer the question “how,” on top of the question “what.” If we can follow its steps, the black box itself might become a gate to access knowledge. Not only is the model tested, it can also be explained and improved. Molnar separates the overall understanding of the black box, which he calls the global model from the interpretation of a model’s modules, which he calls parameters. While global model interpretability is usually out of reach, there is a good chance of understanding some models at least on a parameter level. Not all models are interpretable at a parameter’s level […] There is not even real consensus about what interpretability is in machine learning.¹⁴³

However, even if the model is interpretable, it is not certain that its interpretation will add new knowledge. The issue is not trivial; a correct prediction does not per se provide the solution to a real problem. Knowing the process that will attain the desired result, or avoid the undesired one, is equally important. For instance, in an equilibrium model, as exist in ecology, medicine, or finance, the black box may provide ways to remain within a stable interval by forcing some variables to extremes such that, when that constraint is released, a return to equilibrium requires much bigger swings by other variables. A bias of that kind may be inadvertently coded by a software engineer whose knowledge of the issue is framed within a given span, number of variables, or range of possible events. In 1967 programmer Melvin Conway described the bias as follows:

 John Lewis Gaddis, The Landscape of History: How Historians Map the Past (New York: Oxford University Press, 2002).  Christoph Molnar, Interpretable Machine Learning: A Guide for Making Black Box Models Explainable (2019), 29, 31, https://christophm.github.io/interpretable-ml-book/, accessed March 20, 2022.

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Any organization that designs a system (defined broadly) will produce a design whose structure is a copy of the organization’s communication structure.¹⁴⁴

According to Amy Webb, the AI industry follows a broad interpretation of Conway’s Law:¹⁴⁵ “Systems tend to reflect the people and values who designed them.” A program written for a machine will mimic the sequence its writer believes to be the most effective. But if a machine is provided only with some boundary rules and an end goal, the path to that goal will be unconcerned with the means to reaching it. By applying Conway’s Law in reverse, industry culture and values tend to mirror the logic employed to design their core industry processes. Hence, the AI industry may be concerned with results, more than with the way those results have been arrived at. And if the core processes disregard the “how,” so will the people: the question “how” is not part of AI culture, because the prevailing AI principle is that ends justify means. Amy Webb is a futurist. She teaches strategy at the Stern School of Business of New York University (NYU). In her book The Big Nine Webb claims that, to avoid a dystopian future, the Big Nine corporations that control AI should have public good as their number one goal. Wall Street and the governments of China and the USA subject the Big Nines to the pressure of satisfying their short-term results, with little concern for the more distant future. We need to generate incentives for the AI industry to modify its trajectory because, left to themselves, AI companies are neither willing nor capable of taking responsibility for the consequences of their acts. Total market capitalization of the American Big Six (Apple, Amazon, Google, Facebook, IBM, and Microsoft) represented 15 % of all the 3700 companies floated on the US stock exchanges in December 2019, and 18.4 % in May 2021. The overvaluation of those six companies is destabilizing for the financial market. But it also generates distortions in the decision processes of the companies themselves, and in the behavior of their employees, clients, shareholders, and users. In the case of social networks these are hundreds of millions of individuals. AI companies are important not only to investors, but also to governments. The US government depends on contracts with the Big Six to operate its own structure any day of the year, because the databases, networks, and communication infrastructure it uses are privately held. The government of the People’s Republic of China has more control on its big AI companies, but still depends on AI

 https://www.melconway.com/Home/Conways_Law.html, accessed March 20, 2022  Webb, Big Nine, 106.

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technology for social control and political stability, as the AI infrastructure weaves China’s social fabric. The US government was a big AI client in 2019: Microsoft won JEDI, a Pentagon cloud computing contract worth $10 billion, and a $480 million contract to supply HoloLens headsets to the army. Microsoft’s GitHub subsidiary recently renewed a $200,000 contract to provide software to Immigration and Customs Enforcement. Amazon won a $600 million cloud services contract with the CIA. A follow-up contract with the agency could be worth $10 billion or more. In 2018 Amazon offered to ICE (US Immigration and Customs Enforcement) the facial-recognition software it already sells to police departments. Palantir won a $876 million contract from the US Army to help soldiers gain access to data. In August, Palantir renewed a $49 million contract with ICE. When governments are the client, a sort of dissociative disorder surfaces within the AI companies themselves. For example, Google employees have collected signatures on several petitions to express their concerns about the use of AI for human rights abuses, such as Border Agency patrolling, and MAVEN, a US government program that uses commercial AI software to analyze images from military drones. Microsoft employees have posted anonymous blogs to denounce JEDI as a non-ethical project. Amy Webb suggests that the relationship of governments with AI suppliers is different between China and the US: China is quickly laying the groundwork to become the world’s unchallenged AI hegemon […] The US government has no grand strategy for AI […] We have outsourced the future development of AI to six publicly traded companies whose achievements are remarkable, but whose financial interests do not always align with what’s best for our individual liberties, our communities, and our democratic ideals. Meanwhile, in China AI’s development track is tethered to the grand ambitions of its government.¹⁴⁶

While AI in China is a state affair, in the US the government and the Pentagon are heavily dependent on private AI suppliers: recommendations for a more proactive government role in AI have been issued by previous US governments. For instance, in 2016 the Executive Office of President Obama published an Artificial Intelligence Research and Development Strategic Plan, with a defined vision: The promise of AI touches nearly every aspect of society and has the potential for significant positive societal and economic benefits. Thus, to maintain a world leadership position

 Webb, Big Nine, 3 – 4.

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in this area, the United States must focus its investments on high-priority fundamental and long-term AI research.¹⁴⁷

The same Strategic Plan publishes two graphs, showing that already in 2013 China had surpassed the USA in number of journal articles and number of citations mentioning “deep learning” or “deep neural network,” two buzzwords in use to describe the second stage of AI development. Nevertheless, Governments should have a role in the future of AI, and it should be possible for a concerned US president to shorten the distance between the US and China. That happened once before, in 1961, with Kennedy’s Man on the Moon challenge. But the balance of powers between the USA and PRC in the 2020s is not as favorable to America as was its position over the Soviet Union in the 1960s. However, there is ample scope for long-term action, as indicated by the Obama Strategic Plan: Government leadership and coordination is needed to drive standardization and encourage its widespread use in government, academia, and industry. The AI community – made up of users, industry, academia, and government – must be energized to participate in developing standards and benchmark programs.¹⁴⁸

The Obama Plan was published again in 2019, under the Trump presidency, with some additions and comments.¹⁴⁹ In both editions, the first and the third of seven strategic goals stressed the need to invest in research aiming at ensuring transparency of the black box content: Today the ability to understand and analyze the decisions of AI systems and measure their accuracy, reliability, and reproducibility is limited.¹⁵⁰

Government is not the only client of AI. In fact, AI has become a catch-all phrase in a US$50 billion industry that provides information technology to all sort of industries and professions: consultants like KPMG, IBM, Accenture, or process integrators like Siemens and GE sprinkle “artificial intelligence” on every solution they offer to corporations. Since 2017 Google has been renting out machine time with its proprietary Tensor Processing Unit (TPU) to accelerate the learning

 National AI R&D Strategic Plan 2016, 13 – 16, https://obamawhitehouse.archives.gov/blog/ 2016/10/12/administrations-report-future-artificial-intelligence, accessed March 20, 2022.  National AI R&D Strategic Plan 2016, 34.  https://www.nitrd.gov/pubs/National-AI-D-Strategy-2019.pdf, accessed March 20, 2022.  https://www.nitrd.gov/pubs/National-AI-D-Strategy-2019.pdf, 8.

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process of clients’ AI routines.¹⁵¹ Startups mushroom in every dedicated technology hub, offering AI solutions to problems that range from biotech to self-driving cars. Most of those applications share at least two traits of the algorithm modeling culture: (1) an empirical approach to data, based on trial-and-error machine iterations and ex-post validation by predictive accuracy; (2) an opaque relationship with the data providers, particularly when the provider is the general public, and the precise use of data is undisclosed. Transparency is the first victim of that culture, in both respects: within the process, where identifying the casual relationships is no longer required, and finding the answer to “why?” has become redundant. And in the relationship between user and client, where the former should know as little as possible about the latter’s use for the data voluntarily or involuntarily provided. Lack of transparency is especially worrisome when the Big Nine’s client is the government or the military. On the opposite end, the European Union has introduced legislation that would limit the use of AI. The case in point is real-time facial recognition, to protect the privacy rights of its citizens. According to the Financial Times, this is the first attempt to create a legal framework covering the development and use of AI. […] heavy penalty will also apply to those not meeting the quality requirements for data sets used to train machine-learning models – one of the most common, and insidious, ways for bias to creep in.¹⁵²

Government concerns about the use of AI in diplomatic and strategic settings are shared by activists’ concerns about the social use of AI, and the monopolistic power of the Big Nines. Information collected from social networks and search engines may be valuable to clients at Capitol Hill, Wall Street, and Silicon Valley. It also has high social value for healthcare, education, the environment, and other social and humanitarian purposes. Social networks and search engines perform data mining on the public’s activities, and disseminate back to the public messages, information, or news, through a variety of media. AI players therefore are two-way communicators. On one side they collect data from the public, which is then processed and sold to their clients. Information covers a wide spectrum: it may be a representation of consumer’s preferences, or active enquiries on individuals’ opinions and behaviors. For instance, Google employees have

 https://cloud.google.com/tpu, accessed March 20, 2022.  Richard Waters, Europe’s Push on AI Rules Aims to Recast Global Tech, Financial Times, April 22, 2021.

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successfully prevented the involvement of their company in government activities they considered un-ethical. At the opposite end of the spectrum companies like NSO supply authoritarian governments in Latin America and the Middle East with spyware which is surreptitiously installed on individual smartphones.¹⁵³ Facebook has inadvertently disclosed the data of 87 million Facebook users to Cambridge Analytica, a British AI company hired to support the 2016 Trump electoral campaign. Communication from the client may be transparent or opaque; data sharing from the public may be voluntary, unconscious, or undesired. But the position of the Big Nines contains an objective element of duplicity. They need to ask questions of the public without raising suspicion or mistrust. Automatic gathering of information from the public poses an intrinsic challenge to personal freedom. In the words of Canetti, Personal freedom consists largely in having a defense against questions. The most blatant tyranny is the one which asks the most blatant questions.¹⁵⁴

Obtaining information without appearing to be asking questions is misleading. Avoiding asking questions and relying instead on questions raised by the user or the public, via, for example, search engines, may appear a less threatening procedure for collecting information. But the outcome is similar. The need to appear transparent to the public, while processing and re-selling to a customer the information obtained is disingenuous and leads to a split identity among the Big Nine. Economist Susan Athey at Stanford University explains that in the age of permanent connectivity through smartphones the marginal cost of data is low, and the volume of data is high. In other words, there is plenty of inexpensive data. To access and manipulate the data, search and retrieval must be automated, most likely through machine learning algorithms. The commercial value of data is best realized when highly detailed personal results may be extracted from a large volume of data.¹⁵⁵ Like other industrial processes, AI is subject to continuous improvement. Process improvement in most industries is accomplished through human intervention. For instance, a piece of equipment is replaced with a new design,

 https://www.nsogroup.com/. WhatsApp has sued NSO who apparently delivers the spying code through WhatsApp’s signaling servers, or by emulating the app.  Canetti, Crowds and Power, 285.  Susan Athey and Guido Imbens, Machine Learning Methods Economists Should Know About, Working paper 3776, Stanford Graduate School of Business, March 2019, 1.

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more precise and efficient. Improvement is the outcome of human decisions. Process refinement in AI takes place predominantly through machine learning, the in-built continuous improvement loop of data processing. Whereas a selflearning manufacturing robot engaged in performing a defined set of material actions reaches optimization and rests on that plateau, it is unclear if or when a computing machine will stop learning. Recursive self-improvement might create a situation where “super-intelligent AI would likely make decisions in a nonconscious way, using logic that is alien to us.”¹⁵⁶ A consequence of machine learning is the polarization of opinions through the reinforcing mechanism of the social networks, leading in extreme instances to “fake news” and “conspiracy theories.” Objective information and unity of debate are necessary for the good functioning of a democratic society. Shared information allows the participants in a democratic debate to express different opinions about a topic with which they are all familiar. Additional information may be shared during the debate, and interpretations may be compared, about the facts under review. Subjective viewpoints and opinions will arise, but they originate from a core body of accepted facts, acknowledged by all the participants in the debate. Agreeing on a core of basic facts is a prerequisite to a deliberative process. It helps define and possibly narrow the field of battle. The larger the amount and relevance of facts agreed by the parties, the shorter the distance among them. This sharing of a common ground has been alternatively named with reference to a physical space as forum, polis or agora by different authors. In this context it consists of finding the greatest amount of common information as a step towards consensual decision-making in a deliberative process. Fragmentation of discourse and polarization of opinions in social networks, made possible by self-reinforcing mechanisms by means of machine learning is the exact opposite of building a common space for debate, defined by shared information. In polarized social networks information might be deliberately distorted. Automatic reinforcing mechanisms help create tunnel vision, which restricts both the number of participants in that group, and the breadth of their views. The advent of private television channels destroyed the monopoly of the printed press. For a few years radio and television in Western countries remained a state monopoly. For some time, that ensured that plurality of opinions about the facts of the day would fluctuate within the range of a government’s political spectrum. According to Anne Applebaum:

 Webb, Big Nine, 147.

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Anticipating how divisive broadcasting might become, the United Kingdom in 1922 created the BBC, which was explicitly designed from the beginning to reach all parts of the country not only to “inform, educate, entertain” but also to join people together, not in a single set of opinions but in a single national conversation, one that would make democratic debate possible.¹⁵⁷

Satirical descriptions of reality have existed in democratic countries for a long time, their paradoxical nature is known to the majority, except perhaps the most gullible. It is unlikely that those interpretations might be mistaken for objective information. On the other hand, the free and public access to a plurality of sources of information, and the deontology of professional journalists have usually kept the range of interpretations within the realm of plausibility. In other words, information was homogeneous enough for citizens of the “polis” to share a homogeneous description of events. With the advent of private TV and radio, each channel could decide whether to broadcast a certain event, but the broadcast would not differ too much from that of another channel. Therefore, the single conversation could be maintained within the polis. Media privatization, however, has wiped out the safety net, whereby the views broadcasted could not be too distant from the government’s views of the day. Therefore, positions have become more extreme and the public debate less rational and documented; however, unity of debate within the polis was maintained. It is not by chance that privatization of state TV and the proliferation of private channels has coincided in some Western European countries with the disappearance of traditional political parties. The Internet social media in the age of machine learning are destroying the polis: The issue is not merely one of false stories, incorrect facts, or even election campaigns or spin doctors: the social media algorithms themselves encourage false perceptions of the world. People clock on news they want to hear; Facebook, YouTube, and Google then show them more of whatever it is that they already favor […] The algorithms radicalize those who use them too […] Because they have been designed to keep you online, the algorithm also favor emotions, especially anger and fear.¹⁵⁸

Those virtual worlds inhabited by different groups of citizens will continue to exist without knowledge of one another. The distance will also increase, each group growing more and more self-referential. Missing a common ground of shared facts, those groups of citizens will become less capable of engaging in a deliberative process, and to exercise their democratic prerogatives. Some dem Anne Applebaum, Twilight of Democracy (New York: Doubleday, 2020), 112.  Applebaum, Twilight of Democracy, 113 – 114.

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ocratic leaders and elective officers are struggling to provide a unifying message, whereas others play on the divisive nature of social media to appeal to multiple audiences. The dividing line between those two groups often coincides with the separation between good-faith globalists on the one hand, and populists / nationalists on the other. The difference between the inclusive global village of first-generation Internet, and the fake news of the Big Nine in the age of machine learning may be described as a difference between trust and faith. Open-source requires a high-level of mutual trust: there is a tacit agreement among equivalent users: they know they can trust each other and the network. Unreliable information will be marginalized by the community of users. In the age of machine learning the relationship becomes asymmetrical: users trust a black box with information about themselves and their vision of the world. Through selective algorithms, the black box will return information that will reinforce and substantiate their vision, filtering out conflicting information. On the one hand, mutual trust among peers; on the other hand, blind trust in an anonymous entity. On the one hand the extroverted network of the global village; on the other hand a plethora of self-referential communities increasingly polarized and isolated.

Section 3: Technology, Finance, Migrations The Industrial Revolution has interested social scientists for over a century, leaving in the shade one of its most consequential aspects, globalization. Despite being a staggering phenomenon, nineteenth-century globalization had no name until it was over.¹⁵⁹ The disproportionate influence of Britain may be one reason. The British Empire was global, but Britons saw it primarily as a dominion over the seas. Discussing protectionism and free trade, a renowned historian of the British Empire wrote in 1907: Whatever school of economists prevails, it may be safely prophesied that commercial ascendancy will remain with this country so long as she holds the maritime supremacy and will pass as soon as she loses it.¹⁶⁰

 The first recorded use of “globalization” is in Theodore Levitt, The Globalization of Markets, Harvard Business Review (May–June 1983).  Arthur D. Innes, United Kingdom in Our Time, Harmsworth History of the World 13 (London: Educational Book Co., 1914), 5422.

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Britannia rules the waves, and the flag follows the trade. Dominion over land was a means towards an end, and the end was trading across the oceans. Most British land dominions were part of the infrastructure web – resting harbors where raw materials and exotic products could be assembled, stowed, and loaded to be carried elsewhere. Land acquisition was, quite often, an unintended consequence. Colonies in North and South Carolina, Virginia, Massachusetts, Jamaica, the Bahamas, Australia, and Tasmania were the result of “Transportation,” the forced displacement of convicted British subjects. Colonies were a dumping ground for the “scum” of society. After the Berlin Congress of 1878, other Western powers were too busy fighting for the “effective occupation” of whatever slices of the pie Britain had left behind. They failed to notice the global significance of their own actions. Also, the first globalization was hard to pinpoint because it underwent multiple metamorphoses, from eighteenth-century mercantilism to twentieth-century imperialism. Grasping the homogeneous thread of globalization while those metamorphoses took place would have required high abstraction and foresight. On the contrary, perhaps because there was a precedent, twentieth-century globalization has been analyzed in real time by academia, the media, business, and the public, with a toolbox of analytical categories and of modern statistics. Mainstream interpretations were still based on the liberal axiom of a natural, almost fatal propensity of markets to expand in space and grow in scale. In that perspective, de-globalization has been considered a temporary anomaly, mostly due to local and idiosyncratic resistance. The liberal market is by definition a single indivisible entity. Isolated or protected markets are imperfections that should be corrected by empowering international agencies into lowering the resistance of local populist politicians towards the unifying forces of the global market. Although “right to trade” has been the battle cry of old and new mercantilism, its modern design originated with Friedrich Hayek (Chapter Two, Section 3), and reached its zenith at the Davos World Economic Forum in 2019.¹⁶¹ In the section Globalization 4.0 of that gathering, intellectual powerhouses like the Financial Times and the International Monetary Fund engaged in a rhetorical contest to demonstrate the permanent and irreversible nature of the globalization order. The remainder of this chapter briefly reports on three academic analyses supporting the opposite view, namely the discontinuous nature of the “Internet,

 McKinsey Global Institute, Globalization in Transition: The Future of Trade and Value Chains, 2019 January. Speeches by M. Wolf, A. Tooze, and G. Gopinath are no longer available on the Davos Forum website.

