The Post-American World: Release 2.0 Read Online Free PDF

trouble in their neighborhood and must be checked and contained, but we need to keep in mind the larger world of which they are a relatively small part. Look at Latin America. Venezuela is a troublemaker, but what has that meant on the ground? The broad trend in the region—exemplified by the policies of the major countries like Brazil, Mexico, and Chile—has been toward open markets, trade, democratic governance, and an outward orientation. And that trend, not Hugo Chávez’s insane rants, represents the direction of history.
    The Great Expansion

    Today’s relative calm has a deep structural basis. Across the world, economics is trumping politics. What Wall Street analysts call “political risk” is almost nonexistent. Wars, coups, and terrorism have lost much of their ability to derail markets more than temporarily. Again, this may not last (it has not historically), but it has been the world we have lived in for at least a decade.
    This is not the first time that political tumult became disconnected from economics. Two earlier periods seem much like our long, post–Cold War expansion: the turn-of-the-century boom of the 1890s and 1900s, and the postwar boom of the 1950s and early 1960s. In both, politics was turbulent and yet growth was robust. These two periods had one feature in common: large countries were entering the world economy, increasing its size and changing its shape. The expansion of the pie was so big that it overwhelmed day-to-day dislocations.
    In the late nineteenth and early twentieth centuries, fears of war between European great powers were frequent, often triggered by crises in the Balkans, North Africa, and other hot spots. But the world economy boomed despite flash points and arms races. This was the era of the first great movements of capital, from Europe to the New World. As Germany and the United States industrialized quickly, they became two of the three largest economies in the world.
    The 1950s and early 1960s are sometimes remembered as placid, but they were in fact tension-filled times—defined by the early years of the Cold War, fears of conflict with the Soviet Union and China, and a real war in Korea. There were periodic crises—the Taiwan Strait, the Congo, the Suez Canal, the Bay of Pigs, Vietnam—that often mushroomed into war. And yet the industrial economies sailed along strongly. This was the second great age of capital movement, with money from the United States pouring into Europe and East Asia. As a consequence, Western Europe rebuilt itself from the ashes of World War II, and Japan, the first non-Western nation to successfully industrialize, grew over 9 percent a year for twenty-three years.
    In both periods, these “positive supply shocks”—an economist’s term for a long-run spike in production—caused long, sustained booms, with falling prices, low interest rates, and rising productivity in the emerging markets of the day (Germany, the United States, Japan). At the turn of the twentieth century, despite robust growth in demand, wheat prices declined by 20 to 35 percent in Europe, thanks to American granaries. 3 (Similarly, the price of manufactured goods has fallen today because of lower costs in Asia, even as demand for them soars.) In both periods, the new players grew through exports, but imports expanded as well. Between 1860 and 1914, America’s imports increased fivefold, while its exports increased sevenfold. 4
    We are living through the third such expansion of the global economy, and by far the largest. Over the last two decades, about two billion people have entered the world of markets and trade—a world that was, until recently, the province of a small club of Western countries. * The expansion was spurred by the movement of Western capital to Asia and across the globe. As a result, between 1990 and 2010, the global economy grew from $22.1 trillion to $62 trillion, and global trade increased 267 percent. The so-called emerging markets have