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Date Published:Jan 1, 2007
Once upon a time, not very long ago, economic globalization— the free worldwide flow of capital, goods, and labor—looked both inevitable and inexorable. Most governments seemed to embrace the very real benefits being offered by rapid technological change and international markets and sought to liberalize their economies in order to maximize these gains. Policymakers worked to prepare their societies for a world of ever-increasing interconnectedness and relentless competition, and the debate—at least within the United States—started to revolve around how to cope with the effects of this new "flat" earth.
Then came the financial crises of the 1990s and the early years of this century in Asia, Russia, and Latin America. The U.S. current account deficit—the difference, broadly speaking, between what U.S. residents spend abroad and what they sell abroad—shot upward. The U.S. dollar fell in value and seemed headed for an even more precipitous drop. As outsourcing accelerated, the American middle class came to feel increasingly insecure. Historians such as Niall Ferguson and Harold James pointed out that the previous era of globalization (which ran from about 1870 to 1914) had once seemed as unstoppable as the current one but had ended disastrously; so, too, they warned, could today’s.