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globalization.” In particular, analyses by Geoffrey Moore, Carlota Perez, and AnnaLee Saxenian, in the fields of technology adoption, technology investment, and the migration of skilled labor will be briefly presented. Geoffrey Moore developed his technology adoption model working as a marketing consultant in Silicon Valley during the early days of the Internet. Moore was working with Apple’s communication guru, Regis McKenna, whose motto is: the real goal is to own the market, not just to sell products. In his seminal book Crossing the Chasm ¹⁶² Moore dissects the technology adoption life-cycle by dividing users among early adopters, early majority, late majority, and laggards, separated by a change of direction in the adoption curve. His model provides a rational path to global market dominance by segmenting users according to their propensity to innovate and building appropriate communication strategies for each segment.

Figure 5: Innovation adoption curve – timeline and frequency distribution (Geoffrey Moore 1991). Sources: Geoffrey Moore, Crossing the Chasm.

The bell-shaped curve in Figure 5 is a hybrid between a timeline and a frequency distribution, or Gaussian curve. Time is measured along the x-axis, which also describes the distribution of adoption among five groups of users. The y-axis measures the relative share of new users.

 Geoffrey Moore, Crossing the Chasm: Marketing and Selling High Tech Products to Mainstream Customers (New York: HarperCollins, 1991).

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Moore argues that “marketing strategy changes dramatically – indeed reverts itself – at every major inflection point in the Technology Adoption Life Cycle.” In the early phases of adoption Moore’s advice is to focus on gaining acceptance within at least one mainstream market segment, following very closely the reaction of the first group of adopters. Moore exemplifies: a positive feedback from 60 % of dentists is more persuasive than the reference of 20 % of dentists, 20 % of cardiologists, and 20 % of other medical specialists. The goal in the following stage becomes to establish the new technology as the mainstream standard. At a later stage, standardization will persuade even the most skeptical users, the silent majority. That, however, will require yet another change of marketing strategy, image, and product position. Moore’s model has become the standard approach to markets by Silicon Valley firms. It provided them with a conceptual map of the world as a single market, and a rational justification to seek a monopoly position. The network externality (the advantage of adopting a common standard will increase with the number of its users) and the long tail (the ability to tailor communication and products to specific audiences) complement Moore’s model. After 30 years of consecutive waves of innovation in informatics and communication, the model may appear obvious to the reader. But in the 1990s it provided a strong argument to approach markets on a global scale, or “get global soon.” Geoffrey Moore described the innovation adoption cycle from the point of view of product markets. Carlota Perez drew similar conclusions about the innovation investment cycle with regard to financial markets. Professor Perez is a British social scientist, and an economic policy consultant to Latin American governments. She has demonstrated the synchronicity between technology adoption cycles and investment cycles, over five subsequent waves of innovation: textiles production in the 1770s, steam and railways in the 1830s, steel and electricity in the 1870s, automobiles and oil in the 1910s, and information and telecommunications in the 1970s.¹⁶³ Each innovation cycle took three to four decades to complete, including a period of frenetic investment culminating in a financial crash. In the case of digital technology, the bubble burst, known as dot-com crash, lasted from March 2000 to October 2002. For each innovation cycle Perez has identified a turning point, reached when conservative mainstream investors begin buying stock in the leading companies offering that innovation. In Moore’s model, that moment marks the passage from

 Carlota Perez, Technological Revolutions and Financial Capital (Northampton, MA: Edward Elgar, 2002).

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an early majority to a late majority of adopters. At that point the adoption rate begins to slow down. In Perez’s model it happens when investors with a highrisk profile cash-in their capital gains, and institutional investors become interested in the innovative industry. The inflow of new capital triggers a phase of industry concentration, marked by a chain of mergers and acquisitions. The driver is no longer growth, but sheer size. Its overall effect is to increase the size of suppliers, reducing their number and the overall elasticity of supply. Within a few years a handful of companies dominate the market. From that point on the market ceases to be competitive, and financial concentration prevails. Over-investment leads to a bubble and eventually to a market crash. The same sequence is described by Perez at a macroeconomic level, and by Geoffrey Moore for individual product markets. That is a testament to the broad impact of innovation adoption processes at each scale of economic activity. A bottom-up marketing strategy and a top-down investment cycle analysis converge to shape a single consistent view of markets’ behavior. The two descriptions also share a parallel sequence of inversion points. Mariana Mazzucato adds a meaningful warning about the interplay between financial markets and governments: The British-Venezuelan scholar Carlota Perez has argued that the decoupling of finance from the real economy is not “natural” but an artefact of deregulation and excess belief in the power of free markets. Her groundbreaking work identified a pattern of intense financialization followed by its reversal in each technological revolution […] But after the financial bubble collapse, and amid the ensuing recession and social turmoil, governments have tended to rein in finance and promote a period that favors the expansion of production, benefiting society more broadly and making finance serve its real purpose. But if and when government does not step in and plays its part, financialization can have no end.¹⁶⁴

Not all industrial revolutions occurred simultaneously across regions. Only two of Perez’s innovation cycles sparked a wave of globalization. However, those two episodes show a sequence of major technology adoptions across the globe. The first one is the Victorian Age, between 1835 and 1914. It grew from the Manchester cotton revolution and took off in Western Europe and North America when the logistics infrastructure began to be built on the steam engine. The second one started in the 1980s, spurred by the Silicon Valley semiconductor industry and took off across Southeast Asia with the age of information, mobile connectivity, and Artificial Intelligence. In each case, the US and UK governments were unable to rein in financialization and restore domestic production to a sustainable level. Those two technology revolutions were based on funda Mariana Mazzucato, The Value of Everything (New York: Public Affairs, 2018), 188.

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mental changes in the organization of labor; each one has triggered a permanent transfer of productive activities from the originating country to new economies, and a shift of leadership. The third analysis concerns labor. From her vantage point in the hills of Berkeley, Professor AnnaLee Saxenian has observed the migration of skilled workers from Asia to the San Francisco Bay Area during the semiconductor revolution. She has recorded the inflow of Asian engineers who fed Silicon Valley growth, their networking patterns by nationality and industry specialization, and finally the reverse migration of those engineers first to the Asian Tigers (South Korea, Singapore, Taiwan) and later to China and India.¹⁶⁵ By showing that knowledge travels in brains across the Pacific Ocean, Saxenian has provided a missing link to the international dimension of innovation adoption processes. Inspired by her seminal work, other studies on the relationship between Silicon Valley and its partner regions show how transnational technical communities create the international division of labor in knowledge-intensive sectors.¹⁶⁶ The reverse brain migration from Silicon Valley to Asia proceeded in phases. In the 1980s came the “copy exact” replica of semiconductor manufacturing plants in various regions of Southeast Asia: Texas Instruments, Motorola, and ST Micron moved their people, equipment, and capital to those regions across the Pacific. Later, Japanese and American investments enabled particularly the Taiwanese entrepreneurs to grow independent companies, such as TSMC and UMC. However, structural changes caused by industrial revolutions cannot be explained without a reference to the national industrial policies of the new countries adopting those technologies. Subsidies to attract foreign investment, the funding of education, the protection of infant industries, and proactive reverse-migration policies each played a part in the early production transfer between the USA and the Asian Tigers, China, or India. At first they joined global supply chains in industrial sectors deemed strategic. Afterwards, some of those countries became the dominant players in those industries. Moore’s model of technology adoption also works at the level of individual nations and regions.

 Described as “two-way flows of skill, technology and capital” in Saxenian and Jinn, Silicon Valley-Hsinchu Connection, 898.  “Brain drain has been transformed into brain circulation” in Saxenian, Motoyama, and Quann, Local and Global Networks, vii.

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Section 4: The Information Age The revolution prompted by semiconductors in the late twentieth century has allowed a number of corporations to grow and dominate their markets worldwide. The dot-com industry has been described as the “new economy,” to distinguish it from the “bricks and mortar economy,” composed of matter-intensive and heavy industries. In the twenty-first century Artificial Intelligence has consolidated multiple innovation waves under one broad industry and discipline, dominated by less than a dozen corporations. Ubiquitous smart phones generate terabytes of personal data through social networks and search engines. Social networks run individual data through machine learning loops, and produce results for use by corporations, governments, and automated equipment. At the dawn of the twenty-first century semiconductors, personal computers, mobile phones, the Internet, and Artificial Intelligence have triggered quantum leap changes in the life of humans across the world. The fallout of such industrial revolution spans from the way we read and write, to DNA analysis and how energy is transformed, stored, and used. Their social and political long-term consequences are equally grandiose. The semiconductor revolution in Silicon Valley and the textile revolution in Manchester followed similar patterns. Each introduced a radically new way of organizing labor. Subsequent innovations have amplified and disseminated globally the disruptive effects of the original one, enabling its global spread. In both cases building a logistics infrastructure was the leading agent of globalization. Railways and steamships the first time, and Internet and mobile communication the second time, were both an opportunity to exploit the new way of organizing labor and the carriers of new products or services. The process went through phases: reverse migration and the search for less expensive human resources have established semiconductor clusters in Southeast Asia. As complementary technologies became available, those clusters have gradually specialized and become world leaders in a number of downstream products. The diffusion of new technologies has been explained by three qualified witnesses of the semiconductor revolution: AnnaLee Saxenian, Geoffrey Moore, and Carlota Perez. Each has contributed some key elements to a globalization model. Taken together, those elements form a plausible description of how a technology revolution expands globally. Because of that expansion, demand in the new Asian clusters grew to the point where their own internal consumers have replaced demand from the originating countries. By “decoupling” from the originating countries, the new clusters, their suppliers, and customers have continued to grow independently of Western demand.

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That has been critical in the relationship between China and Brazil. Brazilian export to China has grown from US$1 billion in 2000 to US$21 billion in 2009, competing against the United States on the Chinese and Indian markets. In 2002 Brazil denounced the US subsidies towards American cotton growers, and the EU subsidies towards European sugar beet growers, at the WTO Dispute Settlement Body. It was the first time a developing economy had won a case against Western agriculture protection measures. According to Brazilian officials at the World Trade Organization, “If its key competitors are forced to reduce their subsidies, Brazil could surpass the US as the world leading agricultural exporter.”¹⁶⁷ After 2000 China enhanced its technology achievements, challenging Western scientific leadership. In 2021 China launched the first segment of an orbiting space station. A Chinese mission has successfully retrieved rocks from the moon. A rival version of GPS called Bei Dou provides global positioning services to over 50 countries. Chinese market leaders for communication, Internet services, and online finance such as Ali Baba, Tencent, or Huawei are larger than their American counterparts, and their technical performances are comparable. Separation of the World Wide Web among two or more spheres of influence was an accomplished fact in 2021, and governments were taking action to regulate their own marketplaces and service providers. One reason for the regionalization of the World Wide Web is social and political control. Between the dotcom bubble (2001) and the Great Recession (2008) social networks began to be used in reverse: no longer bottom-up to promote global pop culture and consumption, but top-down to shape public opinion and influence voters. Governments and politicians took to using social networks multiple times a day, bypassing traditional media intermediaries, to communicate directly with their electoral base. Academic studies on fake news gained momentum particularly after the 2016 US presidential elections, when the phenomenon reached mass popularity thanks to Trump’s tweets. After his presidency, Trump was for a time banned from Facebook and Twitter. International organizations have used social networks to recruit militants (ISIS, the Islamic State in Iraq), to interfere with democratic processes (Russia), or to spy on foreign diplomats and politicians (NSO software). More recently, social media driven by machine learning have disrupted the unity of debate by reinforcing highly subjective interpretations of reality. In 2020 journalist An Xiao Mina wrote on the subject: Without proper care, public spaces like the Roman Forum – designed first and foremost as a place for commercial and state business – can readily become places of exclusion, rumor,

 Hopewell, Breaking the WTO, 112.

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disease, politicking, exploitation and open violence as they steadily approach entropy. In this regard, it seems all but apropos that the Forum remains one of the guiding metaphors for the internet, because that is what we find ourselves with today. […] By the end of the Roman Empire, the Forum was sacked and ransacked by competing factions vying for political influence, and new squares arose throughout the world in an effort to decentralize power. Rising armies physically dismantled the Forum for its parts, and the site was popularly known as the campo vaccino – “cow field” – until the beginning of modern tourism.¹⁶⁸

However, this time the West is no longer at the center of the action. Some Asian emerging economies were faster than the West in adopting technologies and scaling up activities in the new economy, as manufacturers first, and as new product developers later. During the 1980s, time and again, Japanese, Korean, Taiwanese, Israeli, and (later) Chinese and Indian domestic companies became more efficient than their American and European counterparts at mass producing hardware and software for the digital age. That was due to (1) the return from California of temporary emigrants, initially with the aim of building manufacturing capacity for the US parent companies – Saxenian has clearly shown that knowledge travels with people;¹⁶⁹ (2) overseas investment and outsourcing by US and Japanese tech companies; (3) nationalist and protectionist economic policies in Asia, favoring a small number of fast-growing companies, often controlled, directly or indirectly, by centralized governments; (4) low labor costs of a disciplined and well-educated workforce; (5) stable, moderate dictatorships and the Asian culture of preserving harmony and consensus. Mature economies in the West adopted new products and services made in Asia, from laptops, to smartphones, to solar panels, and high-tech services, from DNA scanning to AI software. Western technology companies gave up control over manufacturing processes, focusing instead on the product innovation curve. The economic retreat of mature economies has affected their social stability. Wealth is more concentrated, and middle-class incomes have declined in real purchasing power since the 1980s. Manufacturing jobs have increasingly been moved from mature economies to countries with a lower cost of labor. Since the fall of the Berlin Wall, European jobs have moved to Eastern European countries, to Turkey, or to North African countries. North American jobs have moved  An Xiao Mina, The Forum We Wanted, the Forum We Got, NiemanLab Predictions for Journalism 2020, https://www.niemanlab.org/2019/12/the-forum-we-wanted-the-forum-we-got/?utm _source=Daily+Lab+email+list&utm_campaign=1c35ffb26a-dailylabemail3&utm_medium=email&utm_term=0_d68264fd5e-1c35ffb26a-396227149, accessed March 20, 2022.  Saxenian and Jinn, Silicon Valley–Hsinchu Connection.

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to Central America, India, or China. Meanwhile, documented and undocumented labor has entered the mature economies taking up marginal jobs that could not be outsourced. However, employment arrangements have shifted from regular hiring contracts to the vagaries of the “gig economy.” Temporary employment agencies have replaced unions in representing workers in permanent positions. Taxi, delivery, and hospitality are now fulfilled by piecemeal jobs done by immigrants. The displacement of value-creating jobs has resulted in lower corporate taxation whose ultimate effect has been the reduction of governments’ social expenditure. Gig contracts have reduced the fiscal and social responsibility of corporations, and the social safety nets offered by governments. Finally, Western societies, and Anglo-Saxon democracies in particular, have abandoned the role of custodians of liberal democracy, a role they fulfilled since the end of the Cold War.

Chapter Four Section 1: World Trade Disorganization The history of the World Trade Organization (WTO) in the first three decades of its life mirrors the transfer of power between mature economies and developing countries that took place in those years. Between 1960 and 2020 the developing countries’ share of Gross World Product at PPP¹⁷⁰ grew from 20 % to 60 %. That outcome marks the peak of a long climb. The postwar boom in the 1960s increased demand for raw materials, boosting their export. The oil shock of 1973 produced a general price increase. During the 1980s the relocation of industrial production from mature economies to the developing countries gained momentum. In Europe it was helped by the collapse of the Soviet Union, which opened Eastern European countries to EU membership and manufacturing subcontracting. In the United States outsourcing was led by the transfer to Asia of semiconductor production. The manufacturing boom in Asia and Eastern Europe soon created a new middle class with enough purchasing power to absorb part of their own production (decoupling). The economies of those countries, whether liberal or planned, began to challenge Western hegemony in the international trade agencies. The takeover occurred in 2019. In that year, the combined GDP of the three largest developing economies (China, India, and Brazil) accounted for 30 % of the world GDP at PPP, while the G7 mature economies (US, Japan, Germany, UK, France, Italy, and Canada) commanded a total of 29 %.¹⁷¹ In that same year, the five largest economies of Asia (China, India, Japan, Korea, Taiwan, Singapore) taken together generated 34 % of the world GDP. The overtaking, impressive in aggregate terms, looks more sober when comparing the life of individual citizens in the two zones. Average personal income in the Southern countries was still much lower than that in mature economies. India, China, and Brazil had a combined gross product like that of the G7 countries, but their population was four times larger. It was also younger, less educat-

 Purchasing Power Parity (PPP) is a ratio that makes it possible to compare the Gross Domestic Product (GDP) of different countries by expressing each country’s GDP at the local prices, and adjusting for the exchange rate. For example, PPP allows the comparison of how many goods and services may be bought in different countries for the same amount of US dollars.  Data on GDP at PPP (see note above) are taken from the IMF, and are related to October 2019, https://www.imf.org/external/datamapper/PPPSH@WEO/OEMDC/ADVEC/WEOWORLD, accessed October 18, 2021. https://doi.org/10.1515/9783110744477-006

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ed, and crammed into unhealthy shanty towns. Social safety nets, democratic practices, and the care of common goods were poor, making their social progress more fragile, and still reliant on the arbitrariness of Western technology holders. For instance, in October 2020 South Africa and India asked the WTO to allow member countries to waive intellectual property rights and know-how to produce Covid-19 vaccines. As of May 2021, most mature economies and pharmaceutical companies were still opposing the request. NGOs such as Oxfam and Médecins sans Frontières have argued that the vaccine for Covid-19 should be considered a global common good, and that enforcing intellectual property rights has the effect of slowing down the production of vaccines and delaying worldwide vaccination campaigns.¹⁷² Barring sudden collapses, the difference between Southern and Western income per head will shrink over time, as the two blocs converge. To the inhabitants of Southeast Asia every change carries an improvement in the quality of life. In 2020, for the first time since 1650, the population of China did not increase.¹⁷³ Even though economic performances might narrow, social and cultural differences prevent a global standardization along the Western model. Hence, as much as the Western standards of living might shrink, differences will not disappear soon. However, Western mature economies may become quite different places: the lower cost of labor in China, India, and Southeast Asia has caused a massive transfer of manufacturing activities from G7 countries, and that transfer is not likely to stop until Asian excess labor has been absorbed. On the other side, Western middle classes have been losing real purchasing power since the OPEC inflation. The quality and extent of public services has also decreased, following the privatization policies of the 1980s. With few exceptions, the relocation of manufacturing activities to Asia resulted in de-industrialization of the West and, coupled with aging, a reduction in the share of economically active population. Meanwhile, growing immigration of documented and undocumented laborers from the South and the East has increased the “reserve army” in mature economies, creating a dual labor market reminiscent of earlier stages of development. The combined effect of those trends – migration, aging, the gig economy, and de-industrialization – has been a loss of stable employment, de-unionization, and new forms of labor intermediation. The labor market in mature economies has become more flexible because jobs available are less qualified. Workers in 2020 accepted lower wages in response to unemployment, more than they did in previous downturns, such as in the 1970s and 1980s. That

 https://peoplesvaccine.org, accessed March 20, 2022.  Figure 7 in Section 2 of this chapter.

