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The ascent of globalisation captures the sweeping drama of postwar globalisation through intimate portraits of twenty of its key architects. These profiles provide insights into what inspired these pioneers of globalisation — the beliefs they each imbibed in their youth, the formative experiences that shaped their ideas and their contributions to the global architecture. Engaging anecdotes and telling personal details, many of which have never been told, enliven each of the stories, as well as the behind-the-scenes dramas that accompanied the creation of institutions such as the World Bank, IMF, UN and World Trade Organization and the informal governance structures that are part of the postwar global architecture.
Their legacies are critically examined, both their successes and their disappointments: a global financial system that is fragile and unstable; an international trading system that is unfair; the unintended consequences of largely unregulated transnational capital; and dysfunction that plagues institutions like the European Union and the United Nations. The book ends by examining what implications the flawed architecture may have for the future of globalisation.
While advances in transport and communications technology drove the first phase of globalisation (1870-1914), it fell prey to short-sighted policies pursued by the major powers. The lesson learned by internationalists, who would assume position of power during the Second World War, was that the postwar order would need to be protected by international institutions and rules.
The prologue introduced three phases to the construction of the postwar architecture, around which the book is structured. Part I examines the emergence of the international global order, which saw the construction of the UN, IMF, World Bank and European Union. Next came the neoliberal global order in which the markets for goods, services and capital were opened up. Finally, in response to the unintended consequences of neoliberal globalism, the UN and its agencies worked with transnational corporations to implement policies and programmes to give markets a human face.
By the twenty-first century, no single blueprint emerged, and these three models coexisted, sometimes uncomfortably.
A generation of internationalists occupied positions of power in the US, Great Britain and Europe during the Second World War. Most had supported President Woodrow Wilson’s League of Nations and had been disappointed when it failed. They were determined to complete Wilson’s dream, but this time around the postwar order would be constructed around robust institutional architecture, in which they were willing to sacrifice the purity of their internationalist vision against the realpolitik of the times.
Two models of the international liberal order emerged. One was built around the principle that all nations were equal before international law, whether powerful or not. The architects of the Europe Union went further, and experimented with supranational authority, that constrained the sovereignty of member nations.
As the US entered the war, former presidential candidate and dedicated internationalist, Wendell Willkie worried that Americans were not looking ahead to when the war would be won. Having seen the opportunity squandered after the First World War, he set out to convince the public of the necessity of a strong international order to underwrite postwar security and prosperity. Through his book One World and his media appearances, Willkie campaigned against US isolationism and helped popularise liberal internationalism, both inside the US and elsewhere. His successes helped pave the way for the creation of the United Nations, World Bank, IMF and GATT, making Willkie an important pioneer in the history of globalisation.
President Roosevelt called Leo Pasvolsky the ‘architect of the United Nations.’ However, he received this accolade through luck, as his main rival, Sumner Welles, was politically assassinated in a rather sordid affair before he could take credit for his contributions to the final design.
The machinations in San Francisco, where the UN treaty was negotiated, are described. There was a rebellion, led by Australia, against granting the major powers veto and the conference would have unravelled had it not been for some backroom arm-twisting by the US. As a result, the final architecture sacrificed true equality between nation members to accommodate the demands of the major powers.
When the Cold War broke out, this flaw in the UN’s structure made it difficult for the organisation to resolve ongoing tensions between the major power blocs and keep the peace.
The global economic order that emerged at the end of the Second World War was the work of two men: John Maynard Keynes and Harry Dexter White. This chapter describes the tense negotiations between them. Once they had agreed on a final package, however, they worked closely. At an international conference held in Bretton Woods, they convince delegates to create the IMF and World Bank.
The ‘third leg’ of the Bretton Woods stool was to be the International Trade Organization (ITO). Negotiations between the main sponsors of the ITO ran into problems early. Will Clayton for the US and Sir Stafford Cripps for the UK, failed to come to an agreement before the Havana Conference, in which the ITO treaty was negotiated. When the resultant ITO charter failed to be ratified, the major trading powers agreed to the General Agreement on Tariffs and Trade (GATT), which saw limited liberalisation of trade.
These institutions are the fundamental building blocks of the liberal economic order, designed to ‘make finance the servant, not the master of human desires.’
From his experiences during the First World War and then as Deputy Secretary General of the League of Nations, Frenchman Jean Monnet developed a practical plan for uniting countries of Europe under a supranational authority.
After a number of failed attempts, in 1950, Monnet used the conflict between France and Germany as an opportunity to present a plan for the European Coal and Steel Community. This eventually grew into what is now known as the European Union.
The success of this venture was heavily reliant on the Méthode Monnet, in that he deliberately created unstable institutions that demanded reform by gradually extending supranational authority over European markets and politics.
The instability in the eurozone today is a legacy of the Méthode Monnet, in which Europeans face a stark choice between accepting greater integration or winding back the experiment in supranational governance.
In 1971, in order to find a quick fix to America’s growing currency crisis, President Richard Nixon ended the convertibility of the US dollar to gold removing a key feature of the Bretton Woods monetary system. Called the ‘Nixon Shock,’ it threatened the postwar international order.
Into the breach stepped a new generation of global architects, mainly drawn from the business community and neoliberal think tanks. Together, they worked towards a new model of globalisation in which governments would step back from active management of the world’s economy. Instead, the rule of law would limit the ability of governments to interfere with the free movement of goods, services and capital around the world.
At the same time as Keynes was celebrating success at Bretton Woods, neoliberal economist Friedrich Hayek started to publicly campaign against the liberal economic order, in what he called the ‘war of ideas.’
He fired the first shots in this war with the publication of The Road to Serfdom, and then established the Mont Pèlerin Society, where he hoped to rally fighters for his war. He turned out to be a poor field general and it looked like the war might be over before it started.
Hayek, however, did inspire a young fighter pilot, Antony Fisher, who did have fire in his belly and was keen to face grapeshot in the war of ideas. In 1956, Fisher established the Institute of Economic Affairs (IEA). This think tank, together with others modelled on the IEA, helped spread pro-market ideas. The high point of their campaign came when Margaret Thatcher and Ronald Reagan were elected, establishing neoliberalism as the new economic orthodoxy.
In 1980, Hayek advised Fisher that he needed to seed the world with neoliberal think tanks. The result was the Atlas Economic Research Foundation, which networks over 400 think tanks worldwide and they have helped spread the war of ideas.
George Ball became the principal spokesperson for a group of fellow businesspeople who were strong supporters of globalisation. Like Ball, they saw globalisation faltering in the late-1960s, with few friends among the political elite. Referred to by the New York Times as the ‘New Globalists,’ they decided that they needed to take a direct role in promoting globalisation. Otherwise, they feared that postwar order might falter.
Ball argued that global markets needed to be freed from the ‘ceaseless interference from its puzzled parent, the sovereign state,’ and so the New Globalists worked to promote the sovereignty of the markets as the foundation of globalisation.
Deciding that the New Globalists needed a formal platforms to promote their ideas, David Rockefeller created the Trilateral Commission, and Klaus Schwab founded the World Economic Forum. These business clubs successfully co-opted members of the political elite, and together they have formed an engine room for policies, partnerships and programmes to extend the boundaries of market-led globalisation.