“Two Terrible Decades” — from A Century of Commerce

Please download a copy of the PDF file (1.8 MB). I look forward to your comments, corrections and suggestions here in the comments on my website, or by email to peter at this domain.

It is always a mis­take to sup­pose the peri­od of our lives cor­re­sponds with some remark­able his­tor­i­cal events or trends just because those events or trends loom for large in our own lives.

Still, there’s every rea­son to think that the peri­od of peace­ful world com­merce that we have expe­ri­enced since the 1950s was remark­able. Pos­si­bly unique.

The “pax Amer­i­cana” — or the “US Hege­mo­ny” — that brought us the first and only mul­ti­lat­er­al sys­tem of trade treaties, fos­tered not only peace but détente and col­lab­o­ra­tion. Pro­tec­tion for indus­tri­al goods in the largest mar­kets fell from lev­els of 40 per­cent or more to less than 5 per­cent. Even­tu­al­ly, even the most labor and land inten­sive indus­tries (tex­tiles, gar­ments, broad-acre crops) were opened up to com­pe­ti­tion. Use­ful steps were tak­en to open com­mer­cial ser­vices mar­kets and, in the process, to some­what free-up for­eign invest­ment regulations.

Then, almost every coun­try in the world signed up to the glob­al stan­dards of trade admin­is­tra­tion embod­ied in the WTO treaties. The acces­si­ble world mar­ket grew very rapid­ly thanks, espe­cial­ly, to the open­ing of Chi­na and the boom in Asian incomes and demo­graph­ics. Most economies sought even deep­er cross-bor­der inte­gra­tion in a rush to form cus­toms unions and free trade agree­ments. Aver­age incomes every­where rose and rose, pulled ahead by trade.

Trade dis­putes con­tin­ued — even grew in num­ber — but were iso­lat­ed by the treaties from for­eign and strate­gic poli­cies. The con­cil­i­a­tion and adju­di­ca­tion of dis­putes seemed to work well.

Now, how­ev­er, there’s a sense that the wind may be swing­ing around again. In just two or three years dis-inte­gra­tion of mar­kets, pol­i­cy con­tention and new bar­ri­ers have become more common.

Since the recov­ery from the 2009 glob­al reces­sion, the puff has gone out of world mar­kets and the (rel­a­tive) peace, too. Inter­na­tion­al sum­mits are marked by irri­ta­tion and spats. Mar­ket inte­gra­tion, “out­sourc­ing” and for­eign invest­ment are no longer get­ting pos­i­tive press. UN data shows FDI was down by almost a quar­ter in 2017 (most­ly due to low­er cross-bor­der M&A activ­i­ty); FDI flows into emerg­ing economies are stuck around 2010 lev­els; the rate of growth of inter­na­tion­al pro­duc­tion is slowing.

Growth in the for­eign-val­ue-added of exports also peaked around 2010 lev­els; that is, glob­al-val­ue-chains that are the sinews of glob­alised mar­kets are sagging.

Maybe this is a tem­po­rary trend. Maybe it’s a “rever­sion to mean”, a cor­rec­tive to globalisation’s “excess­es”. Maybe close inte­gra­tion is not always a sus­tain­able ben­e­fit when the social or polit­i­cal costs are high. Maybe the slow-down only sig­nals changes in the nature of inter­na­tion­al pro­duc­tion (to ‘asset light’ forms over­seas production).

I don’t know what the future holds (sor­ry!) and I assume that we will not repeat the past (that can nev­er hap­pen). But I am inter­est­ed in how we got here and how gov­ern­ments and inter­na­tion­al busi­ness man­aged trade and eco­nom­ic rela­tions before the “long peace” that start­ed in the 1950s.

The pre-WWII world was when inter­na­tion­al busi­ness, as we con­ceive it, became pos­si­ble. Inter­na­tion­al busi­ness­men (yes, only men in this part of the sto­ry) soon dis­cov­ered, how­ev­er, that they could not build busi­ness across a bor­der unless gov­ern­ments were will­ing to col­lab­o­rate on pub­lic policies.

Unfor­tu­nate­ly, col­lab­o­ra­tion is pre­cise­ly what gov­ern­ments failed to deliv­er in two decades after the Great War of 1914–18.

Ideas per­sist, but the plans and hopes detailed in this account were shat­tered. How and why is the sub­ject of this first part of my his­to­ry of the Inter­na­tion­al Cham­ber of Com­merce — “Two Ter­ri­ble Decades”.

Please down­load a copy of the PDF file (1.8 MB). I look for­ward to your com­ments, cor­rec­tions and sug­ges­tions here in the com­ments on my web­site, or by email to peter at this domain.

Warn­ing: this is a fair­ly full account of ICC’s ear­ly his­to­ry. You may pre­fer just to skim (there’s a linked table of con­tents). In the next day or so I’ll pub­lish a full syn­op­sis of the first part that might help you to decide what you wish to read.