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may be a sign that, for the first time, the decrease in standards of living was perceived as permanent. In fact, employment expectations of the Covid generation seem to have adjusted downwards, compared to those of the Millennials. Meanwhile, income inequality increased. Part-time contracts, seasonal jobs, intermediation, and the gig economy of Uber, Deliveroo, Airbnb, and the like reduced the fiscal responsibility of corporations, and the stable funding of social safety nets. As a result, extraordinary funding and “helicopter money” have become ordinary practice whenever a government faces emergencies of a sanitary, environmental, or financial nature. Emergencies are seldom funded with a longterm perspective, because democratically elected representatives are no longer representing homogeneous constituencies or well-defined parties in a social contract. National budget deficits increased as emergencies piled up, the last one on top of the previous one. The economic overtaking by Southern countries measured by GDP was mirrored by their gradual takeover of the World Trade Organization (WTO). That was of particular significance as the WTO had been created by Western economies for the untold purpose of maintaining control over international trade. The WTO embodied Hayek’s idea of a supranational agency¹⁷⁴ capable of imposing global rules upon countries, whose elected governments might implement policies in contrast with free trade. But the phantom of democracy has haunted Hayek to his posthumous achievement. In 2015 the WTO trade dispute board decided that tariffs levied by the United States and the European Union to protect their agriculture were unlawful. Between 2012 and 2020 the director-general of the WTO was a Brazilian manager. The director-general since March 2021 has been economist Dr. Ngozi Okonjo-Iweala, a woman from Nigeria. The takeover of the WTO by the developing world deserves to be told in some detail. The story began in 1947, when the GATT was established. Its primary purpose was re-starting international trade after the Great Depression and the two world wars. The GATT’s founding partners were 23 countries, but decolonization quickly added to its membership. As the number of countries in the United Nations grew from the original 51 to 193 in 2020, so the number of GATT member states also grew from 23 to 128 in 1995. In that year, GATT was transformed into the WTO. The World Trade Organization had 164 members in 2021. The GATT and the WTO were run on the principle of one country one vote, unlike the United Nations, where a Security Council of five permanent members and ten elected members has the right to veto resolutions by the General Assembly, and unlike the World Bank and the International Monetary Fund, where

 Chapter Two, Section 3.

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votes are proportionate to the capital subscribed. Due to the rapid growth of membership after the war, by 1970 most GATT members were emerging producers of foodstuff and raw materials, exported and consumed by mature economies. When Arab oil producers introduced the embargo of 1973, they not only caused a deterioration of consumers’ purchasing power in the West, but they also started a trend of improvement in the terms of trade for the South, through a process of imitation by other producers of raw materials. In 1974 the United Nations promulgated the NIEO resolution¹⁷⁵ (New International Economic Order) and issued a Charter of Economic Rights and Duties of the States. At the time, the president of Tanzania, Julius Nyerere called NIEO “the trade union of poor nations.” Its stated intention was to create more balanced relationships among sovereign states, allowing the developing economies to trade at a par level with advanced industrial countries and multinational corporations. As an Indian delegate to the GATT put it: “Equality of treatment is equitable only among equals.”¹⁷⁶ NIEO asserted that the economic development of the Global South might accelerate if developed economies would accept to restrain their own negotiating powers and voluntarily share investments and technologies. NIEO was the first organized attempt to leverage the democratic rules of governance of supranational institutions in favor of the developing economies, and the first organized challenge to the postcolonial order. It asserted the economic sovereignty of independent nations, a principle antithetic to the globalism of neoliberals. In fact, Building on Hayek’s theories, his students and followers at the GATT constructed a counter theory to the NIEO that they hoped would prevent what they called “economic decolonization” from disrupting world order from the margins.¹⁷⁷

The OPEC embargo and the NIEO demand for more favorable treatment coincided with two reports issued in 1972 and 1974 by the Club of Rome: The Limits to Growth and Mankind at a Turning Point. By projecting consumption patterns, economic growth, and demographic trends, a team of MIT researchers produced the first comprehensive model on the exhaustion of finite resources.¹⁷⁸ Since nat-

 https://digitallibrary.un.org/record/616826?ln=en, accessed March 20, 2022. Declaration adopted by the General Assembly without vote.  Quoted in Slobodian, Globalists, 219.  Slobodian, Globalists, 23.  “Since ours is a formal, or mathematical, model it also has two important advantages over mental models. First, every assumption we make is written in a precise form so that it is open to

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ural resources were largely produced by developing economies, The Limits to Growth provided supporting arguments to the claims of both OPEC and the NIEO. The OPEC embargo increased the price of oil and started a decade of global inflation. As a result, the buying power of the dollar fell from 1 in 1973 to 0.4 in 1984, while the quadrupling of oil revenues generated a spike in investments in the Global South. Nevertheless, the NIEO declaration and the Club of Rome reports were ignored. Western governments were mostly concerned with the immediate consequences of the oil shock on domestic economies: inflation, social imbalance, economic recession, unemployment, and investments in the Southern countries, funded by the petrodollar revenues. It took Ronald Reagan (president of the USA between 1981 and 1989) and Margaret Thatcher (prime minister of the UK between 1979 and 1990) a whole decade to diffuse the inflationary pressures and quell the social conflict brought to the West by the deteriorating terms of trade. As stated in Chapter Three, Hayek is acknowledged for having inspired both Reagan and Thatcher and was awarded both the Nobel Memorial Prize¹⁷⁹ and the presidential Medal of Freedom. By the end of the decade global order seemed to be restored: in 1987 Reagan and Gorbachev signed the Intermediate-Range Nuclear Forces Treaty. In 1989 the Berlin Wall fell. While those epoch-making events were taking place in Moscow, Berlin, Washington, and Brussels, the semiconductor revolution was quietly underway in Silicon Valley, building the technology platform of the second globalization. In retrospect, NIEO was an unsuccessful attempt by developing economies to encourage the global social responsibility of corporations. OPEC, on the other hand, proved that a show of force by a cartel of commodity producers could attain success, by shattering the nerves of global markets and governments. Subsequent events at the WTO will confirm the paradox: developing economies were more likely to succeed by using the same tools of mature economies, rather than by naively questioning the neoliberal axioms. A lesson was learned, but the verdict was postponed by two decades. All serious concerns for a sustainable future were ignored, while neoliberal theorists were presented

inspection and criticism by all. Second, after the assumptions have been scrutinized, discussed, and revised to agree with our best current knowledge, their implications for the future behavior of the world system can be traced without error by a computer, no matter how complicated they become,” Meadows et al., The Limits to Growth, 21. What was a standard disclaimer at the time, may seem a laudable precaution in the present age of inexplicable black boxes in machine learning algorithms. See Chapter Three, Section 2.  Together with his main opponent, Gunnar Myrdal.

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a Pyrrhic victory. The real winners of the day were the oil and gas companies, and the Arab sovereign wealth funds. In 1995 the GATT merged into the WTO. Whereas the GATT had been only an international treaty, the WTO was a permanent organization with 600 employees, based in Geneva. The WTO’s authority over participating states is substantial: the organization provides a Dispute Settlement Body whose decisions are binding for all member states. The scope of the GATT was limited to reducing tariffs. The WTO’s aim is to harmonize policies across borders, eliminate national subsidies to agriculture and specific industries, and open participating countries to foreign investments. The WTO expands its scope to agriculture, service industries, intellectual property, and foreign investments. Developing economies are expected to adopt established product and process regulations concerning labor, the environment, and healthcare. GATT rules targeted primarily policies at the border (such as tariffs) and did not interfere significantly with the autonomy of national governments and internal domestic policy making. However, the new reach WTO rules to “beyond the border” measures (as well as their accompanying enforcement mechanism) was intended to close off many of these prior flexibilities and deliberately constrain national policy making.¹⁸⁰

In many respects, the WTO is the final embodiment of the original neoliberal program. Since the 1930s neoliberals had argued that a global free market provides for the best utilization of global assets (capital, labor, natural resources). National governments, however, might resist participating in global markets, because they need to maintain the consensus of particular domestic interests, such as industry lobbies, trade unions, or farmers. Furthermore, in fragile democracies populist governments might satisfy those particular interests as a means to retain political power, thus generating a vicious circle. To fence off that risk, a supranational agency should be given authority to enforce end expand global free trade agreements, overcoming the resistance of populist governments. Holding national governments to commit to free market rules and accept the supranational agency’s authority was the neoliberals’ strategy. The WTO came to life at a time of brisk change for the American economy. In 1995 the semiconductor industry had reached global proportions. Outsourcing of manufacturing processes to Asia involved both tech industries and traditional sectors. The new economy and the dot-com bubble were close to peak, and output per hour in non-farm activities began to grow because of informatics. Technology-based companies with a strong immaterial component were attracting in-

 Hopewell, Breaking the WTO, 55.

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vestments, while the “old economy” was outsourced through global supply chains. The WTO was deemed to be the authority ensuring that the global supply chain would not be hindered by the interference of national governments: “The WTO was at the heart of the neoliberal revolution sweeping the globe, and its officials saw themselves as writing a new constitution for the global economy.”¹⁸¹ Turning the neoliberal agenda upside-down, at the 1996 ministerial meeting in Singapore the United States proposed to extend to developing countries the labor regulations and the environmental protection measures in use with mature economies. The proposal was met with furious resistance by the developing countries. It was perceived as a frontal attack of their unique manufacturing advantages, namely, low-cost labor and absence of environmental constraints. It was in fact a protectionist proposal camouflaged by humanitarian and environmental concerns. But it was also a late attempt to reverse, or at least slow down, the outsourcing process, which was causing unemployment and de-industrialization among the rust belts of mature economies. That blend of good intentions and opportunistic protectionism was awkward, not least, because it was preached to the wrong choir: the temple of neoliberal doctrine. For that reason, its proponent could not be deemed entirely sincere: the proposal had merit, but it should have been packaged more transparently. In 1998, during the WTO negotiations known as the Uruguay round, the United States Congress decided to implement section 301 of a law passed in 1974, the Trade Act. Section 301 authorized the government to block imports from countries that violate international trade agreements. In practice, the United States asserted its right to unilateral retaliation, should the Dispute Settlement Body of the WTO prove unable to enforce compliance. In the same breath, the United States proposed to make the WTO dispute resolutions more binding. The other members agreed, hoping to diffuse the threat of unilateral retaliation. Hence, the principle of single undertaking was adopted, stating that all aspects of every agreement would be binding for all WTO members. Furthermore, the organization’s authority was extended to new areas, particularly services and intellectual property. The US’s muscle flexing was taking place in a power vacuum. The Soviet Union no longer existed, and the emerging economies were still depending for their growth on their booming exports to Western countries. The inclusion of intellectual property and services among the binding matters authorized mature economies, by far the largest holders of intellectual property, to impose licenses and extract royalties anywhere in the world. That was particularly directed towards China, where intellectual property jurisprudence and en-

 Hopewell, Breaking the WTO, ix.

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forcement had been loose, and India, a big exporter of services to the West. The United States were also attempting to cure the trade balance, by compensating industrial deficit with intangibles surplus. The US action might have appeared a sign of diplomatic and strategic power. In fact, it was a sign of economic weakness. The election of a new director-general in 1999 resulted in a compromise, showing that the center of gravity was shifting. The mandate was split between a New Zealander and a Thai. The most visible indication that the organization was not progressing according to plans did not come from issues of internal governance. It was a macroscopic demonstration of civil society known as the Battle of Seattle. During four days in November 1999, 50,000 protesters disrupted the WTO ministerial meeting, and caused its cancellation. The protests succeeded in disrupting the negotiations, but the primary cause of the failure to launch the round lay among the negotiating parties themselves […] US President Bill Clinton made statements to the press about imposing labor standards through the WTO that provoked a massive reaction by developing countries. The Ministerial ended in collapse when virtually all developing countries walked out in protest.¹⁸²

The attempt to impose labor standards on developing countries was a repeat of the 1996 advances in Singapore. It might have been a sensible proposal by a Democratic president concerned about unemployed American workers, whose jobs were at risk because of increasing outsourcing to Asia. Those workers, and their unions, were among the Seattle protesting crowd. It was, however, a poorly chosen audience: workers’ rights were neither high on the agendas of trade negotiators from the (mostly un-democratic) developing economies, nor an item in line with the WTO neoliberal mandate. Hayek’s WTO could conceive human rights only in the old-fashioned liberal sense, as the protection of economic freedoms, property rights, and the rule of law. The WTO, however, adopted another Clinton suggestion and re-branded: the subsequent round of negotiations was dubbed “the Doha Development Round.” That was, however, another “blatant act of public relations” rather than a good faith attempt to meet the demand of the developing economies. In the aftermath of Seattle, the main concern of the WTO’s management was not the protesting crowd in the streets; it was the reaction of developing countries within the General Council. When the next round of negotiations was launched at Doha in November 2001, the WTO agenda was still driven by the US and EU, with support from Japan and Canada. The ministerial meeting

 Hopewell, Breaking the WTO, 73.

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took place shortly after the World Trade Center attack of 9/11. A few weeks before the meeting President Bush declared “Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists.” In a tacit show of solidarity, participants did not object to the agenda that the EU and the US had prepared. It was apparent, however, that the West had been setting at least three traps for itself; the new commitment to economic development, the principle of single undertaking set in 1998, and the one-state-one-vote rule. At the 2003 meeting in Cancun those traps were sprung simultaneously. For the first time since the NIEO, a group of developing countries had formed a coalition, the G20-T. India and Brazil led the group. China kept a low profile, being the main target of Western frustrations. An agricultural plan presented by Europe and the United States triggered the indignation of G20-T members. The plan foresaw a reduction of import tariffs by the developing countries, while leaving unchanged the export subsidies paid by the Unite States and Europe to their own farmers. The occasion was too good to be passed over. The coalition was numerous and compact, as the G20-T represented more than half of the world population and two thirds of its farmers. Its leaders were well trained managers of Brazilian mega-farms and high-ranking Indian bureaucrats. They had come to Cancun well prepared, with a series of “technically sophisticated” and “astute”¹⁸³ counterproposals aiming at dismantling the direct and indirect subsidies enjoyed by Western farmers. The action over agricultural subsidies should not have surprised Western negotiators. Already in September 2002 Brazil had launched two salvos, in the form of dispute settlement requests: one against Europe sugar beet producers, the other against US cotton subsidies. The superficial attitude of Western negotiators towards unresolved agricultural issues revealed their underestimation of the power of the majoritarian rule, as well as a lack of understanding of the extent of “decoupling.” The increasing trade among developing countries themselves had reduced their dependence on trade with the West: The emergence of the G20-T at the Cancun Ministerial marked the end of the era in which the US and EU could drive the agenda. Under Brazil and India’s leadership, the G20-T transformed the negotiations into an open battle divided along North–South lines […] After 2003 Brazil and India effectively displaced Japan and Canada from the inner circle of WTO negotiations […] The change in the composition of the inner circle at the WTO is far from superficial but reflects a major change in power relations at that institution. The creation of the WTO represented the last gasp of American hegemony within the multilateral trading system.¹⁸⁴

 Hopewell, Breaking the WTO, 81.  Hopewell, Breaking the WTO, 86, 73, and 76.

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The change in power relations at the WTO was the result of a well-conducted diplomatic action. But that action succeeded because underlying material conditions had changed. The Cancun meeting of 2003 marked indeed the end of an era. Brazil had become a main provider of food to China and other Asian countries, by applying large farm technology to the Amazon rainforest. Its megafarms inherited the land-grab attitude of the Louisiana cotton plantations in the 1800s, and the technology-intensive practices of North American corporations. They certainly did not resemble small subsistence farmers of Asia or Africa. But, precisely for that reason, they allowed China to postpone the modernization of its own peasant sector, retain employment in subsistence agriculture, and focus instead on advanced manufacturing and high technology. Brazilian exports to China grew from US$1 billion in 2001 to US$64 billion in 2020, and 53 % of its total exports went to Asia. Since 2018 China has been Brazil’s first export destination, importing from Brazil twice the amount Brazil exported to the USA. Trade integration among emerging countries was not limited to commodities. Brazil’s main imports were agricultural equipment (US$21 billion) refined petroleum (US$12 billion), and fertilizers and pesticides (US$8 billion); China was Brazil’s main trading partner, both for imports and exports. The United States provided the bulk of agricultural equipment. In 2019 Brazil was the third largest exporter of agricultural products, after the US and the EU. Brazilian agriculture contributed to 40 % of its export. In that year, Brazil was the largest world exporter of coffee, orange juice, beef, poultry, tobacco, and can-based ethanol. The Brazilian food processing industry includes world leaders: JBS S.A., for example, owns 150 meat processing plants in 15 countries, employs 250,000 workers, and is the second-largest meat processing company in the US. Former agriculture minister Blairo Maggi controls the largest private soybean company in the world. In 2006 Maggi received the Golden Chainsaw Award from Greenpeace for being the Brazilian who most contributed to the destruction of the Amazon rainforest. The growth of Brazilian professionally managed mega-farms was made possible by the adoption of modern agriculture practices supported with investments, technology, and deforestation. It was propelled by the growing demand for foodstuffs by Asian developing economies. Growing trade among developing countries was both a reason for joining forces with China and India, and an opportunity to gain distance from the US and the EU. The rise of Brazilian agriculture has taken place through destroying and converting the Amazon rainforest and the Cerrado savanna into modern large-scale intensive cattle and agriculture farms. Disruption of native biota, species, and

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native population has been ongoing on a staggering scale. That was not the most enticing business card Brazil could present to its Asian partners. To acquire credibility in their eyes, Brazil had to share the G20-T leadership with a partner of proven anti-colonialist culture; even better if its farmers were small landowners practicing traditional agriculture. India was the ideal partner to balance the negative image Brazil might project to the smaller G20-T partners. The alliance was of a purely tactical nature; a Brazilian participant in the negotiation described it as “a kind of very delicate embrace where you cannot leave each other,” while an Indian negotiator defined “a coalition of the unwilling […] but we know between the two of us (India and Brazil) there is a formidable force that the G2 (US and EU) can’t ignore.”¹⁸⁵ That force consisted of the many votes of developing countries. A similar pool of votes had been organized around another coalition, the G33, led by India, whose aim was to protect rural livelihoods and provide food security. At the 2008 ministerial meeting G33 members obtained the right to engage in public food stocking. In a subsequent round in 2013, against the strong opposition of the United States, the G33 were able to extend the program to include subsidized food for the poor, and minimum price support for farmers.¹⁸⁶ The G33 vision, led by India, was opposite to the agriculture of Brazilian mega-farms. India was protecting traditional rural societies from the large international commodity traders, of which the mega-farms were egregious examples. Yet India needed Brazil to legitimize it standing as a counterpart equal in status to the Western members of the WTO. On the other hand, Brazil needed India to dilute its negative image as a social, anthropological, and environmental threat. Nevertheless, after the meeting in Cancun, India and Brazil cemented their gains: Brazil and India both invested heavily in staff and resources dedicated to the WTO. They now have among the largest delegations in Geneva, supported by highly trained officials in their capitals, and their negotiating teams are amongst the most skilled, active, and knowledgeable at the WTO […] Both countries were able to provide the highly sophisticated expertise and technical capacity […] that most other developing countries lacked.¹⁸⁷

China became a member of the WTO in 2001 but took a more active role only after the 2008 ministerial meeting in Geneva. It should not surprise if a centrally planned economy is not active in an organization whose aim is the development

 Hopewell, Breaking the WTO, 86.  Hopewell, Breaking the WTO, 88.  Hopewell, Breaking the WTO, 91.

