Free After Tamerlane by John Darwin Page A

significantly. The level, however, was still far below what it hadreached by the end of the twentieth century. 12 And, except for East Asia, manufacturing industry had been heavily concentrated in Atlantic Europe and the Old Northeast of the United States. No other part of the world could compete in those markets with industrial goods. Semi-globalization was all but stopped in its tracks by the outbreak of war in Europe. In the age of disruption that followed, the economic integration of the pre-1914 world went into reverse. After a short-lived recovery in the late 1920s, the global economy shrank. Its main entrepôt, Britain, abandoned the policies that had smoothed its exchanges: a gold-backed world currency and the commitment to free trade. The world’s largest economy, the United States, retreated deeper into its cave of protection. Much of the rest of the world was divided between blocs: each under its hegemon; each aiming to shrink its trade with the others. The Soviet Union withdrew into virtual isolation. Smaller states struggled to reduce their external dependence. Primary producers sawtheir incomes collapse. The East Asian economy, within which China had been industrializing swiftly, was now cut in half, first by Japan’s ‘yen bloc’ and then (in 1937) by its invasion of China. By the time the world mobilized for a new total war, the great trade expansion of the previous century could no longer be seen as a guide to the future. The closed economy, self-reliance and internal development – not the promotion of trade – had become the price of survival in a segmented world.
    Nor was this view to be dispelled completely after the Second World War. The post-war recovery, when it eventually came, mirrored the divisions that peace left unsolved. The vision of global free trade that had inspired the creation of the International Monetary Fund, the World Bank and the General Agreement on Tariffs and Trade had to face the reality of global cold war. The autarkic empire of the Soviet Union was hugely expanded in Eastern and Central Europe. The Communist triumph in China entrenched even more deeply the prewar partition of the East Asian economy. China, like Stalinist Russia, withdrew into planned isolation. South Korea, Taiwan, Hong Kong and Singapore followed Japan’s path and became its trade partners. The European Community, the vehicle for Western Europe’s recovery, formed a protectionist bloc. Its economic arrangements reflected its primary purpose: to secure a permanent end to Franco-Germanantagonism, not to promote an open global economy. When the European overseas empires broke up into a mass of newstates, most favoured a closed, state-managed, economy in their drive to build an industrial base, and leveraged diplomatic alignment against aid and investment from the superpower rivals. But perhaps the most significant feature of this age of recovery was the scale of American power. It was the Second World War that made the United States not just the world’s largest economy, but also its strongest. It was the global cold war that made it the world’s greatest military power. These were the assets with which America entered the ‘globalized’ world at the end of the century.
    Perhaps enough has been said to make an obvious point. The economic regime to which we have grown used in the last decade and a half represents an extraordinary moment in the turbulent history of the global economy. It was produced by an earthquake as dramatic as anything in the world’s modern history. It required the combination of geopolitical change – the sudden collapse of Soviet power and China’s decision to embrace a market economy – and a technological revolution in communications and transport. The turn to the market in the People’s Republic and the former Soviet bloc brought a massive enlargement of productive capacity and an enormous newmarket. It coincided with the