In their new book, academics Karl Moore and David Lewis trace the origins of the world economy all the way back to the origins of civilization. Drawing on archeology, religion and economic history, The Origins of Globalization argues that international trade has been around as long as trade itself—and that it’s not going anywhere anytime soon. Moore, a professor at McGill’s Desautels faculty of management, spoke with Macleans.ca about the book and the lessons the ancient world might hold for these troubled economic times.
Q: Your book is about globalization, and yet you write that “regionalization is the major story in the world economy.” How do you reconcile the two?
A: It used to be that there were two ways of looking at the world: the first level was national; the second one was global. Today, we argue there are four. We’ve added region-think NAFTA, the European Union. We also have-and Richard Florida has talked a lot about this-city and the creative class. Nation is becoming less important, while region and cities are becoming more important.
Q: Are we going back to the ancient Greek city-state?
A: When we think about aerospace, it’s dominantly Montreal-a fair bit in Toronto, but it’s dominated by Montreal. When we think about oil, it’s Calgary. When we think about the finance sector, we think mainly Toronto. National competitiveness can be broken down to a city level.
Q: You acknowledge that globalization can have a homogenizing effect on a culture, that one of the negative components of it is Westernization.
A: The right form of economy of capitalism really depends on three things—culture, social institutions and history. There are some differences between Canada and the U.S., but we essentially have a free-market system, though with a huge role for government, which Republicans don’t like to realize. We’re not as laissez-faire as Hong Kong, for example. But what we say is taking that model and forcing the Japanese, who are in trouble right now, or forcing the Chinese or the Germans to change to our model, would do more violence to their system than anything else. Should they learn from us? Absolutely. But with a little bit of humility, we should accept that we could learn from them as well.
Q: There seemed to be a downplaying of the tension between the state and private industry in your book. Do we tend to overstate the antagonism between the two?
A: To a certain degree, it’s the right-wing of the Republican party and some conservatives here in Canada and the Tories in the U.K. that get wound up and see markets as the solution, as the salvation of humanity. I love free markets. I think they’re a great idea. But there are limits to them. Throughout history, the role of the government, the role of the state, was at different levels. In Ancient Greece, it was more entrepreneurial, with less of a role for government. Rome was partly built by the military expansion of the Roman Empire, their conquering of a good part of the known world. The military and the government were very central to how business expanded. A lot of Roman business occurred because they were supporting the army and then, as the army moved on, after they’d conquered a place, they turned away from making swords toward making ploughshares-making things for a domestic economy rather than a war economy. You go back even further to Ancient Phoenicia and Assyria, where the temple was an important part of the economy. The investment bankers of the day were in the temples. You’d go to your priest to get funding for your business venture. There’s different ways of achieving economic success.
Q: Political fanaticism or radicalism seems to have played a relatively minor role in the building of the world economy.
A: When you look at business and the spread of business internationally, you see that business is fairly pragmatic. Business people can do well under totalitarian regimes. We think of China, which is communist, but business people have prospered in China. What business people like is predictability, saying, ‘Just tell us the rules of the game, and if we know the rules, we can go out and make a buck following those rules.’ When you change those rules too often, it makes it difficult for business to make a profit. When Phoenicia took over from Assyria, the business people in Assyria accepted their new masters. And when Rome conquered Greece and conquered Phoenicia and Carthage, the business people, who are great patriots during the battle, once they recognized which way the battle had gone, they continued to trade, they continued to run their businesses under new masters.
Q: Your book is especially cautious on China, saying it has “joined the world before, and retreated.” Can you expand a bit on your doubts about China?
A: During the 20th century, because of communism, China withdrew and focused on itself. In the last 20 years or so, it has opened up to the West, to the world, and it has had a huge impact. It’s the third-largest economy in the world and it may well pass Japan-we’ll see how the economies of both those countries go. But, clearly, it’s a player, a big player.
With hundreds of thousands, undoubtedly millions, out of work in China, how does the government deal with it? That would be an issue in any country, but it’s particularly an issue when you look at the vastness of China and its population. If the government feels too threatened, it may again withdraw a bit from the world economy. It’s done that before; it could do it again.
Our hope is, and I think the hope of the West is, that we’re so engaged in each other’s economy-we’re their biggest customers, they’re one of our biggest suppliers-that there’s a peace dividend. They don’t have the degrees of freedom to withdraw in the way they would have had 10 or 15 years ago.
Q: Are economic empires becoming more and more short-lived? We seem to have gone from empires that could last 500, 600 years to ones that can barely last a decade.
A: Well, the U.S. is still very much the superpower. It’s declined in vitality to some degree because of the economy, but the whole rest of the world has gone down in tandem. The underlying point is that the world economy has greater velocity, we’re more interlinked, and therefore, we’ll see dominant powers be dominant for a shorter period of time.
Q: Going back 5500 years, to the origins of the world economy, one of the constants, according to your book, is the strain capitalism tends to put on the environment, which has caused empires to collapse.
A: Yeah, absolutely. In Pompeii, it was because of natural phenomena. Other times, it appears it was deforestation and the creeping of the desert made an area not able to sustain agriculture, so society had to diminish. Today, it appears to be at another level altogether when we look at global warming. In some ways, this may be the biggest threat to our form of capitalism. Simply, we have too many people demanding too many resources and the world can’t sustain it. As the middle class rises in India and China, they want our lifestyle. Now, the world can barely sustain the North American lifestyle for North Americans. When we add hundreds of millions of Chinese and Indians and other countries to that equation, it may be that we’ve tipped the balance of the world and we’re going to have to go back to more frugal ways of the past. Maybe that’s what we’re looking at: global warming, along with the recession, is going to encourage a more frugal and more careful society. We’re going to just live differently. That may be one of the central things that changes our economy over the next 20 to 30 years.
Q: It seems like we’ve needed bigger and bigger companies to meet these increasing demands. And yet, historically, you write, “smaller companies tend to have tremendous staying power.” It certainly seems like today’s economic problems are at least partly caused by these giant companies-they’re too big to fail, they’re slow to react, etc. Have we been going in the wrong direction, building these massive businesses?
A: What we’ve seen is the taking of the value chain of the firm-the activities it does-and outsourcing it. Manufacturing increasingly goes to China; we outsource the IT to India. The idea is that firms don’t need to be as big in order to be successful. So we see that as one trend. On the other hand, to be really a global firm and take a product around the world, that calls for some big firms with big channels of distribution, like an IBM or a Microsoft. They can reach the world. I think in 10 years we’ll still have some big, big, companies. But we’ll see a lot of vitality, a lot of innovation come from smaller companies. It’s the idea of market-makers and market-takers. The market-makers create new ideas, but it’s the market-takers, the big firms, that take those ideas and send them globally.
Q: You describe the book as “a call for today’s globalizers to make the world safe for diversity.” What do you mean by that?
A: We had this trend in globalization in the ’80s and ’90s, the idea that we were going to move to one model of capitalism. Thomas Friedman wrote about how globalization had Mickey Mouse ears. It was about Americanization and cultural homogenization; teens around the world would be all alike. There was a backlash against that. In some ways, as you become part of a larger group, you want to maintain a sense of community at a smaller level. I think what we see is that people wish to keep their identity. We see that in Quebec. You can be both a proud Quebecer and a Canadian at the same time. In a world that can be more one, we want diversity. We want to be unique in our communities. We want to maintain those differences; they make us more fully human.