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of a global free market. For the United States, China’s participation in the WTO was considered an opportunity to negotiate a reduction of its trade deficit. In the 1990s each country saw the other as a potential trade partner. But China obtained the largest gains. Between 2001 and 2007 US imports from China grew from US$103 to US$340 billion and the trade imbalance from US$80 to US$274 billion. In 2000 total Chinese exports were one third of US’s. By 2009 China was exporting more than the US. By 2015 the trade surplus had allowed China to accumulate US$4000 billion in foreign currency reserves, while empty containers were forming ever bigger pyramids in Western ports. After their success in the early dispute on cotton and sugar beet, recourse to the conflict resolutions board became common practice for developing countries. Binding dispute resolutions were another tool – besides democratic voting and packaged agreements – the South was turning against their former WTO bosses. In 2010 India won a dispute over patent coverage of generic pharmaceutical products. The European Union had confiscated products in transit through European ports, with destinations in third countries. India won the dispute because Europe was in violation of the norms for the free circulation of merchandise. In the ten years following 2003, China, Brazil, and India undertook 28 actions against the United States, and 19 against the European Union. The arguments were the most disparate: environmental standards, intellectual property, tariff and nontariff barriers in a vast array of industries. The formal WTO takeover by developing economies was sealed with the nomination of the Brazilian Roberto Azevedo as director-general in 2013, and his confirmation for a second term in 2017. Azevedo left the WTO in 2020 to take a position as executive vice president and director of corporate affairs at Pepsi Cola. The rise of environmental consciousness, the wakeup call on finite resources, and the alliance of developing economies with the aim of improving their terms of trade, planted the seeds of a globalist vision that would become dominant in the following 20 years. That globalist vision is substantially different from the globalism of neoliberals. The former has informed the progressive Web culture, as promoted by the generation of Greta Thunberg and the crowds participating in the 1999 Battle of Seattle. The latter is the globalism of multinational corporations, as represented by the Davos World Economic Forum and the McKinsey Global Institute. As the Brazilian example has shown, that divide did not separate countries by stages of economic development. Instead, it was a fracture between the mostly large corporations that benefit from organizing their processes and markets through global supply chains, and the communities that, in a variety of positions, are at the receiving end of global restructuring. These may be rust-belt workers left without a job because their factories have

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been moved elsewhere. Or urbanized peasants working in overcrowded sweatshops in Asia. They may be Western farmers forced to abandon marginal lands because their curtailed governments’ subsidies are no longer enough to sustain international price competition; or native people in the Amazon rainforest, displaced by the deforestation practices of mega-farms. There is, however, a striking difference between those two constituencies. The corporate world is homogeneous and connected across the world through mighty organizations such as the World Economic Forum, McKinsey, or the IMF (International Monetary Fund). Instead, farmers in Iowa are bamboozled by a cocktail of propaganda, opioids, and subsidies, while their natural allies in Amazonia are chased by fire from their land. Not only do they speak different languages, but they are also unaware of sharing a common antagonist. After 2011, American presidents as diverse as Obama and Trump have vetoed the nomination of new members to the appeal committee of the Dispute Settlement Body, arguing that the WTO was no longer protecting American interests. During the Trump presidency (2016 – 2020), the action of Director-General Azevedo (2013 – 2020) was limited by an incomplete Dispute Settlement Body and the disenfranchising by the United States. In the eyes of both American presidents, freezing the body would prevent further damaging deliberations. Azevedo resigned one year before the end of his second term. It was only after the election of President Biden that a new director-general was appointed in March 2021. A lady economist from Nigeria, Dr. Ngozi OkonjoIweala worked for 25 years at the World Bank and was twice Nigeria’s finance minister. Dr. Okonjo-Iweala had specific experience on epidemics, having chaired the Global Alliance for Vaccination and Immunization. Vaccines, she said, should be a global public good, not because of social justice, but as a matter of sound health policy. The Global Vaccine Alliance has experience negotiating with governments and pharmaceutical manufacturers and has developed a well-organized platform on a continental basis. However, a vaccination program on a global scale has never been attempted. Through the leadership of Dr. Okonjo-Iweala for Covid vaccination worldwide, the WTO might cut itself a new role as global agent for coordination and cooperation between the public and private sectors on a dramatic issue that can only be resolved through a genuinely global approach. That agenda is almost diametrically opposed to the one envisioned by neoliberals, who imagine the WTO as a barrier to prevent the mingling of democratic governments with the markets for labor and resources. The history of the WTO seems to be far from over. And Slobodian was correct, when he wrote that the central problem of the WTO was the absence of an acknowledged legitimating purpose. Perhaps Dr. Okonjo-Iweala has brought

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that purpose. Slobodian concluded with a prediction: once established, “democratic legitimacy it seemed, could not be designed away.”¹⁸⁸

Section 2: The Great Divergence Global trade shrunk on four occasions early in the new millennium: with the financial crisis of 2008, with the “Chinese slow-down” of 2015, and with the Covid-19 pandemic. The Ukrainian invasion with its baggage of sanctions, foodstuff and fuel disruptions, was the straw on the camel’s back. Figure 6 shows the value of world export by merchandise, while Figure 7 shows exports by country for the same time intervals. The curves in the two figures have similar shapes, showing that trade was synchronous worldwide. The overall curve from 2000 to 2020, however, reveals that global trade has peaked. Each short-term slump was caused by a different obstacle, but the compounded effect has been a flattening of the curve. There is evidence that, after 40 years of export-led growth, sometime around 2008 the Chinese government shifted towards the growth of internal demand. This coincides with a more active participation within the WTO. Table 1, derived from Figures 6 and 7, shows average changes in export values for the world and for China, over three periods: before the 2008 crisis, between the crisis and the “Chinese slow-down,” and between slow-down and Covid-19. Table 1: Average changes in export values for the world and for China % Annual change World export value China export value China export as a share of its GDP

 – 

 – 

 – 

+ % + %  %

+ % + %  %

+ % + %  %

Sources: World export value and China export value – elaborations of data shown in Figures 6 and 7; China export as a share of its GDP – The World Bank, Indicators, https://data.worldbank. org/indicator/NE.EXP.GNFS.ZS?locations=CN, accessed March 21, 2022.

Export trade from China grew almost three times faster than world export up to 2008, half that of world export between the crisis and the “slow-down,” and in line with world export after the slow-down. The bottom row of Table 1 shows China’s exports as an average share of its GDP. Between 1975 and 2006, the value of

 Slobodian, Globalists, 279.

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Figure 6: World exports by merchandise, 2000–2020. Source: International Trade Statistics, Merchandise exports by product group – annual (million US dollars), https://stats.wto.org/, accessed March 21, 2022.

Figure 7: Total exports – China, European Union, India, United States of America, 2000– 2020. Source: International Trade Statistics, Merchandise exports by product groups – Reporting Economies –annual (million US dollars) https://stats.wto.org/, accessed March 21, 2022.

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exports grew faster than the value of GDP. In 2004 Asia intraregional trade surpassed its trade with mature Western countries.¹⁸⁹ In 2006 China’s export reached a peak of 36 % of its GDP, but that ratio has steadily declined ever since, down to 18 % in 2019. It is probable that a reversal of such proportions and consistency over three five-year plans, in a centrally planned economy, is the result of long-term government decisions. China’s 14th Five-Year Plan (2021– 2025) acknowledged that the Chinese economy and society need to be insulated from international challenges and the risk of instability. Without openly encouraging economic decoupling the plan describes a “dual circulation”: a domestic economy independent from an external one. China should rely more on domestic science and technology, but also on domestic demand, rather than export, to avoid finding itself in full overproduction mode while its Western trading partners are facing an under-consumption crisis. Reporting on the 14th Five-Year Plan, the European Chamber of Commerce in China warned Western companies against an increasing “decoupling risk,” particularly in semiconductors and in service areas where China aims at increasing its independence – such as data management, standards, Artificial Intelligence, and ICT – and to foresee a future of “patchwork globalization.”¹⁹⁰ The transfer of power at the WTO signaled a declining role for the West. The trade slow-down confirmed that the second globalization had reached a peak and will now begin to reverse its course. Chinese planners were preparing for that eventuality by enabling the Chinese domestic market to absorb the excess capacity resulting from the decline in global demand for Chinese industrial products. The volume of trade is a measure of integration among economic regions, and trade flows are an indicator of their reciprocal standing. Trade fluctuations also predict future patterns. For instance, the Black Sea area contributes about 30 % of global exports of wheat, 65 % of sunflower, and roughly one third of gas and fertilizers. How does the Ukrainian war affect prices and flows of fossil fuels and foodstuff in the Pacific Triangle? Commerce is not the only variable in a relationship among nations. Previous chapters have shown that mercantilism is but one face of globalization. Technology, demography, culture, and social structures are other predictors of long-term equilibrium and change. A documented investigation of those issues is beyond  Khanna, The Future Is Asian, 62.  European Union Chamber of Commerce in China and Merics, Decoupling, Severed Ties and Patchwork Globalization, January 2021, https://merics.org/en/report/ decoupling-severed-tiesand-patchwork-globalization.

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the scope and timing of this essay; the challenge China has mounted to the Western leadership of the world economy has generated volumes of assorted literature, too abundant and sometimes too ideologically charged to be surveyed here. The remains of this Chapter and the next one will briefly touch on some non-mercantile variables affecting the soft -landing of this de-globalization: material history, demography, strategic commodities and components, and self-perception of the Western man. For instance the ability of regions to control strategic materials and components would help in understanding their industrial policies. Two examples are the mushrooming of semiconductor fabs across Southeast Asia in the 1980s, and the mining of rare earth elements in Latin America and Africa in the new century. They will be discussed in the next chapter. One question has puzzled historians attempting to explain the growing distance between standards of living in Europe and Asia in the modern age. The issue is known as the Great Divergence, and its interpretations have shaped a broad debate between Western and Asian historians. According to Fernand Braudel, asymmetry of information makes a comparison of past standards of living across continents unreliable: the West invented historiography. Western historians accurately comb the past through a rigorous investigation of sources. On the contrary, only recently have Asian historians begun to study their own past using an investigative approach to primary sources. Up to the nineteenth century, historiography has played a largely ritualistic and apologetic role, both in Europe and in Asia. Furthermore, Asia is an imaginary unit, whose space and time are highly fragmented. The sentiment of a unified Asian identity is still unripe, and so are its historical analyses.¹⁹¹ For more than one reason, therefore, the Great Divergence belongs to the realm of contentious issues. Marc Bloch¹⁹² explains the information asymmetry: the sacred books of Jewish and Christian traditions are history books. Jews tell the history of their tribes, the lives of their kings and prophets. Christian liturgy commemorates the earthy life of the Son of God, and episodes of the lives of saints. The journey of humanity, between fall from Heaven and Final Judgment, is a metaphor of individual life. The drama of sin and redemption – the central meditation of Christians – unfolds through time. So pervasive is history in the Western mind that, until the nineteenth century, natural history was the common appellation of life scien “The pan-Asian anticolonial movements of the nineteenth and twentieth century inspired Asians to rediscover a common spatial and political understanding of Asia,” Khanna, The Future Is Asian, 74.  Marc Bloch, The Historian’s Craft (New York: Knopf, 1953).

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ces – witness the Natural History Museums around the globe. To the pure theist, concludes Bloch, inner revelation is sufficient to believe in God. Not so for the God of Christians. Unlike Greek and Roman polytheistic religions, all main Christian dogmas and sacraments are based on events that take place in historic time and unfold through an orderly time sequence. Every good Christian is supposed to be familiar with those historic facts. Bloch and Braudel followed a practice of historiography describing the daily life, which they described as “material civilization.” History of material civilization outside of Europe has yet to be written. Existing non-European history reflects apologetic pride, political bias, or nationalistic aspirations. In China, for instance, every dynastic change requires a re-classification of the previous dynasties: The acts and decisions of the Prince and of his council are justified or condemned through recourse to precedents, that is to say, by interpreting historical facts. Acts and decisions will be judged by the Sky and the People as follows: A wise man, having produced a historic fact, will demonstrate that it was in fact analogous to the present one. He will then proceed to describe what had been the judgment of the Sky and the People in that predicament. That theory had a serious consequence: it prevented the development in China of a critical historical attitude. It caused the conceiving of history as a continuous adaptation of the past, as an effective means to organize the present. The most curious parts of Tong Tchongchou [Dong Zhong Chu, the primary promoter of Confucianism] are those where he establishes the principle that to each change of dynasty follows a re-classification of the previous dynasties.¹⁹³

On the other hand, modern Asian historians object to the use of Western categories and examples: “Given Asia’s rich historical record of inter-civilizational interactions, it is odd when Western scholars make analogies to European History to explain Asian states’ behavior.”¹⁹⁴ For instance, the role of Christianity in setting history as a homogenized description of events may be contrasted with the role of Asian religious traditions in providing for a stable coexistence among diverse faiths: The fundamental differences among Asian dominant religions (the traditional Buddhism, Zoroastrianism, Vedic Brahmanism, Shintoism, plus Islam and Confucianism) are the reasons they have been able to coexist in stability: they are so dissimilar, yet each is so numerically robust, that conquest of one by the other is both spiritually unthinkable and logistically impossible.¹⁹⁵

 Marcel Granet, La pensee chinoise (Paris: Editions Albin Michel, 1968), 468 (my translation).  Khanna, The Future Is Asian, 76.  Khanna, The Future Is Asian, 71.

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Both approaches raise questions: material civilization is a recent departure from a long Western tradition of apologetic history. On the other hand, the recent territorial expansionism of China does not match the description of a regional power peacefully coexisting among diverse peers. And the violent suppression of religious minorities in India is far from “spiritually unthinkable.” Is it possible that a rapidly increasing population competing for space and resources has shrunk the spatial buffers and the cultural tolerance once permitted by the vastness of Asia? In 2001 the United States had a GDP of US$1.3 trillion and a trade deficit with China of US$83 billion. It seemed that inviting China to join the WTO would have been a way to control the damage: President Clinton argued that globalization was Americanization, and it was the future. Moreover, the American and global foreign policy elite was convinced that China was rapidly dismantling its state-economy and moving to imitate the United States, the European Union, and Japan. Like Bush Senior […] the entire Western intellectual world was sure it knew better than the CCP (Chinese Communist Party) leaders what they were really up to.¹⁹⁶

By 2018, the United States’ trade deficit with China had grown to US$400 billion, largely a consequence of business decisions made by American corporations to relocate millions of strategic jobs and knowledge to a low labor cost country.¹⁹⁷ As a result, the US had 5 million more unemployed, about 2 million opioid addicts, and 50,000 deaths from opioid overdose.¹⁹⁸ That is but a small example of the danger of adopting Western categories when analyzing Asia. As long as it will be framed by cultural biases, the Great Divergence will remain an academic debate between European and Asian historians. Between material civilization and a tolerant religious coexistence, which is a more appropriate indicator of the quality of life in the past 500 years? While waiting for a new generation of global historians to overcome cultural biases, and develop common measurements, which may make possible the comparison of the socioeconomic achievements of both sides, a couple of long-term trends may provide some clarity. One is demography, the other is the foodstuff terms of trade. Population growth provides a rough but reliable indicator of social development and of standards of living. When Europe began its “Renaissance” in the sixteenth century, India, China, and Western Europe had between 80 and 110 mil-

 Clyde Prestowitz, The World Turned Upside Down (New Haven, CT: Yale University Press, 2021), 73.  Prestowitz, World Turned Upside Down, 3.  In the darkest times of its recent past China had between 4 and 12 million opium addicts; and Britain fought two wars (in 1841 and 1856) to advance its right to legalize trade in opium, and exempt it from Chinese import duties.

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Figure 8: Population growth in China, India, and Western Europe, 1–2020 AD. Sources: Population 1960–2020 (all countries): https://databank.worldbank.org/reports.aspx? source=2&series=SP.POP.TOTL&country=#; population before 1960: China: https://en.wikipe dia.org/wiki/Population_history_of_China; India: https://en.wikipedia.org/wiki/Demogra phics_of_India; W. Europe: Angus Maddison, The World Economy: A Millennial Perspective, OECD, 41, https://read.oecd-ilibrary.org/economics/the-world-economy_9789264189980-en# page41; all websites accessed March 22, 2022.

lion people each. Population curves moved roughly parallel until the 1950s, when Western Europe’s population began to flatten out at about 700 million, while population in India and China kept growing. The urbanization of peasants, import of foodstuffs, and mechanization in agriculture have reduced population growth in industrialized Europe over the course of two generations. Figure 8 shows the impact of Western European industrialization in the first half of the twentieth century. World population in 1960 was 3 billion, in 2020 it was 8 billion. Most projections foresee a global peak in 2060, at 10 or 11 billion. China seems to have already peaked in 2020, following a path like that of Western Europe in the 1960s. China in 2020 still has a virtual surplus labor of subsistence farmers. European low-income farmers survived in southern and eastern regions until the 1960s, but were absorbed by urbanization, emigration, food import and the industrial “miracle” of the post-WWII era. Population in China and India has continued to grow, and the impact of higher disposable income and urbanization has not yet been reflected in population statistics. However, in 2020 Chinese population stagnated for the first time

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since 1700. The seventh population census of 2020 revealed a total growth rate of 5 % over ten years. It seems that China has reached the point of economic maturity where population reaches stability. The United Nations and other agencies predict that India and Africa will keep growing until 2070 and 2100 respectively. The second long-term indicator is availability of low-cost foodstuffs. Economic history and development economics have shown that modernizing agriculture may be a double-edged sword. Upsetting the balance between output and employment in densely populated subsistence agriculture has often resulted in a reduction of output, increasing poverty, or both. The abandonment of marginal lands may be a cause. Displacing manpower from subsistence agriculture to industrial production without an alternative source of foodstuffs may result in food scarcity and price increases. On the other hand, modernizing agriculture without providing alternative employment opportunities raises unemployment and poverty. China has adopted a model of export-led industrialization, ensuring sufficient foodstuff supply though import. Prices of imported food had to be sufficiently low to contain industrial wages, the key competitive advantage for the manufacturing export sector. The provider of low-cost foodstuff to the Chinese manufacturing revolution has been Brazil. Its prices might remain low thanks to the combination of high mechanization and the low cost of new fertile land – the Amazon and the Cerrado. It is worth noticing that similar favorable terms existed for the food Britain would import from its Commonwealth, and for the cotton Britain would import from the southern United States. In both the British and Chinese cases, economic growth resulted from high added value manufacturing export produced by an urbanized workforce fed with low-cost imported foodstuff. Hence, the questions: “Is there a Pacific Triangle similar to the Atlantic Triangle of the Manchester cotton cluster” deserves a positive reply. Import of food from the Commonwealth allowed Britain to displace peasants from subsistencelevel agriculture and move them to the factories without facing a rapid rise in the price of foodstuffs, which would have increased labor costs. China has been able to pace the transfer of subsistence farmers into the factories without generating food shortages because of imports from Brazil. In both cases the low cost of labor force which made industrialization successful was possible because of favorable terms of trade with overseas suppliers of foodstuffs. That would make it possible to maintain a reserve army of labor among the rural population, without causing food shortages. It would also allow prioritizing investments in manufacturing over agriculture, and exporting high value-added manufacturing products, rather than un-competitive agricultural products. At least as long as the terms of trade with food producers remained unchanged.

