Did globalisation cause the First World War?

The Fraying Bonds of Peace: Economic Origins of the First World War, William Mulligan, Cambridge University Press, £35

John Maynard Keynes was not only a great and ground-breaking economist but also a stylish and skilful writer. He remains eminently quotable. At the very beginning of William Mulligan’s The Fraying Bonds of Peace, his lament for the lost world of 1914 appears. This was a time, as Keynes wrote, when a Londoner ‘sipping his morning tea in bed’ could order goods from almost any part of the earth or invest his capital wherever he so chose. What is more, Keynes’ Londoner ‘regarded this state of affairs as normal, certain and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous and avoidable’.

The word globalisation would not be coined for many decades, but, to a modern observer, it is a fitting description of the world both Keynes and his fictional Londoner inhabited. Indeed, modern economic historians now usually look back on the final few decades of the 19th century and the opening decade and a half of the 20th as the first great age of economic globalisation, a time when measures of global economic integration hit levels that would, in many cases, not be surpassed again until the 1980s.

As Mulligan carefully catalogues, the exact statistics on the growth of international trade and global financial integration in this period are still subject to dispute. But the broader trend is clear. Driven by rapid improvements in transport and communications technology, which lowered the costs of moving goods across great distances, together with the global financial architecture provided by the gold standard, cross-border trade rose at a rapid clip.

As the historian John Darwin noted, ‘the annihilation of distance was a late Victorian cliché’. Take, as but one example, the time required to cross the Atlantic. Whereas Columbus’ celebrated voyage of 1492 had taken around two months, by the mid-1840s, a steam powered vessel could manage the crossing in just two weeks. But the rate of improvement was not slowing down; by the 1880s that time had been cut to closer to a week. The Titanic’s ill-fated maiden trip in 1911 was scheduled to take just six days. The opening of the Suez Canal in 1869 effectively cut the travel distance between Europe and Asia by around 4,000 miles. Things were speeding up on land, too. By 1870, around 125,000 miles of railway track had been laid around the world. A figure which leapt to over 400,000 miles by 1900 and to more than 620,000 miles by 1913.

Statistics on cross-border trade and the transport and communications revolution often fail to note just how integrated the global – and European – economies were by 1914. As Mulligan notes, even in strategic industries, cross-border ownership was not uncommon and dependencies on foreign provision were rife. Berlin was almost as reliant on British supplies of coal as on the Silesian coalfields.  And even as tensions between the powers rose, six German factories in Russia were responsible for 80 per cent of the chemicals that nation produced.

The question then, and one that has troubled both observers at the time and later scholars, is: how could powers bound together so tightly by economics find themselves at war? It is a topic with obvious contemporary relevance.

These debates, as Mulligan writes, date back to at least the 18th century when Montesquieu argued, in The Spirit of the Laws, that ‘peace is the natural effect of trade’. Social scientists returned to this theme in the 20th century, with the international relations theorists Joseph Nye and Robert Keohane articulating the notion of ‘complex interdependence’ from the late 1970s onwards. Their theory, a critique of the more traditional ‘realist’ approach to international relations, which focuses on states as the lead actors in the international system, playing up the role of military power, looked instead at the often-complex web of connections between societies. Such links offer material benefits in the form of cheaper goods or access to technology, but also build in vulnerabilities.

The question of how such interlinked powers found themselves fighting a total war has troubled historians. Some have argued that the ‘globalisation’, to use the phrase anachronistically, of the 19th century was an imperial project, carried out by empires which themselves were in competition. That, though, underplays the level of connectivity within Europe. Others have noted that, while Russia and Western Europe’s economies were increasingly integrated, there were fewer commercial relations in the Balkans. Austria, by this argument, was less constrained when it made its fatal decision to declare war on Serbia, which brought the July Crisis to a head.

More generally, it can be argued that the question of ‘why did peace between the great powers last from 1871 until 1914?’ is at least as interesting as ‘why did it end in 1914?’ It may be that deepening economic ties were not enough to keep war at bay forever, but they at least provided strong incentives to avoid it for many decades, in the face of often severe international crises.

Mulligan, in his deeply researched book, The Fraying Bonds of Peace, provides a coherent analysis. By his telling, the European political order and the international economic order became increasingly intertwined and, by the years immediately before the war, became an increasingly important source of tension. The deepening economic interdependence brought, as it always does, both benefits and vulnerabilities and, as states sought to combat those vulnerabilities, the system became increasingly militarised. Even as Germany saw its power and prosperity boosted by booming industries and expanding capital markets, it became ever more vulnerable to flows of trade and finance being cut off. This was the dilemma at the heart of interdependence.

Particularly after the Second Moroccan Crisis, by Mulligan’s telling, states that were economically vulnerable became increasingly willing to militarise their foreign policies to counteract this. In 1911, during a standoff over Morocco, a flight of French capital put pressure on Germany’s own markets and forced Berlin to back down. The German response was, in part, to expand its army to contain French power.

What is more, economic and commercial policy was increasingly put in the service of political ends. French governments directed capital flows towards building Russian and Serbian military capacity, British planners began to examine how they could use naval – and financial power – to exploit German vulnerabilities and destroy its economy in any future conflict. Indeed, in an interesting parallel with the modern United States, Britain faced an interesting dilemma: its role as the hegemon and lynchpin of the international economic and financial system provided not only great material benefits to its economy, but also gave it the option to exercise that hegemony to harm its political foes. Any exercising of such power risked undermining the whole world system that underpinned its global role.

Growing economic interlinkages had provided a powerful restraint on war and helped to shape the international political order from the 1870s to 1910s, but over time this complex system began to generate new tensions. In particular, Mulligan argues, leaders in Germany, Italy, Austria-Hungary and Russia began to turn towards military force to compensate for weaknesses in the economic sphere. These decisions led to an arms race and ever more militarised diplomacy and, when the July Crisis came, the old restraints were found wanting.

Deeper trading and financial links can just as easily become a source of tension as a guarantor of peace. The nature and structure of the global economy is interlinked with the geopolitical order and changes in one can easily spill over into the other.