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| Picture Credit: Diplomat |
The globalized economy involves "everyone, everywhere and everything" but at present we witness a world economy divided into regions - NAFTA, the EU, MERCOSUR and ASEAN. Economic activity takes place within these regions, not among them, and these forms of regional economic activity date back to antiquity. This article argues that by linking globalization to history, new paths to development and economic growth can be revealed.
By Karl Moore and David C. Lewis
Karl Moore, a business professor at McGill University, and David Lewis, a historian, examine the history of international business in "The Origins of Globalization." Despite the digital ties that bind the world like never before, regional geography still determines many economic decisions, they argue.
Back in the 1990s, it seemed to many that the Anglo-Saxon economic model was superior to all others - and destined to supplant them.
Now even The Economist is admitting, reluctantly, that "a new European pecking order has emerged, with statist France on top, corporatist Germany in the middle and poor old liberal Britain floored."
While the French model seems to do better at cushioning France from the Great Recession, the staunchly free-market British weekly still expects the Anglo model to triumph once recovery begins.
A new world economic order is emerging, but it may not be the "End of History" or Pax Americana envisioned by Francis Fukuyama and Thomas Friedman in the 1990s. Instead it may be more like the "Rise of the Rest" described by Fareed Zakaria.
The great Canadian media guru Marshall McLuhan may have been right when he prophesied in the 1960s that the center of the world would be everywhere.
The economy now involves everyone, everywhere and everything. Managers and entrepreneurs will need a wide view of both the past and the present.
History punishes reductionist, black-and-white, one-size-fits-all thinking. In the 1930s, Anglo-Saxon capitalism seemed on its last legs, and Communism and Nazism were the wave of the future. In the 1950s, history became a race between New Deal capitalism and an advancing Communism.
By the 1970s, the Japanese model was in - and by the late 1980s the Chinese model seemed to be taking its place. By the 1990s, the U.S. model was back in vogue, and with a free-market vengeance.
What's the best economic system for any given nation? This depends on three things: its history, culture and existing social institutions (i.e., the ways it is organized and run).
Americans are highly individualistic and will bristle under a state-run economy. Frenchmen are horrified by the low-tax, low-wage model found in many "red" states in the United States.
Business cultures are also deeply grounded in the history of nations. China's rickety banking structure is a holdover from the days of Mao, yet it seems almost impossible to fix.
History affects economics in countless ways. After all, millions in China remember Japan's "Rape of Nanjing" as if it were yesterday. As for today, the world will not soon forget that it was the U.S. financial industry that tipped the world into a severe recession.
Even in the United States, there is more than one model. The Democratic model popular in the Northeast dates back to the activist town hall governments of Puritan New England. The Republican model popular in the South of the United States dates back to the minimal governments of Virginia and South Carolina.
Some aspects of these models go back even further. Entrepreneurial but regulated capitalism, balanced by strong traditions of citizenship, government involvement and charitable voluntarism, were found in Republican Rome.
Canadians have long modified the Anglo-Saxon model in harmony with their own history. Quebec still embodies a tradition of state enterprise dating back to Louis XIV. Ontario, similarly, still carries what's left of a Tory Conservative belief that freedom "wears a crown."
Except perhaps in pre-1997 Hong Kong, statism and monarchy have always fit well together - and libertarianism and republicanism have always joined hands.
For instance, even the bluest of Canada's Tories balk at the radicalism of the U.S. Republican Right. Assistance for able-bodied, childless, single adults is a case in point.
In 1991, Michigan's Republican Governor John Engler outsourced such assistance to the Salvation Army. Four out of five Michigan residents approved.
At the same time, Ontario's Conservative Mike Harris preserved such assistance but slashed it by 22% - and required work or training under the Ontario Works program. Engler was re-elected twice with 60% of the vote, Harris only once with 45%. Both left office in 2002 to 2003.
Michigan today retains Engler's faith-based approach, but general assistance remains in Ontario, and the work requirements were loosened.
What we think of as a global economy may in fact be three linked regional economies: NAFTA in North America; the EU in Europe, Africa and the Middle East; and ASEAN in the Pacific Rim. The biggest economic activity in trade and foreign direct investment takes place inside these regions, not among them. For instance, Ontario does more business with the United States than all of Japan. The implications of this are that the Anglo-Saxon model is likely to prevail in NAFTA, and the French and German models in the EU.
We find traces of such a regional model even in antiquity. By the time of Augustus (27 BCE), a hemispheric economy extended from Roman Spain all the way to Han China.
Within that economy, most trade in the Roman world took place within the Roman world - and most trade in India took place within India. A smaller amount of trade took place along the Silk Road, or across the Indian Ocean, between the regions.
As history has shown, there is more than one way to run a successful economy or a region.
In the future, expect to see considerable variety among such systems - all of which will allow their citizens to ride the morphing waves of globalization.
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