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What happens next? Despite the high hopes of the Clinton era, the West and the WTO have not been able to transform China into a capitalist society, nor to impose Western standards on the low-cost labor force of Asia or on the Asian polluting industries. On the contrary, the race to the bottom has shrunk the existing safety nets of Western workers and the environment. In Asia, technology is being used by bureaucratic and political superstructures to dominate the personal life of individuals at all levels of society. Artificial Intelligence is also used, by authoritarian regimes, to permeate the lives and social structures of Western citizens. In both Asia and the West, AI is used to influence electoral processes, disrupt digital infrastructures, and perform acts of digital terrorism. Will China be able to export its high-tech authoritarianism and transform the West into an absolutist state? For the time being, in a number of Western and proto-Western states internal threats to democracy appear more imminent than external threats. The list of Western governments with absolutist temptations includes Eastern European countries that have recently joined the EU, such as Poland, Hungary, Bosnia, Montenegro, and Macedonia, would-be Europeans such as Turkey and the Middle East, not to mention an attempt by the out-going president of the United States to overthrow the result of democratic elections in 2021. External threats to new democracies are coming from Asian despotic regimes: Ukraine and Taiwan are the most immediate targets.

Section 3: The Second Copernican Revolution European eyewitnesses described the collapse of globalization after the First World War as the end of an epoch.¹⁹⁹ Ruin in the defeated Central Empires was both economic and political. After improving in most Western nations during the Victorian Age, standards of living shrunk during and after the war. Social parachutes offered by the Central Empires during their ancien régime governments, were no longer in place. In the May 1920 issue of The Atlantic, Guglielmo Ferrero published a troubled piece entitled The Crisis of Western Civilization. As usual, he was explaining Europe to his American readers. Four months earlier, the Democratic Party of Wilson had been defeated. The election of a Republican president represented a plebiscite against Wilson’s international policy, and particularly against his proposal for a League of Nations and the Versailles agreement. Both League and Treaty had been rejected by the US Senate. In the paper, Ferrero argues that, in Versailles,

 Chapter Two, section 2.

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The nations turned their backs on one another, and departed, each to its solitary fate. Such seems to be the tragic epilogue of the most tragic of wars. And yet, only six years since, in the early months of 1914, Western civilization seemed to be a unit. We believed that we knew what we meant when we spoke of “good and evil,” “right and violence,” “justice and oppression,” “liberty and despotism.”²⁰⁰

Ferrero’s diagnosis of the Western crisis stands on the opinion that, by rejecting the League of Nations, the US Senate had chosen force over right, and war over legitimate sovereignty. Like Keynes, he condemns both the Allies’ disregard for Wilson’s Fourteen Points, and the reckless fragmentation of the Central Empires, and concludes that “force alone, as Talleyrand said, creates no right.” Ferrero was aware that the Central Empires’ fragmentation and the entire Versailles Treaty was the consequence of a deep-seated and serious disease which is undermining Western civilization. This disease is manifested in an impotent aspiration towards a world order based upon justice […] But this aspiration is impossible of fulfillment, for the doctrines and institutions essential for such fulfillment are lacking.²⁰¹

Ferrero was disappointed that the new master of the West, its most powerful nation, had chosen to rule from an isolated fortress, rather than through the pursuit of consensus. The historian of Caesar and of Napoleon was blaming the United States for not having learned his lessons. In particular, he blamed the United States for withdrawing from others the right they had bestowed upon themselves: self-determination. By refusing to stand behind principles and instruments of international law, the United States let all the peoples at liberty to define right and justice as they please; consequently, they have found in their consciences only a very weak resistance to the dangerous passion which victory was fatally certain to arouse in them. This passion […] which seemed to be a great force is, in reality, a great weakness of the Western world: its bland and artless confidence in its own omnipotence.²⁰²

The fading Victorian epoch survived for half a century on an oxymoron: on the one hand, an industrial economy shaped by the factory system, working-class urbanization, industrial monopolies, growing protectionism, and colonial Great Games; on the other hand, a romantic and naturalistic culture inspired by the

 Guglielmo Ferrero, The Crisis of Western Civilization, The Atlantic, May 1920, 700.  Ferrero, Crisis of Western Civilization, 710.  Ferrero, Crisis of Western Civilization, 707.

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aristocratic myths of Central Empires and Northern monarchies. By 1914 Europeans of all nations and conditions perceived that the old order was over; but very few imagined how that empty space might be filled. Ferrero was rebuking the United States for not taking responsibility to fill that legitimation gap with democratic values, thus reducing European anxiety towards an unpredictable future. Americans, as will be shown, were all too eager to widen the gap. The war persuaded even the most romantic idealists that an irreversible transition had occurred. The international socialist movement collapsed in 1916 because of its inability to defuse the rising nationalism of its own delegates. After the war, implosion of the Central Empires amplified the quest for a new identity. The void was filled by a plethora of new states that provided a fragile sense of national belonging. Nor were the winners better attuned. Keynes’s description of the Versailles conference²⁰³ portrays European leaders as incapable of providing inspiration, direction, a sense of collective belonging, or viable practical solutions. Four revolutions followed; but only the one in Russia eventually achieved stability. The others were defeated and fell prey to nationalistic, populist, and later fascist regimes. All three ended on the wrong side of the next global war. In all four revolutions crowd management and indoctrination provided an immediate response to the loss of identity and fear of the future. Thus Canetti: There is nothing that man fears more than the touch of the unknown […] It is only in a crowd that man can become free of this fear […] As soon as a man has surrendered himself to the crowd, he ceases to fear its touch.²⁰⁴

The United States were the exception. They had inherited from Britain the global leadership and they represented the continuity of Western culture. At Versailles, President Wilson launched the League of Nations, the institutional heir apparent to the Victorian world order. But, except for a few million immigrants from Poland, Russia, and Italy, not many Europeans realized that America was the new global leader. By rejecting Wilson’s proposal to participate in the League of Nations, the US Senate abdicated that leadership. For the following 20 years American foreign policy consisted of staying away from European disputes. Until the Second World War, America’s main influence over Europe was that of popular culture brought by the entertainment industry to the European working classes through movies, music, dancing, cigarettes, the myths of consumerism, upward social mobility, and an idyllic image of modernity.  Chapter Two, Section 1.  Canetti, Crowds and Power, 15.

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Nevertheless, the American dream shielded the myth of Western omnipotence from the decline of the first globalization. Continuity was maintained through a “hidden” transfer of power from the metropolitan state to a former colony. That did not surprise: in the ancient world, emergence of a colony or a cultural upspring was not unusual: Athens and Rome, Rome and Constantinople, Pella and Alexandria, or Tyra and Carthage are some examples. Culture and language of the old and the new powers shared the same roots: the emperors Adrian and Marcus Aurelius persisted writing in Greek three centuries after the Roman conquest of Attica. Economic relations between British cotton mills and American plantations were complementary rather than competitive. Cultural continuity was nurtured through migration and emulation. The United States were in no hurry to exercise the leadership they had inherited. It took American businesses until the Marshall Plan and the Cold War to begin looking beyond the oceans. The second globalization, which some historians called re-globalization, was ignited by an industrial revolution akin to the first one. The Information Age began in a small and peripheral technology cluster and took 30 years to become a global industry. Like the first globalization, the second was also fueled by the growth of several technologies merging towards the creation of a global infrastructure. The infrastructure was in the first case a logistics network propelled by the steam engine, in the second case the information network propelled by the World Wide Web, the mobile phone, and Artificial Intelligence. During the mature phase, in both episodes, industries concentrated and created monopolies or trusts; governments became involved in protecting trade and domestic industries. Countries where governments actively encouraged adoption of the new technologies witnessed a sharp increase in industrial capacity, productivity, and wealth. Societies were transformed. Gradually, economic leadership migrated from the originating country to those active followers. In the first globalization leadership moved from the United Kingdom to the United States, in the second globalization it moved from the United States to the Far East and China. However, power transfer in the second globalization did not move from the metropolis to a former colony: the second time there was no cultural continuity. Chinese do not speak English, China is not a representative democracy, and has never been occupied by a Western nation. China is the oldest uninterrupted national entity, and its culture has strongly influenced its neighbors in Southeast Asia. From the viewpoint of China, this is a return to normalcy after a discontinuity of 500 years of Western intermission. Further, in the case of China, it is a redress after 150 years of humiliation by the European powers. But China is not alone. Other nations within Asia, and some outside, have achieved positions of

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global influence. Putin’s desire to resurrect the Tzarist empire is a case in point. Together, they form a critical mass. Asian nations study their reciprocal cultures; by learning about each other they are identifying the elements of a common pan-Asian identity. Converging on a common identity may not be a deliberate choice and may not be an option: few Asian societies share democratic values and some display rigid national identities. The Economist Intelligence Unit (EIU) compiles an annual Democracy Index. In 2020 out of 28 governments in Australasia, only five were deemed “full democracy”: Australia, New Zealand, Japan, South Korea, and Taiwan. Ten were considered “flawed democracies,” while the remaining 13 were described as authoritarian regimes. For some people of Asia, sharing a common identity was not a choice but an imposition. China’s eastern borders are surrounded by nations that were forced to give up their culture and integrate. North Koreans cannot travel. Japanese society chastises multiculturalism. Singaporeans maintain a three-faced apartheid. In modern times, indirect tools are employed to control and censor of social media, suppress ethnic minorities, culturally colonize, or force to homogenize. China has a “social scorecard” to track compliance to the Party line by citizens and corporations. Internet apps, Artificial Intelligence, and soap operas all play a role in the cultural homogenization. National pride has not prevented the establishment of a unified Asian market. For a quarter-century Japanese, Korean, and Taiwanese large corporations have been major investors in China. In November 2020 China proposed the Regional Comprehensive Economic Partnership (RCEP). It was signed by 15 AsianPacific countries: ten ASEAN members plus China, Japan, South Korea, Australia, and New Zealand. India withdrew at the last minute. It was the first time Japan and Korea signed a trade agreement with China. RCEP was the largest free trade agreement ever signed. According to the official summary of the agreement, “the RCEP Agreement will complement the World Trade Organization (WTO), building on the WTO Agreement in areas where the Parties have agreed to update or go beyond its provisions.”²⁰⁵ How will the power transition proceed? For two decades after the Versailles conference the United States expanded into untapped domestic markets, empty land, and natural resources which allowed them to ignore Europe and Asia. On the contrary, China will not be able to retreat for 20 years to a city on the hill. Its dependence on international trade is substantially higher than that of the USA. China’s economic growth has been based on manufacturing exports and was fu-

 Summary of the Regional Comprehensive Economic Partnership Agreement, htttps://rcepsec.org, accessed March 21, 2022.

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eled by agricultural imports from South America and equipment imports from the Northern hemisphere. Chinese trade diplomacy is highly proactive: it includes the New Silk Road, joining the WTO, and the RCEP. Chinese political expansionism is equally proactive: Mongolia, Tibet, Hong Kong, Siberia, Taiwan …. Due to its limited natural resources, China needs to avoid the trap of falling into splendid isolation. The future shape of a regional Asian market is beyond the scope of this book and the competency of its author. A more approachable question is how Westerners would adjust to the loss of centrality. After 500 years of continuous expansion, European upbringing was no longer the default solution. As K.M. Panikkar noted, after the First World War “nobody anymore thought that the Europeans were superior or infallible.”²⁰⁶ The heir apparent of the second globalization comes from a much older tradition; the cultural continuity is broken. The impact of the transition this time will be more immediate and perceptible, and the adjustment required of the Westerner’s self-image will be deeper. The Western roots of global leadership stem from the Renaissance. Between 1500 and 1700, a quantum leap took place in the cultural evolution of the West. The common expression Renaissance man describes a versatile individual, able in many arts and crafts. Through a mixture of high self-confidence and low regard for the culture of others, the Renaissance and Enlightenment produced the ideas that propelled Europeans to conquer the world. They dominated through explorations, extortionist trade, and religious fanaticism. They clung on through technical inventions, revolutionary arts, a scientific mindset, and a new world vision presented by individuals who provided leadership at all times: whether explorers, privateers, artists, preachers, scientists, or entrepreneurs. The new collective identity of the Westerner begins with the scientific revolution of Copernicus. He explained his heliocentric theory (and the calendar adjustments it implies) to an attentive Pope Clemens VIII already in 1533. His main opus, De Revolutionibus Orbium Caelestium was published in 1543. The limited extent of Copernicus’s reform (a moving Earth in an otherwise traditional universe) persuaded the Catholic Church to adopt his new calendar in 1583. But the radical consequences of that break with the old cosmology became apparent during Galileo’s and Kepler’s time. In 1616 the Church backtracked and banned the Copernican theory of the moving Earth. Luther called Copernicus “an upstart astrologer.” But the new paradigm stuck and produced a rebound in the Western individual. Copernicus elevated Western societies above the medieval closed ho-

 Chapter Two, Section 2.

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rizon, by abolishing the vision of a universe rotating around a fixed Earth, and by replacing that divine design with a mathematical demonstration, where the Earth was but one among many planets orbiting around the sun. It was a revolution of both method and vision. The Copernican shift of perspective can be seen as a fundamental metaphor for the entire modern world view: the profound deconstruction of the native understanding, the critical recognition that the apparent condition of the objective world was unconsciously determined by the condition of the subject, the consequent liberation from the ancient and medieval cosmic womb, the radical displacement of the human being to a relative and peripheral position in a vast and impersonal universe, the ensuing disenchantment of the natural world.²⁰⁷

Accepting that the Earth rotates around the sun requires unplugging from immediate perception and taking a step into abstract reasoning. It involves accepting relativism: perception of reality varies with the position of the observer. Copernicus freed Westerners from medieval anthropocentrism, by moving them to an undefined place in the periphery, somewhere in a vast and anonymous universe. That broader horizon enabled the adoption of economic, technological, and social innovations which generated a chain reaction. By the turn of the third millennium the West was undergoing a second Copernican revolution. Its effects are just beginning to surface. In the second deglobalization event Westerners have lost their central position on the planet and have been displaced to a relative and peripheral position. After five centuries of increasing influence, the West no longer provides the prevailing economic and cultural model. The Renaissance man, the age of Enlightenment and the frontier spirit have lost their prominent position in shaping the world’s culture. The great revolutionary political projects of the modern era, heralding personal and social liberation, had gradually led to conditions in which the modern individual fate was ever more dominated by bureaucratic commercial and political superstructures. Just as man had become a meaningless spec in the modern universe, so had individual persons become insignificant ciphers in modern states, to be manipulated or coerced by the millions.²⁰⁸

Western identity began meandering across Mittel Europa during the first de-globalization. With the second de-globalization, the crisis had reached the United States. The internal crisis may be explained in part by the transition from a phase of growth with high expectations of social mobility, to a phase of concen-

 Richard Tarnas, The Passion of the Western Mind (New York: Ballantine Books, 1991), 416.  Tarnas, Passion of the Western Mind, 388.

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tration of wealth, where the link between political and economic power becomes institutional and immutable. In both cases, however, there is a second explanatory variable: it is the emergence of a new global contender (the USA and China). Seen from the opposite side of the looking glass, Asia has reached a full reckoning with the impact of Western history on its present. Now the West must reckon with the rise of Asia on its future.²⁰⁹

But China was never a formal colony of Europe, hence this time the myth of Western omnipotence could not be maintained. After four centuries the West was no longer the world’s economic locomotive. Even its political and moral authority had declined. Liberalism had been eclipsed by a sequence of crises and “black swans” such as the 9/11 attack on New York, the 2008 financial crisis, and the Covid-19 pandemic. Socialism, the main Western alternative to liberalism, had disappeared with the self-extinction of the Soviet Union, and the disappearance of industrial workers’ organizations in mature countries, due to the massive delocalization of whole industries. The first Copernican revolution unleashed the energies of the Western individual which led to the first globalization under British rule and, after a tragic but relatively short re-adjustment, to the second globalization under American rule. The second Copernican revolution displaced Western culture from its central position on the planet, because the new challenger to global power in the second globalization was not carrying Western culture and values. After 400 years the Western crowds perceive that they have ceased to occupy the center of the human universe. The Westerner’s viewpoint is no longer the default position. Western culture reckons with its loss of centrality. It is relative, undefined, and peripheral. Conversely, Asia is assembling a comprehensive vision of itself while it prepares to play the leading role in the show. The West has been attracted before by Asian culture: in the seventeenth century collecting a bibliotheca orientalis was fashionable among popes (Clemens XI) and kings (Louis XV). So much so that in 1716 the Gran Vizier Sehid Ali Pasha prohibited librarians from selling old books to foreigners who, on behalf of affluent collectors, were raiding the Istanbul antique shops.²¹⁰ A taste for the Orient permeated the Empire style, particularly after Napoleon’s Egypt expedition. Orientalism is the name of a French painting school in the late nineteenth

 Khanna, The Future Is Asian, 358.  Alex Bevilacqua, The Republic of Arabic Letters (Cambridge, MA: Harvard University Press, 2018).

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century, whose members included Ingres and Delacroix. And at multiple times writers and painters in the British Empire have been fascinated by the Orient. Those tendencies expressed the curiosity of the conqueror towards a conquered culture. On the contrary, the influence of Asian lifestyles over young Western generations in the late twentieth century gradually took the form of colonization, cultural at first and economic later: not unlike the influence of Hollywood and jazz on European popular culture in the interwar period. It is one thing for the Grand Vizier to ban the sale of ancient manuscripts, and another for the United States president to ban the Chinese network TikTok. Similarly, managing a family chain of Indian restaurants in the City of London does not carry the same weight as floating on the London Stock Exchange the world’s largest steel producing company, Arcelor Mittal, for the purpose of acquiring inefficient European plants in order to shut them down and reduce capacity. In 2020 China Baowu Group surpassed Arcelor to become the top steelproducing company. A social or cultural identity crisis often leads to a crisis of legitimation. That theorem has been proven repeatedly, at various turns in the history of political ideas. Hence, it should not come as a surprise if the Western men confronting their loss of centrality will also question the foundations of their government. Until recently, the growing influence of Asia has been considered from a cultural and economic viewpoint. But the rise of Asia has also impacted the political structure of Western societies. The preamble to Chapter Three argued that emerging Asian countries have adapted the liberal democracy model to their use, by removing the “democracy” part. In fact, the Western stereotype of individualism and creativity inherited from the Renaissance and cultivated through the age of Enlightenment and the frontier spirit, might not be the most conducive attitude in overcrowded mass societies controlled through digital networks fed with Artificial Intelligence. It might be argued that the traditional virtues of Asian societies, with their cooperative and collectivistic nature, might offer a more harmonious ordering of the whole. Ironically, the reaction of Westerners in the face of growing Asian influence is taking them closer to the Asian political model. The transition from unipolar domination to a multipolar world is contrasted by a search for internal unity. The confusion generated by spikes of divergent opinions produces uneasiness among individuals who feel uncomfortable when facing dissent and uncertainty. The most elementary political form of unity is authority. Authoritarianism attracts people who have a low tolerance for complexity. Acknowledging the authority of a single leader is the simplest and most immediate way to ensure unity and suppress dissenting voices. To control their intolerance for complexity, and

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keep the troubling voices at bay, Westerners endorse the political regime they most fear. That was the lesson of Canetti discussed in Chapter Two. The Western political response to their loss of centrality is correlated to a change in the social structure of Western societies. Authoritarian temptations have been most visible in the mature economies most affected by the outflow of industrial activities. However, delocalization has also destabilized countries at the receiving end, particularly those with a short history of democratic life, such as the former Soviet Union and its satellites, or those covered by a thin veneer of Western culture, such as the Middle East and Turkey. Or both, such as the Balkans. If social change loaded the gun, however, technology pulled the trigger. In a precious little book Anne Applebaum has explained the impact of the communication revolution, brought by Artificial Intelligence and the Internet, on the polarization of political views:²¹¹ The social media algorithms themselves encourage false perceptions of the world. People click on the news they want to hear. Facebook, YouTube and Google then show them more of whatever it is that they already favor […] The algorithms radicalize those who use them too. […] Because they have been designed to keep you online, the algorithms also favor emotions, especially anger and fear. And because the sites are addictive, they affect people in ways they don’t expect. Anger becomes a habit. Divisiveness becomes normal.²¹²

The increasing use of machine learning by social networks, for the purpose of providing information, news, or fake news in line with the presumed user’s opinions, has the effect of reinforcing those opinions, by creating separate bubbles of subjective reality. Those bubbles are isolated from the agora, town hall, or public space where diverse opinions can be compared, debated, and ordered in a single space, under a common, homogeneous view of reality. The private and almost secluded nature of those bubbles of subjectivity contrasts with the public and open attributes of printed news and public broadcasts. But their frailty is contagious: once the credibility of some news is undermined, all news become tainted. The tribal fragmentation of social networks resembles the oral transmission of pre-writing civilizations. In the absence of a verifiable source, the latest or closest account becomes the one most sought after. According to Marc Bloch, a similar oral tradition prevailed also in the trenches of the First World War, and created a similar flourishing of fake news:

 Applebaum, Twilight of Democracy; also discussed in Chapter Three, Section 2.  Applebaum, Twilight of Democracy, 113 – 114.

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War has been in many regards an extraordinary experiment in regression. But a regression is never complete: it is impossible to cancel by a single stroke the sign of many centuries of mental evolution. The 1914– 1918 soldier was quite prone to believe all fake news. Although, it seems to me, his belief did not last long. Naturally, his curiosity was centered above all on those events which might affect his most immediate destiny: Guard, changing position, or an imminent action. But his curiosity was as vast, while his vision of the world was as narrow and partial, as that of medieval common people.²¹³

The disposition to believe Internet fake news might be of short duration, as is most fake news. But curiosity is vast, while vision is narrow, hence any subject may be mystified. However, according to Bloch, “a regression is never complete,” therefore we may hope that today’s propensity to a-critically accept any interpretation of reality is a temporary aberration. The extended use of online communication during the Covid-19 pandemic, for work or school or socializing, might have shaped a new generation of users, more sophisticated, immunized against conspiracy theories, and capable of navigating across an ocean of fake news with a critical bearing. But the damage done to the information profession will prove difficult to cure. Bothseideism is a neologism employed to describe a commitment to formal equanimity grown within the media as a consequence of extreme social polarization. It consists of providing equal space to both sides in a political dispute, regardless of the objective merits of either analysis or opinion. That form of suspended judgment is tantamount to sacrificing the right to investigate the truth to the altar of social conformism. It amounts to accepting intellectually flawed arguments with the excuse of political correctness. Some Western societies are curing their own identity crisis by declaring that schizophrenia is not a disease. That position will not save democracy.

 Bloch, The Historian’s Craft.

Chapter Five Section 1: The De-globalization Risk Each episode of globalization was ignited by an innovation process that became pervasive: the Manchester cotton district invented the factory system, while Silicon Valley’s semiconductors enabled the Information Age. Each episode may be divided into three phases, following a practice common among economic historians. In this essay, the first phase has been described as creative, entrepreneurial, and competitive. The second phase was characterized by monopolistic concentration and close relationships among industry, governments, and finance, particularly within the newly emerging economies. In the third phase the world market becomes brittle, and eventually collapses, while global leadership moves from the originating nation to a newcomer. The First World War was the trigger of collapse for the first globalization. It has been recalled in Chapter Two through the eyes of eminent witnesses, such as Keynes, Polanyi, Ferrero, Canetti, and others. The first phase of each globalization episode was ignited by a small group of talented individuals working within an industry cluster, over the timespan of two generations. A team of fervid innovators inspired each other in a cumulative inventive process. In both instances they were engulfed in a flow of collective creativity; and they were motivated by the clear perception that their ideas and actions might advance the frontier of human possibilities. According to Geoffrey Moore²¹⁴ the adoption of new technologies by consumers follows a pattern where enthusiastic early adopters are gradually joined by cautious late followers. The same occurs not only with individual consumers, but also with industries and nations. Some countries embark in adoption and imitation at an early stage, others limit their interaction with the new technology to passive and late adoption. A lower or higher propensity to adopt innovations in the early stages affects the competitive position of nations and industries when those innovations become mainstream. Sitting on the fence is oftentimes a recipe for retrogression. The second phase of take-off consists of applying the innovation process to many industries. Their combined output converges towards the creation of a global infrastructure. That process is led by a new generation of entrepreneurs, who are aware of their institutional role within the early adopting regions. They

 Chapter Three, Section 3. https://doi.org/10.1515/9783110744477-007

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concentrate their industries in larger concerns called conglomerates, cartels, trusts, or multinational corporations, with support from national governments and international finance. Leadership of the globalization process shifts towards new countries, whose governments have moved early to establish industrial policies that attract investments and specialized workforce through migration and reverse migration, while erecting trade barriers to protect their infant industries. The separation between governments and the industry’s national champions becomes blurred, as they battle side by side for global domination. In the third phase, de-globalization produces a decline of leadership within the originating nation-states. There is consensus about the causes of that decline. In 1978 Giovanni Arrighi wrote The Geometry of Imperialism, a much-quoted system analysis of the global economy. In 2008 he integrated his set of diagrams with a broader analysis of capital accumulation, titled The Long Twentieth Century. ²¹⁵ In that second book, Arrighi explained the migration from one global leader to the next in terms of financialization. He identified a pattern that moves from an early stage of investments in productive purposes, towards a later stage where capital becomes itself the generator of surplus. Arrighi’s cycle overlaps with the cycle described by Carlota Perez,²¹⁶ who identified a trend moving from a phase of industrial innovation to a phase of financial speculation within each wave of technological progress. The difference between the two authors’ theories can be summarized thus: the vectors of Arrighi’s cycles are nation-states, whereas the vectors of Perez’s cycles are supranational oligopolies. The two globalizations described in this book were triggered by two new forms of production organization: the factory system and the Information Age. In those two cases, the vectors of Arrighi and Perez overlap, and the cycles coincide. The migration of global leadership from one nation-state to the next is caused by large-scale adoption of the new form of production organization by newcomers; the new global leader emerges among them. It is precisely because its government facilitated the adoption of new technologies that the most enterprising nation-state inherits global leadership, eventually leap-frogging the nation where the innovation was born. In a 2011 paper, Shane Montgomery Willson described global leadership migration as a three-step process:

 Giovanni Arrighi, The Long Twentieth Century, extended edition (New York: Verso, 2010) and La geometria dell’ Imperialismo (Milano: Feltrinelli, 1978; English edition: The Geometry of Imperialism [London: NLB, 1978]).  Chapter Three, Section 3.

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Arrighi’s theory suggests that world hegemons generally move through systemic cycles of accumulation beginning with a rise to world hegemony through historical circumstances that lead to (1) comparative advantages in the production of material goods, (2) the relocation of the financial center of the world to that nation, and (3) organizational changes specific to that world hegemonic nation that are then integrated by other nation-states.²¹⁷

Applying that sequence to the second de-globalization and the American decline, Willson finds that economic theory played a crucial role in the crisis’ build-up: Detrimental changes were justified to the US public by arguing that a radical reinterpretation of classical liberalism as a political philosophy was used alongside new anti-government economic theories to create the ideology of neoliberalism. This ideology gave the domestic consent necessary for the deindustrialization of the US economy.²¹⁸

Neoliberal “Reaganomics” was not the only fig leaf of de-industrialization. The utopia of a post-industrial economy prospering through online services, remote data processing, and work from home was highly popular in the 1990s. Both rationales emphasized the difference of labor skills and labor costs between mature Western economies and Southeast Asia. Neither Reaganomics nor the global village utopia contemplated that the structural adjustments in each economic area would snowball, starting a transition of large proportions. The fashionable term “churning” was used to indicate a misalignment between demand and supply of workers’ skills. It was a necessary adaptation of the labor markets in mature economies. The painting by Huebner on the cover of this book describes the impact of churning during the first globalization absent any serious social and industrial government action. Collapse of the second globalization was presaged by black swans of assorted nature: the 9/11 terrorist assault, the dot-com bubble, the financial crisis of 2008, the election of Donald Trump, and the Covid-19 pandemic. Online piracy overlapped with new forms of Digital Cold War, exposing the frailty of the global information and communication infrastructure. Governments and organized crime fought using GPS satellites, Artificial Intelligence, fabricated news, infrastructure hacking, and gigantic Ponzi schemes, such as the cryptocurrencies. The climate and bacteria crises exacerbated hard-to-control migratory movements, while the long demographic explosion will take time to quench. Some  Shane Montgomery Willson, The Financial Crisis as an Expression of Macrohistorical Trends (Master’s Thesis, University of Tennessee – Knoxville, 2011), https://trace.tennessee.edu/utk_ gradthes/1108, accessed March 21, 2022.  Willson, The Financial Crisis as an Expression of Macrohistorical Trends, 9.

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of those threats may be controlled in due time, but only diplomatic and social coordination on a global scale could avoid a collapse of the second globalization similar to the First World War. The “second Copernican revolution,” that is, the realization that the world economy is no longer orbiting around the West, coupled with the social consequences of “churning,” has caused an identity crisis in mature Western countries. A social or cultural identity crisis often leads to a crisis of legitimation. A previous section of this study discussed the recourse to identitarian wars, as attempts to reinforce a government’s legitimacy. What the chances are that the second de-globalization may result in a conflict, and how that might be avoided, are the next questions: avoiding the next global war depends upon the ability of governments to maintain internal legitimacy through peaceful means. J.L. Gaddis²¹⁹ recalled the definition of rational war provided by von Clausewitz as war waged by a state in expectation of a benefit, diplomatic, economic, or territorial. Gaddis gave three examples of wars that would not pass the rationality test: the Thirty Years War fought to impose religious unity on the Habsburg Empire; the Napoleonic Wars, fought to establish the legitimacy of post-revolutionary governments; and the First World War, waged, according to Ferrero, to disband the international workers’ movement. However, according to Gaddis, “the 1914 crowds from all corners of Europe welcomed the war with the spontaneity of an assembly of Athenian citizens.”²²⁰ Besides the identitarian war, prevention is another exception to Clausewitz’s rational wars. In 2012 political commentators on both sides of the Pacific Ocean began using an expression that became fashionable: Thucydides Trap.²²¹ In that case the reference to Athens stems from a quotation of Thucydides from the Peloponnesian War: “It was the growth of Athens, and the fear it created in Sparta, which made the war inevitable.” Professor Allison, of the Kennedy School of Government, coined the expression to describe the risk of war when a rising power (Athens or China) challenges the primacy of a dominant power (Sparta or the United States). The expression was adopted by China’s leader Xi Jinping and caused streams of ink on both sides, with the stated goal of preventing a potential conflict, and the untold goal of keeping the fuse lit. The election of President Biden in 2020 might have temporarily defused the risk of an identitarian war or a Thucydides Trap. Therefore, it may have postponed the risk of a hard landing from globalization. A mutual interdependence  Chapter One, Section 3.  Gaddis, On Grand Strategy, 273.  Graham Allison, The Thucydides Trap: Are the US and China Headed for War?, The Atlantic, September 24, 2015.

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on some crucial materials and technologies could ensure that until 2025 or 2030 neither nation will have the confidence of prevailing in a confrontation. However, an early crisis of internal legitimacy would void that prediction. Jingoistic temptations to the American electorate, or China’s sensitive national pride vis-à-vis Taiwan’s unification, could ignite in either country the rash of confrontation. Ukraine has offered a tragic preview. But a careful handling of public opinions and sound bilateral trade relations would allow the economic growth of China to continue, without threatening American self-perception and standards of living. When, in the medium term, the Chinese GDP grows twice as big as the US’s GDP, China’s per-capita income will still be one half the size of the US’s. The United States no longer holds the diplomatic, moral, and economic leadership of the world. On the other hand, it seems that China has not yet reached a degree of technology independence that would permit a level confrontation with the West. As a result, neither China nor the USA can claim exclusive global leadership. During the first two decades of the twenty-first century, the increasing economic interference of national governments in the digital infrastructure has transformed the World Wide Web of the self-regulated era (1980 – 2000) into a fragmented, highly manipulated, archipelago of divided islands. Internal cohesion within a regional block may reinforce government control, domestically and overseas. Governments hack the Web to suppress dissenting opinions, disrupt economic competitors, and influence domestic politics in neighboring countries. National security concerns justify censorship at the highest level: a president of the United States was permanently banned from Facebook. Cyber control and online censorship are used as anti-competitive barriers, as well as political weapons, and the distinction between the former and the latter has become blurred. “Weaponizing interdependence” is how a 2021 best-seller has described that twist in global connectivity.”²²² Conversely, the cost of a fragmented and regionalized network may be impunity for all. Organized crime and government secret services ride the Internet for highly rewarding and disruptive expeditions. International hacking of infrastructures and Ponzi schemes are successfully run for years, with a degree of influence and impunity once accorded only to central banks and supranational financial institutions. Intergovernmental attempts to raise income taxes on technology companies, reduce CO2 emissions, curb cryptocurrencies, or regulate

 Mark Leonard The Age of Un-peace: How Connectivity Causes Conflict (London: Bantam Press, 2021).

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Artificial Intelligence, are routinely evaded. Hackers, cyber-criminals, and secret services are the online Luddites of the third millennium. In that tormented landscape, regional integration has become global dis-integration. The two leading regional powers maintain closer control of their domestic divided networks, but neither of them has the power to regulate the World Wide Web. The chances of a soft landing for the second de-globalization also depend on control of a few strategic industries. Two industries in particular play a role in softening China–USA friction during the third decade of the century: semiconductors and rare earths. Europe and the United States gave up the race to mass produce semiconductors in the 1990s, surrendering to the government-sustained large firms of Japan, South Korea, and Taiwan. That failure was a result of neoliberal Reaganomics hubris, and Internet hangover. As a result, in 2020 more than 70 % of total world semiconductor production came from Taiwan, South Korea, Japan, and Singapore. China and the United States held 12 % each, with about 5 % in Europe and Israel. But the Chinese position is weaker when measuring capital equipment. Only 10 % of the machinery needed to run a semiconductor plant comes from China. In fact, 80 % of world semiconductor equipment is concentrated in four companies. Two are from California (Applied Materials and LAM Research); one is from Japan (Tokyo Electron), and one is from the Netherlands (ASML). Finally, most semiconductor components are designed in California, Taiwan, or Japan. Chinese electronic companies depend on Western technology to manufacture integrated circuits. The PRC’s 14th Five-Year Plan covers the years 2021– 2025. It foresees US$1.4 billion in investments aiming at reducing dependence on the United States, Japan, and South Korea. The trade imbalance is huge. Only 27 % of integrated circuits sold in China (either for domestic consumption or re-export) are manufactured domestically. The Chinese government has repeatedly attempted to acquire manufacturers overseas. In 2015 the offer to acquire Micron, the only American manufacturer of DRAM memories, was blocked by the Obama administration. In 2016 an offer to acquire Aixtron, a maker of silicon deposition equipment, was blocked by the German government. Taiwan “foundries” are the largest manufacturers of custom integrated circuits for third parties. The brain-drain of Taiwanese engineers by Chinese companies has been a constant source of tension (also sometimes of industrial diplomacy) between the two Chinas. Huawei is the largest Chinese assembler of smartphones and equipment for the 5G next generation Internet. In 2020 the Trump administration decreed an embargo on semiconductor components, and Huawei replied announcing the investment in its own semiconductor manufacturing facility. The Biden administra-

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tion will limit restrictions to the transfer to Huawei of equipment, designs, and production techniques to older generations, banning machinery that produces high density components. The learning curve for new fab workers is so steep that China would have a better chance by occupying Taiwan, rather than attempting to replicate Taiwanese plants on Mainland China.²²³ In fact, since the 1980s TSMC and other Taiwan foundries have produced custom components for third parties, matching the quality and sophistication of the most reputed American, Japanese, and Korean brands. Mainland China is the destination for a big part of that production, although its share may be difficult to quantify. Taiwan foundries can maintain that level and quality of output, thanks to access to American and Japanese know-how and equipment. The Taiwanese components shipped to Mainland China include parts assembled by Chinese subsidiaries of Taiwanese companies into newest generation American products. For instance, Apple smartphones and computers are assembled by the subsidiaries of two Taiwanese companies, Foxconn and Pegasus, located in Mainland China. Therefore, American equipment manufacturers continue to supply latest generation equipment to Taiwan, to manufacture components exported to China to be assembled in American smartphones. Taiwan companies will maintain a technological advantage over Chinese companies as long as American equipment and consumer industries support them. Is it plausible that the American support will fail once Taiwan is annexed to China? Integration of the industry supply chain has been increasing since the 1990s. Taiwanese governments and industries have obviously cultivated strong ties with both powers. For nationalistic and identitarian motives to prevail over the dry logic of business, and upset the existing fragile supply chain, alternative sources of technology must be available. The 2020 events in Hong Kong show that China will not postpone indefinitely the annexation of Taiwan. Through Hong Kong, China has acquired a strong cluster of global financial know-how, a strategic asset for a world leader. Taiwan presents a similar opportunity in terms of semiconductor know-how. But a precipitous action may destroy the supply chain. American consumer electronics companies will have to relocate their assembly processes elsewhere, and the Chinese government will have to replicate the semiconductor technology sources at home. Each task takes years.

 Yi-ting Wang, Chip War: Taiwan’s Role in China’s Semiconductor Industry Policy, China’s Global Impact 2, chinapolitik.de, June 2019.

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As a rational alternative, the USA and China might agree on an appeasement over the head of Taiwanese independence. That might be preferable for world peace, as it will resolve a point of international tension, but will represent a retreat for democracy, and a loss of Taiwanese and American jobs. The second industry in the game are rare earth elements. They are a group of metals used in a number of innovative technologies, from car batteries to missile guidance systems. Some examples of rare earths are erbium, used to manufacture fiber optics, neodymium and samarium, used to make permanent magnets, yttrium, to make LED lamps, cerium, for catalytic converters, and lanthanum, used in electric car batteries (there are 10 to 15 kg of lanthanum in every Toyota Prius). Dysprosium is used in GPS (Global Positioning Systems) as well as for intelligent bombs, drones, and missile guidance systems. In rare earth elements the USA–China position is opposite to that of semiconductors: 72 % of world consumption of rare earths was supplied by Chinese companies in 2019. Rare earths are in reality abundant, but highly dispersed within other inert material, and therefore expensive to mine. Their extraction is a time consuming and highly polluting process. It requires displacing large amounts of surface terrain and transporting it to large leaching ponds where ammonium chloride or ammonium sulfite are added to separate the elements from the soil. As an alternative, water mixed with those acids may be injected directly into the soil through plastic hoses.²²⁴ Both processes generate large flows of contaminated liquid which percolates into waterways and groundwater. Environmental damage is extensive, both because of the large amounts of terrain displaced, and because of the large quantities of separating agents which contaminate the air and the water. In recent years China has reduced the quantity of rare earths mined domestically, and has increased import from Brazil, Malaysia, Vietnam and Africa. Those same polluting processes are now exported to African countries such as Cameroon, Angola, Tanzania, and Zambia, often in the context of New Silk Road agreements. The 14th Five-Year Plan recommends preserving domestic sources of strategic materials, by favoring import instead. The United States are also attempting to limit domestic earth mining locations, because of its high environmental cost. For example, the second-largest American producer, Livent Corporation, owns major extraction plants of lithium in Argentina. In October 2020, the Chinese government issued restrictions on rare earth exports, in retaliation for the restriction on integrated circuits issued by the United

 Michael Standaert, China Wrestles with the Toxic Aftermath of Rare Earth Mining, Yale Environment 360, July 2, 2019.

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States government. But, despite those postural exercises, it is unlikely that those reciprocal interdependencies will end soon: American companies depend on Chinese rare earth elements, as much as Chinese companies depend on American semiconductor equipment technologies. Multinational technology corporations are, in both countries, the main opponents to trade restrictions, as through globalization they have been major beneficiaries of outsourcing through supply chains and exports. High-tech America has become Beijing’s most potent force in Washington. That gridlock has been lively described by Clyde Prestowitz: When the representatives of US companies doing business in China are called on to testify before Congress, they do not necessarily present what is best for America. They are often thinking of what is best for their business in circumstances under which Beijing has them by the balls while they, by dint of their legally unlimited political donations to US politicians, have Washington by the balls.²²⁵

Traditional industries may be more favorable to trade restrictions, particularly those that have delayed upgrading technology for higher productivity. Hence, national governments will be more or less inclined to “defend” globalization, according to the prevailing strength of the domestic industry lobbies. Where technology companies are a major employer and positive contributor to the trade balance, governments may be expected to stay open to international involvement. The more conservative governments will be those whose traditional industries and less modernized companies prevail. The same reasoning applies to agriculture: few would be surprised if Brazilian agribusiness became more open to trade than the small subsistence farmers of India. As the first globalization has shown, the strategic posture of a nation is often affected by the balance between the international interests of its technology corporations and those of its more mature businesses. To conclude, the chance of a soft-landing de-globalization hangs on the lobbying powers of influential industries, but also on the whim and ability of national governments to cultivate the trust of their citizens and preserve legitimacy. Niccolò Machiavelli explains that an attribute of capable leaders is the ability to recognize and exploit a favorable opportunity. On the contrary, “when fortune wants to lead to great ruins, it will find men apt to facilitate them.”²²⁶ During

 Clyde Prestowitz, The World Turned Upside Down, New Haven, Yale University Press, 2021, 260.  “Fa bene la fortuna questo, che ella elegge un uomo quando ella voglia condurre cose grandi, di tanto spirito e di tanta virtu’, che e’ conosca quelle occasioni che ella gli porge. Cosi’ me-

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the 1919 conference in Versailles, at the dusk of the first globalization, an estranged leadership determined the course of the following three decades. Similarly, at the dusk of the second globalization, the allegiance of Western leaders to democracy will determine the outcome of the Copernican identity crisis. Chapter Two, Section 2 briefly mentioned a stark example of how taking advantage of opportunities may result in governments maintaining or loosing legitimacy. When President Wilson returned to the United States, after six months in Versailles, he presented the League of Nations to the American Senate, only to see his project rejected. Wilson, a history professor, had a clear vision of the United States position as the new leader of the industrial world. Like Keynes, he was aware of the flaws of the Versailles peace treaty, having drafted and signed with Germany a Fourteen Points armistice that would be ignored at the conference. Last of the Fourteen Points was a non-governmental organization capable of piloting the postwar soft landing: the League of Nations, Wilson’s farsighted vision, was acknowledged in 1919 with the Nobel Peace Prize, but the American Senate rejected participation in the League, and Wilson’s Democratic Party lost the 1920 presidential elections. Wilson was the bearer of a global vision. The League of Nations was the prototype of the United Nations, the inspirer of the Global Agreement on Tariffs and Trade (GATT), and of the World Trade Organization (WTO). His antagonist, Henry Cabot Lodge, led Senate opposition to the League from an isolationist stance. Article 10 of the League of Nations mandated signatory states to intervene in support of any member threatened by external aggression. That provision, according to Cabot Lodge, violated the right of the United States to independent determination, and the revered Monroe doctrine. But opposition to the League of Nations was first of all a concession by Cabot Lodge to his voters. In 1910 13 million first-generation immigrants lived in the United States, one seventh of the total population. Most of them originated from Southern Italy or Eastern Europe. In some industrial cities of the US northeast, such as Boston, New York, Chicago, Philadelphia, Cleveland, or Pittsburgh, the newcomers and their prolific families outnumbered the natives.²²⁷ Cabot Lodge claimed that patriotic ideals were a Roman character, while personal loyalty to an emperor was a byzantine invention. The new (non-voting) immigrants, he claimed, embraced an ideal of power foreign to the American tradition, re-

desimamente, quando ella voglia condurre grandi rovine, la vi propone uomini ch’aiutino quella rovina,” Niccolò Machiavelli, Discorsi sopra la prima deca di Tito Livio, Libro II, cap. 29.  Richard Hofstadter, The Age of Reform (New York: Vintage Books, 1955), 179 and 183.

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Figure 9: President Woodrow Wilson presents the League of Nations to the American Senate. Source: Punch Magazine, March 19, 1919, 243 (artist unknown).

placing the belief in principles and ideas, with loyalty to a boss, greased by personal favors. Cabot Lodge was isolationist to protect the standards of living of his electoral base, against one of the consequences of globalization: massive migratory flows. He was acknowledging the high standing of the American economy but rejected its role as global leader. The United States did not have any duty to lead, save, or redeem the Old Continent. On the contrary, the government was supposed to

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lead the American people in an entirely different direction, where Europe would not be able to follow.²²⁸ Three years earlier, in the debate on whether or not to enter the war, Wilson had invited his fellow “citizens of the World” to decide not in the interest of a single nation or continent, but “on behalf of a liberated humankind.” After the war, in full de-globalization mode, that appeal would not resonate with the majority of American voters. Wasting the globalist mindset is a terrible loss of opportunity for humanity. That explains the discomfort of Keynes, Canetti, Ferrero, and Polanyi in the face of the collapse of the Victorian Age. Not so for Hayek and the neoliberals, who either deny the fact, or see the transition from globalism to nationalism as the path to preserve power legitimacy.

Section 2: The Iron Law of Wages and Other Traps De-globalization may trigger a conflictual relationship between the old leading nation and the new aspiring leader. Or it may evolve into a multipolar fragmented market. In both cases, the loss of a globalist mindset would be an opportunity wasted to Homo sapiens, as some of the most pressing issues of the present age may only be tackled through a global approach. Such are the cases of pandemics, migrations, demography, Artificial Intelligence, the environment, or climate change. Cultivating and maintaining a globalist mindset towards those global issues may provide a unifying objective that will overcome the risk of seeking an answer to the identity crisis in a nationalistic cultural identity. A common goal is the public space where a dialogue is possible. On the contrary, populist and nationalistic regimes deny the existence of issues requiring a common solution. Geologists have defined the Anthropocene as an epoch in evolution when the presence of humans may be detected in the Earth’s stratigraphy. Albeit a very short episode in the history of the planet, human presence is now clearly visible in rock sediments, whether in the form of micro-plastics, radioactivity from nuclear explosions, heavy metals, or extensive farming. If we compress the life of Earth into 24 hours, the first human ancestors appeared less than minute ago, and Homo sapiens only in the past four seconds.²²⁹

 Hofstadter, Age of Reform, 280.  The Earth has existed since 5 billion years ago, our first ancestors since 2 million years ago, and Homo sapiens since 200,000 years ago. Humans reached all continents of the globe 15,000 years ago.

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Let’s change the scale again and make the existence of Homo sapiens equal to 24 hours. In this scenario Homo sapiens reached the most recently inhabited areas, Antarctica and Patagonia, only two hours ago. However, no civilization before the Renaissance undertook a systematic expansion over the entire planet, simply because no one possessed a precise notion of the planet’s borders. The quest for global reach took place in the last three minutes of Homo sapiens’ day-long life. In those three minutes Western humankind colonized every continent, establishing a kingdom upon which the sun never sets, and affirmed its right to make use of natural resources anywhere on the globe. That right is based on the idea that other civilizations do not make an efficient use of those resources, because they lack the technical knowledge and proper tools to exploit them optimally. Therefore, the right to husband nature’s riches pertains to the most astute and better armed. In the twentieth century, Homo sapiens has reached the outer perimeter. In the last minute world population has grown by a factor of 20. No more land is available for further expansion, unless someone else is displaced. Historian Eric Hobsbawm defined population growth over the past 2000 years as a socio-biologic Supernova. ²³⁰ The loop between demography and food supply has been known since the nineteenth century as the Iron Law of Wages. The law states that productivity in agriculture determines the price of food, and the price of food regulates population growth. Whenever food becomes abundant wages rise above the minimum required for the subsistence and reproduction of workers. As a result, population will grow, increasing the supply of labor but also the demand for food. The price of food will increase because less productive land will now be tilled to satisfy increasing demand. The combination of an excess supply of labor and a higher price of food will bring consumption per head back to the bare subsistence level, therefore preventing further demographic growth. The iron law describes a closed economy with static agricultural technology, and steady consumption patterns. In other words, the law assumes that the amount of goods ensuring subsistence and reproduction will not change from one generation to the next. The law was formulated by Robert Malthus in 1798 and is also known as the Malthusian Trap. It has been used to justify poverty during the Industrial Revolution and to explain the dynamics of labor markets in developing countries.

 Chapter Four, Section 2, Figure 6.

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In particular, the law may help explaining the globalization phase of exporting labor-intensive activities from industrial countries to countries with lower consumption patterns, on the condition that other sources of cheap food are available. Brazil’s food exports to China replaced the output of Chinese workers who had moved from agriculture to industry. The iron link between population and food has been repeatedly disproved in mature market economies. Britain escaped the Malthusian Trap through the Industrial Revolution, and particularly by using coal to feed the steam engine. Preindustrial economies had relied on “organic” sources of energy, that is, on human and animal power, and forest wood. Land had to provide not just food, fibers (the raw material for textiles), and building materials, but fuel as well. But in the eighteenth century, having run out of forests, Britain for the first time exploited systematically the vast reserves of underground fossils to sustain the growth of population and production. According to the decennial national census, total population in England grew by 76 % between 1801 and 1841, and by 146 % between 1841 and 1911. Total population grew much faster than male employment by industry,²³¹ showing that population growth was not constrained by the demand for food. Additional food for the growing population came from higher yield and import. Nevertheless, the Malthusian Trap maintained an aura of credibility throughout the Victorian Age. The Malthusian Trap has also been disproved by the economic development of the United States. During most of the nineteenth century a constant scarcity of labor and abundance of new fertile land have kept food prices low, and real wages higher than European averages. Polanyi explains: As for theory, the Malthusian trap may help explain the limits to growth in agrarian economies characterized by high concentration of land ownership, and no access to mechanization or trade. Its extension to nineteenth century market economies is however a theoretical mind trap. It was on account of this false appearance that the law of wages could not be based on any rational rule of human behavior but had to be deduced from the naturalistic facts of the fertility of man and soil, as they were presented to the world by Malthus’s law of population combined with the law of diminishing returns on land. […] Not until a century after the publication of the Wealth of Nations (1774) was it clearly realized that under a market system the factors of production shared in the product, and as produce increased, their absolute share was bound to rise.²³²

 Findlay and O’Rourke, Power and Plenty, 323.  Polanyi, The Great Transformation, 129.

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The relationship between demography and feedstock has lent itself to a variety of rhetorical implications. Polanyi described it as a theoretical mind trap. On the other hand, the idea that there must be some limit to the land-based supply of food is compelling: the concern that a growing population sharing finite resources (be it fish, food, forest, oil, water, or rare earths) will eventually face an issue of sustainability resurfaces periodically. The Malthusian Trap originated from a naturalistic analogy; its claims have been falsified by the rising standards of living towards the end of the first globalization, thanks to technical progress in agriculture and the use of fossil fuels. But there must be a limit to the availability of finite resources, the tolerance for bacteria, and the adaptation to climate changes. The Iron Law of Wages is an example of the way economic theories may generate biases in public perception. Economic theories explain reality under stated assumptions. The Malthusian Trap was bypassed through progress in agriculture and the new factory system. In that case, Malthus’s theory was beaten by technical progress and new sources of energy. However, by 2021 the intensive use of fossil fuels has generated climate change and global warming. Cattle raised for food is the single biggest source of CO2 and deforestation. Fertilizers pollute the oceans with nitrogen. And high population density has accelerated the transmission of bacterial infections. The exponential increase of population, food production, and carbon emissions are now a threat to economic, health, and environmental stability. The solution in one economic age becomes the problem in the next. To avoid falling into new Malthusian Traps, it is important to identify them, and clearly expose their implicit assumptions. Neoliberalism is not fit to handle the management of finite resources on a global basis. Instead, finite resources have to be approached as common goods, and managed by public agencies through non-market criteria. A theoretical framework geared towards the sustainable management of common goods must be applied. The underlying assumptions should be based on environmental sustainability, the precautionary principle, and the maintenance of biodiversity and ecosystems. The Malthusian Trap shows that common goods and finite resources cannot be approached within a neoliberal framework, because neoliberal assumptions describe a reality that no longer exists. In a section describing Distribution and Increase, Socialism and Production, Canetti wrote: Justice begins with the recognition of the necessity of sharing. The oldest law is that which regulates it, and this is still the most important law today and, as such, has remained the basic concern of all movements which have at heart the community of human activities and of human existence in general. Justice requires that everyone should have enough to eat.

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But it also requires that everyone should contribute to the production of food. The overwhelming majority of men are engaged in the production of gadgets of all kinds; something has gone wrong with distribution. The problem of justice is as old as that of distribution. Whenever men went hunting together the sequel was distribution. As a pack, they had been united, but when it came to the distribution of the prey they had to divide, never having developed the communal stomach which would enable them to feed as one creature. […] The isolation which eating entails is one of the roots of that terrifying growth called power. Anyone who eats alone and in secret, must kill alone. Anyone who kills with others, must share the prey with them.²³³

A contemporary version of the Malthusian Trap is being used to regulate humans’ access to natural resources. In a world where nature’s riches have become scarce relative to population, regulating their access, use rights, and exploitation is inevitably a task for governments. In mature economies, governments have found their ultimate legitimacy in the ability to ensure private property rights. Soon, natural resources governance and rights of use may become the most forceful argument to legitimize governments’ own existence confronting voters. In her introduction to a seminal book on the value of “natural capital,” Professor Gretchen Daily wrote: Technological innovation may temporarily mask a reduction in earth’s potential to sustain human activities; in the long run, however, it is unlikely to compensate for massive depletion of such fundamental resources as productive land, fisheries, old-growth forests, and biodiversity.²³⁴

Daily describes the allocation of natural resources among alternative uses a zerosum game. If there is no surplus, why should the private sector be involved? On the other hand, which government function would be as universal and quintessential as regulating how nature’s goods are shared? Yet, governments’ role in regulating the use of natural resources has been resisted by the private sector even in the face of the climate crisis. Neoliberals accept the irreplaceable role of government in enforcing private property rights. Why are they reluctant in accepting that governments should also enforce common goods and public property rights? Clearly, the problem is not the role of government per se. The resistance of liberal institutions towards the governance of nature’s goods and services is based on a different reason: government would subtract

 Canetti, Crowds and Power, 190 – 191.  Gretchen Daily, Nature’s Services: Societal Dependence on Natural Ecosystems (Washington, DC: Island Press, 1997).

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from the rule of the market those goods and services which are declared common or public, because goods or services governed by the public would be excluded from economic exploitation. Forcing the market mechanism to allocate natural resources, which are initially not excludable, is possible only by rendering them excludable. Commons were enclosed. Privatization is the modern term to describe those appropriations. It may not be possible to exclude a citizen from the benefit of national defense, but it is possible to privatize the army, and make money at the other end. Conversely, it is not possible (yet) to make citizens pay for the air they breathe, but industries pay for polluting it. Mainstream economists and leading international agencies, like the World Bank and the IMF, look for ways to compress natural resources within the laws of supply and demand, through all sorts of intellectual acrobatics. Yet, government regulation would be a simpler solution. Liberals’ preferred counter-argument consists of showing that all goods and services, like ecosystem services or carbon credits, can and therefore should be managed through the market mechanism. Where there is a price, human ingenuity will find a way to build a fence and prevent free riding. The reason for doing so, they argue, is efficiency: markets are more efficient than governments in allocating resources. But that, like the Malthusian one, is a theoretical mind trap: nature was not meant to be allocated efficiently, rather the opposite: it should be preserved. Hence, efficiency has no meaning here. Other principles should apply, like equanimity, precaution, and sustainability. Another reason is that, by managing natural resources, governments acquire legitimacy in the eyes of their constituents. They receive democratic endorsement for their ability to shield natural goods and services from the market rule.

Section 3: Democracy, Globalism, and Common Goods Democracy and globalism are two necessary conditions to promote a common effort towards the protection of common goods. However, not all forms of democracy and not all versions of globalism fit the purpose. Since the 1980s, privatization of several services that were publicly available through governments has fueled a branch of economics devoted to the study of public goods and common goods. ²³⁵ Examples of public services – or common

 Elinor Ostrom was awarded the Nobel Prize in 2009 for her studies on interactions of communities and ecosystems. She proved that collective organizations may have a rational approach towards the use of exhaustible resources.

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goods – that have been privatized in mature economies are: the utilities (water, telephone, and energy), public transportation (roads, railways, and national airlines), broadcasting (radio, television, Internet access), dairy products, oil companies, waste management, and jails. Common goods and public goods are called non-excludable because their use may not easily be precluded. However, some of them exist in limited quantity. Therefore, their use by one person will reduce availability to others. That property is called rivalry (among consumers). One example is fish in the ocean. Fishing is not preventable but overfishing by someone might reduce availability of fish to someone else. Goods that are both non-excludable and non-rivalrous are public goods. For example, eradication of Covid-19 is a public good. That distinction is not always straightforward. For example, burning fossil fuels reduces someone else’s ability to breathe good quality air. So, although clean air is in principle a public good, there are ways of restricting someone’s use of it. Under those circumstances, air becomes a common good. As another example, England, France, and Japan had for centuries a real estate tax based on windows, thus charging a fee for air. Neoliberal privatizations in the 1980s allowed companies and entrepreneurs to extract a rent from public and common goods that, until then, had been distributed by governments, or were freely available. Globalization did help to export the practice by making large corporations unaccountable to regulators, and by fomenting competition among national governments willing to sacrifice public goods to the altars of foreign investments in exchange for morsels of supply chains. In other words, privatization turned some public goods and, particularly, some common goods into commodities, by creating barriers to access that had not existed before. Water is often quoted as an example. The environment, in the shape of more or less strict environment protection laws, may be another. The chart in Figure 10 lists a number of issues that are cross-border in nature and require international cooperation to be solved. The map builds on the vision of the Club of Rome and the League of Nations. It may be noticed that many of those issues involve common or public goods. In fact, goods that cannot be contained within a nation’s borders are likely to be non-excludable. Incidentally, that is one more reason why nationalist and populist governments tend to deny the existence of issues related to common goods. Preserving a globalist mindset would ensure that those issues, goods, and services continue to be viewed as common and non-excludable. In contrast, the temptation of solving the new Copernican identity crisis through autarchy would make those issues unsolvable, therefore increasing the risk of a hard landing of the de-globalization phase. In fact, the inability of isolationist govern-

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Figure 10: Issues requiring a global approach, map by the author.

ments to confront the global issues involving common goods would generate a loop of denials, fake news, and scapegoats, eventually leading to a legitimation crisis, the creation of some external enemies, and an identitarian or preventive war. The expression “preserving a globalist mindset” requires further specification. Those who witnessed the collapse of the first globalization understood that wasting the globalist mindset is a terrible loss of opportunity (Chapter Five, Section 1). Therefore, nurturing and evolving a globalist culture is a worthwhile political action per se. Paraphrasing Elias Canetti, identifying global issues with common goods may be called globalism of the people, while Hayek’s neoliberal globalism may be called globalism of power. Globalism of the people holds the persuasion that humans should act collectively to manage finite natural resources as well as to preserve the cultural heritage of common intangible values, such as trust between governments and citizens, and tolerance among peoples of different cultures. That belief may translate into calls to action, at various levels. In fact, globalism of the people includes the concept that problems requiring a global approach also require a combination of solutions. Complexity is feared by those who believe that a single solution will fix all problems. For the sake of simplicity, they seek authoritarian leaders promising just that. To the contrary, tolerance towards the ideas of others is a prerequisite for accepting complex solutions. Specific problems and their proposed solutions will vary depending on culture and location. Different populations and regions will agree on different solutions to similar issues. Further-

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more, the same issue may be tackled only by complex plans. Peoples should remain open to adopting multiple solutions, not only to preserve the richness of cultural diversity, but also because most complex problems require the concurrent impact of a multiplicity of actions. A plan of action for the globalism of people would involve the coordinated action of multiple subjects with different roles and tasks. The cultural issues of openness and globalism were mentioned earlier. The World Wide Web of the first period (1980 – 2000) was a good example of open culture, and certain of its actors might promote a revival of that age. For that, a commitment would be needed by some of the Big Nines, towards content monitoring, responsible use of personal data, and a self-regulating code pertaining to the transparency of algorithms. It is unlikely that national governments would be able to impose such discipline. Hence the initiative should come from within the AI industry, which should be happy to take the opportunity to clean-up their public image. A few enlightened national governments in Northern Europe, North America, and the Pacific would provide supporting credibility to citizens’ committees and associations, by advancing instances of the people within the halls of the palace, to wit, from non-governmental volunteers’ organizations to multinational agencies (EU, WTO, WHO, and so on). Non-governmental organizations would produce hands-on research on global issues with the scientific support of academic institutions. They would be funded through public and private research grants aimed at identifying practical solutions to some of the most pressing global issues. Governments and intergovernmental agencies would be eager to tap the creativity of the public, entrepreneurs, and scientists, in order to find answers to pressing global problems. Consumers and investors would pressure corporations to embrace good corporate citizenship, corporate social responsibility, and environmental action. In 2020 globalization has reached a peak. After 50 years of increasing economic integration, the process has reversed its course. A similar reversal happened once before, in 1914. The First World War marked the end of the Victorian Age and la Belle Epoque, plunging the European continent into a 30-year nightmare. At the end of the tunnel the economic, strategic, and cultural leadership of the world had moved from Britain and continental Europe to the United States. If experience is a guide, this time it should be possible to avoid turning deglobalization into a global tragedy. A soft landing is possible, on some conditions. The first condition is for the West to exit denial and acknowledge that economic leadership is shifting from the West to Asia. This globalization has generated a second Copernican revolution: after 500 years of economic and cultural leadership the Western individual is no longer at the center of the universe.

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The West must become willing and capable to accept a multilateral role in the new global economic order. The second condition is for Asia and the West to accept that several issues of a demographic and environmental nature can only be solved through a coordinated multipolar effort. Sharing goals and developing common strategies are necessary steps to preserve common goods such as climate, finite resources, or the environment. It is a task for the West to persuade the peoples of Asia that democratic processes and fundamental digital freedoms must be added to the list of common goods. By acknowledging and pursuing that task, the West may avoid falling into the Thucydides Trap. Finally, common goods are too fragile and critical: our collective future should not be trusted to the responsibility of elusive national governments. Eastern and Western Big Nines, international agencies (EU, WTO, WHO, UN etc.), and non-governmental organizations of citizens should partake in the management of those issues, promote citizens’ participation in devising viable solutions on a local basis, and allow them to compare those solutions across the global village. The human species is facing daunting global challenges. To meet them, citizens need to participate, understand each other, debate, and deliberate. Keeping the virtual global forum reliable and open will greatly enhance their chances to succeed. In December 2021, fulfilling a campaign promise, America’s President Biden called for a two-day “summit for Democracy.” The representatives of more than 100 governments participated in the virtual meeting. Some did not attend, and some were not invited. Although the initiative was certainly welcome, several commentators thought that after the attempted coup of January 6, 2021, the USA were not able to lecture the rest of the world on democracy. Some of the non-invited leaders said that Biden should work on securing the democratic process in his own country, rather than preaching to others. A commitment for the survival of democracy should not be mistaken for an ideological or strategic battle between Anglo-Saxon liberal views, and the illiberal views of China and Russia, or the social-democratic approach of Northern Europe. Promotion of that kind of liberal democracy by the United States is not conducive to globalization, as it may be mistaken for an ideological war against other forms of government, or as an attempt to impose a certain vision of the world, instead of an effort to persuade other countries to work together on a common goal. Democracy is critical because it paves the ground for deliberation among parties who hold different positions, with the aim of converging towards a consensus, as broad as possible. But reaching a common solution at the global level may become impossible if, instead of encouraging gradual convergence, the process begins with an antagonistic stance.

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A distinction between globalism of power and globalism of the crowds has been described more than once in this book. While a globalist mindset is indispensable for the governance of common goods which are global in nature, the globalism of power will not reach a productive outcome, because it does not contemplate the common ownership of natural resources. Globalism of power promotes the universality of the market rule. “Common goods” is not a socialist expression; however, it is used to indicate certain scarce resources that should be exempted from the rule of the market. Markets are supposed to ensure optimum allocation efficiency; but scarce natural resources should not be allocated to whomever, nor is efficiency the criterion for handling them. Allocation implies assignment to someone, and therefore exclusion of someone else, and efficiency implies the existence of an end to be accomplished. On the contrary, the purpose of managing common goods is to preserve them unassigned, for the whole world, present and future. If the goal is to persuade a majority of the world population to act together for the preservation of common goods, polarizing ideas and contentious definitions should be avoided: this is no time to align Brazil, India, China, the Muslim world, and Russia with the Western concept of democracy. The goal is establishing a deliberative process, not generating universal consensus on some culturally defined principles of governance. Nor is there space for a globalism which pretends to impose the market rule as universal, because common goods should be managed outside the realm of private property and market laws. What is needed is a collective acceptance that common goods are a global issue, and a consensus about what those common goods are. They should not be appropriated by a particular entity, be it a national government or a multinational corporation. They should not become a bone of contention between ideologues. All we need is to establish consensus on the form of global governance of public goods. That is more urgent, and more specific, than finding consensus on a certain form of democracy, or a certain definition of globalism. Deciding how to deliberate collectively on common goods is the task at hand. Establishing agreement around one definition of democracy or globalism may be useful, but it is not the goal. Western citizens and governments are confronted with a task of high responsibility and consequences, one certainly worthy of the highest commitment.

Post-scriptum This book went to print in June 2022, during the invasion of Ukraine by a Russian Army. That is an immense tragedy for the Ukrainian people, and an incremental threat to global peace, democracy, and sustainability. In fact, Putin’s war is more than one additional “black swan” along the path of this second de-globalization. It is also the opening salvo of Asian claim to global leadership. The fact that fossil fuels have become a bone of contention shows how climate and common goods have taken central stage in that new phase.

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Index of Names Adrian, Roman Emperor 150 Allen, Paul 96 Allison, Graham 161 Applebaum, Anne 4, 114 f., 156 Arkwright, Richard 19, 25 f., 36 Armstrong, William George 5, 15, 42 Arrighi, Giovanni 159 f. Athey, Susan 113 Azevedo, Roberto 9, 137 f. Bardeen, John 92 Bashforth, Francis 41 Beckert, Sven 16 f., 22 – 24, 38 Bevilacqua, Alex 154 Biden, Joseph Robinette 4, 9, 12 f., 138, 161, 163, 178 Blank, Julius 92 f. Bloch, Marc 142 f., 156 f. Brattain, Walter 92 Braudel, Fernand 142 f. Braunthal, Julius 44 Breiman, Leo 106 f. Brin, Sergey 99 Brown, John 46 Brunel, Isambard Kingdom 32 f., 35, 43 Bush, George H.W. 75, 134, 144 Cabot Lodge, Henry 167 f. Cairnes, John Elliott 38 Canetti, Elias 4, 6, 10, 48, 54, 60 f., 64 – 70, 72 – 74, 79, 103, 113, 149, 156, 158, 169, 172 f., 176 Canova, Frank Jr. 98 Cartwright, Edmund 25 f. Chamberlain, Joseph 36 Charles V, Holy Roman Emperor 19 Chickashaw, Nation 21 Clausewitz, Carl von 5, 15, 48 – 50, 161 Clemenceau, Georges 56 – 58 Clemens VIII, Pope Ippolito Aldobrandini 152 Clinton, William Jefferson 133, 144, 147 Columbus, Christopher 19 https://doi.org/10.1515/9783110744477-010

Commager, Henry Steele 40 f., 47 Conway, Melvin 108 f. Copernicus, Nicolaus 9, 152 f. Crompton, Samuel 26 Daily, Gretchen 173 Deane, Phyllis 16, 37 f., 40 Dolfuss, Engelbert 75 Eiffel, Gustave 35, 72 Engels, Friedrich 3 f., 15, 26 – 31, 51, 53 Eugenie, Empress of France 35 Faggin, Federico 95 Faraday, Michael 35 Ferrero, Guglielmo 4 – 6, 10, 15, 47 – 51, 54, 61, 64 – 67, 69 f., 72 – 74, 147 – 149, 158, 161, 169 Field, Cyrus 35 Findlay, Ronald 16, 62, 85, 88, 171 Foch, Ferdinand 56 Gaddis, John Lewis 5, 15, 48 – 50, 108, 161 Galileo, Galilei 152 Gandhi, Mohandas Karamchand 68 Gates, William Henry III 96 Giedion, Siegfried 34, 72 Gilmour, William 27 Gopinath, Gita 117 Gorbachev, MIkhail 86, 130 Granet, Marcel 143 Greenspan, Allan 7 f., 96 f. Grimshaw, Robert 26 Grinch, Victor 93 Hargreaves, James 25 f. Hayek, Friedrich August von 7, 54, 71, 73 – 79, 81 – 83, 86 f., 117, 128 – 130, 133, 169, 176 Hicks, John Richards 77 f. Hinton, Geoffrey Everest 106 Hitler, Adolph 60, 75, 80 Hobsbawm, Eric John Ernest 37, 46, 71, 170

186

Index of Names

Hoerni, Jean Amedee 93 Hoff, Marcian 95 Hofstadter, Richard 167, 169 Hopewell, Kristen 4, 89, 123, 131 – 134, 136 Horrocks, William 26 Huebner, Carl Wilhelm 29, 51, 160 Hugenberg, Alfred 46 Imbens, Guido 113 Innes, Arthur Donald

116

Jackson, Andrew 21 Jacquard, Joseph Marie Charles Jefferson, Thomas 33 Jinping, Xi 161

Mazor, Stanley 95 Mazzucato, Mariana 120 McKenna, Regis 94, 118 Meadows, Donella Hager 86, 130 Mina, An Xiao 123 f. Mises, Ludwig von 7, 74 f., 79 – 81, 83 Molnar, Christoph 108 Moore, Geoffrey 4, 8, 93, 118 – 122, 158 Morrison-Bell, Clive 63 Morse, Samuel Finley 35 Mussolini, Benito 48, 64 Myrdal, Gunnar 130

17, 27

Kay, John 25 Kelvin, William Thomson, Lord 35 Kepler, Johannes 152 Keynes, Jon Maynard 4, 6, 10, 36, 38, 56 – 64, 70, 73, 76 – 79, 81, 148 f., 158, 167, 169 Khanna, Parag 90, 97 f., 141 – 143, 154 Kilby, Jack St. Clair 95 Kleiner, Eugene 93 Krupp, Alfred 5, 15, 41 f., 44, 46 League of Nations 41, 63 Lee, Tim Berners 40, 102 Licklider, Joseph Carl Robnett 91 f. Lima, Gilberto TAeu 76 f. Lincoln, Abraham 40 List, Friedrich Georg 39, 43, 91, 107 Lloyd George, David 56, 58, 60 Lombroso, Cesare 64 Louis Napoleon, Napoleon III 35, 42, 44, 154 Luther, Martin 152 Luxemburg, Rosa 45 Machiavelli, Niccolo’ 166 f. Maggi, Blairo 135 Malthus, Thomas Robert 12, 170 – 173 Marcus Aurelius, Roman Emperor 150 Marshall, Alfred 39, 67, 150 Marx, Carl 26, 30 f. Mascheroni, Lorenzo 33

Napoleon, Emperor of France 49 f., 148 Negrelli, Luigi 35 Nevins, Allan 40 f., 47 Nicholas I, Emperor of Russia 42 f. Nicholas II, Emperor of Russia 43 Noyce, Robert 92 f., 95 Nyerere, Julius 86, 129 Obama, Barak Hussein 110 f., 138, 163 Orlando, Vittorio Emanuele 56, 58 Ostrom, Elinor 174 Owen, Robert 28 – 32 Page, Lawrence 99 Paine, Thomas 33 Panikkar, Kavalam Madhava 67 f., 70, 152 Paul, Lewis 25 Peel, Robert 71 Perez, Carlota 4, 8, 118 – 120, 122, 159 Polanyi, Karl Paul 4, 6, 10, 23 f., 28 f., 32, 38, 54, 61, 64 – 67, 70, 72 – 74, 79 f., 158, 169, 171 f. Prestowitz, Clyde 144, 166 Putin, Vladimir 43, 151 Raditza, Bogdan 47, 65 f. Randers, Jorgen 86 Reagan, Ronald 7, 75, 86, 130 Robbins, Lionel 76 f., 82 Roberts, Sheldon 93 Rockefeller, John Davison 40, 71, 75, 82 Roebling, Johann 34 f. Roepke, Wilhelm 82 Roosevelt, Theodore 40, 47

Index of Names

Rothschild, Lionel 36 Rousseau, Jean Jacques Russell, Bertrand 78

Villa, Pancho (Francisco)

187

55

72 f.

Samuelson, Paul 78 f. Saxenian, AnnaLee 4, 8, 95, 118, 121 f., 124 Sedol, Lee 106 Seguin, Marc 33 Sehid Ali, Pasha Grand Vizier 154 Shima, Masatoshi 95 Shockley, William 91 f. Slobodian, Quinn 4, 63, 75, 78 – 80, 82 f., 129, 138 f. Sraffa, Piero 76 – 78 Standaert, Michael 165 Talleyrand, Charles Maurice de 72, 148 Tarnas, Richard 153 Terman, Frederick 91 f. Thatcher, Margaret 7, 75, 86, 130 Thompson, Edward Palmer 26 Thunberg, Greta 87, 137 Tooze, Adam 117 Torvalds, Linus 103 Trump, Donald 9, 74, 94, 100 f., 111, 113, 123, 138, 160, 163

Wang, Patti 89 Wade, John 28 Wang, Yi-ting 164 Waters, Richard 112 Webb, Amy 106, 109 f., 114 Whitney, Ely 21 William III, Prince of Orange 17, 19 Willson, Shane Montgomery 159 f. Wilson, Thomas Woodrow 6, 50, 54, 56, 59 – 61, 71, 74, 80, 147 – 149, 167, 167 – 169 Witte, Sergei Yulyevich 39, 43 Wolf, Martin 117 Xiaohong, Quann

95

Yasuyuki, Motoyama

95

Zapata, Emiliano 55 Zedong, Mao 68 Zimmermann, Arthur 55

Subject Index artificial intelligence 8, 97, 105, 110 f., 120, 122, 141, 147, 150 f., 155 f., 160, 163, 169 automated data processing 2, 114, 160 BRICS

League of Nations 41, 54 f., 63, 69, 74, 80 – 83, 147 – 149, 167, 175 legitimacy 10 f., 15, 21, 45, 49, 51, 65, 73 f., 139, 161 f., 166 f., 169, 173 f.

88

climate 6, 11, 19, 73, 88, 160, 169, 172 f., 178 collapse 3, 6, 50, 53 f., 63 – 67, 69, 71, 81 f., 120, 126, 133, 147, 158, 160 f., 169, 176 common goods 7, 9 – 14, 44, 73 f., 83, 127, 172 – 176, 178 f. copernican revolution 10, 153 f., 161, 177

machine learning 7 f., 74, 91, 97, 104 f., 107 f., 112 – 116, 122 f., 130, 156 malthusian trap 11, 170 – 173 mechanization 4 f., 15 f., 21, 24, 28, 32 f., 35, 145 f., 171 migration 1, 3 f., 6, 8 f., 51 f., 88, 90, 95, 118, 121 f., 127, 150, 159 mobile phones 99, 102, 122

decoupling 8, 88 – 90, 120, 122, 126, 134, 141 de-globalization 3, 6 f., 10, 51, 61, 85, 117, 142, 153, 158 – 161, 163, 166, 169, 175, 177 democracy 7, 10, 12 – 14, 46, 51, 72 – 75, 77, 79 f., 83 f., 90 f., 108, 115, 125, 128, 147, 150 f., 155 – 157, 165, 167, 174, 178 f. demography 6, 9, 12, 86, 144, 169 f., 172

nationalism 50 f., 69 f., 149, 169 neoliberal 4, 7, 39, 74 f., 78, 82 f., 89, 129 – 133, 137 f., 160, 163, 169, 172 f., 175 f.

early adopters

second globalization 3 f., 6 – 8, 11, 55, 68, 91, 130, 141, 150, 152, 154, 160 f., 167 Second International 5, 44 f. semiconductors 11, 91 – 94, 97 f., 105, 122, 141, 158, 163, 165

3, 118, 158

factory system 2, 4, 15, 17, 25, 27, 31 – 33, 35, 37, 53, 91, 148, 158 f., 172 fake news 71, 104, 114, 116, 123, 156 f., 176 first globalization 2, 6, 53 f., 68, 72, 91, 117, 150, 154, 158, 160, 166 f., 172, 176 identitarian war 10, 15, 161 infant industry 39, 43 integrated circuits 1, 95, 163, 165 Internet 7 f., 89 – 92, 97 – 105, 115 – 118, 122 f., 151, 156 f., 162 f., 175

https://doi.org/10.1515/9783110744477-011

populism 5, 48, 90 protectionism 31, 38 f., 43, 50, 62, 116, 132, 148 rare earths

11, 163, 165, 172

Versailles 6, 10, 55 f., 58, 60, 68, 80, 82, 147 – 149, 151, 167 World Trade Organization 7, 9, 45, 74, 78, 83, 87, 89, 123, 126 – 128, 130 – 139, 141, 144, 147, 151 f., 167, 177 f.