Trade and the exchange of ideas and knowledge are one thing, the coordination of policy, institutions, and laws quite another. In the extreme case of a world that has fully integrated its institutions and laws and is ruled by a central global government, no matter how benevolent and enlightened, economic progress would sooner or later come to an end and stagnation ensue. In part, this is simply because the gains from integration will eventually run into diminishing returns. Once we have fired all customs agents and eliminated all export subsidies, and workers and capital are free to settle wherever they maximize their returns, any additional increments would be harder and harder to achieve. But the main reason for stagnation is that in a global village the engine of economic growth would run out of fuel.
That engine is, was, and will always be technological creativity. Of course, other things are necessary for an economy to grow — capital accumulation, skills, motivation, well-functioning markets, and so on. But all other factors tend to have short-lived effects. They can increase income, but they tend to burn out after a while. Technology is the only thing that does not run into diminishing returns. There are no known limits to the human ability to control and manipulate the forces of nature.
Will globalization, assuming it defeats the surging powers of nationalism, enhance technological creativity? Again, based on past experience, the answer is ambiguous. A global village would, if its government is effective and peaceful, be a land of milk and honey. Such benefits have been realized in our own time in Western Europe and the Far East: Once Germany and France, or Japan and Korea, ceased fighting each other, they could redeploy their ingenuity from military to civilian objectives, with rather remarkable effects on living standards. The United States, which maintained peaceful coexistence among its constituent states over its history (with one major exception), is another example of this model.
Too much peaceful coexistence, however, may weaken international competitiveness and thereby dull the spur to technological creativity. Technological progress, even in civilian technology, is often made in tooth and claw. Without the pressure of competing neighboring states, societies may lose their cutting edge. Closed large empires, such as China, Russia, and the Ottoman state, though not entirely impervious to progress, could not sustain their creativity in the long run. In Western Europe, political fragmentation and the “states system” prevented such stagnation. No single European ruler ever managed to unite the entire continent under a single government. Competing political units held each other in check and guaranteed a high degree of political diversity. At different times Spaniards, Frenchmen, Germans, and Englishmen aspired to hegemonic power, but because they failed to establish a long-lasting empire, diversity and competitiveness were maintained, and creativity and innovativeness could not be suppressed.
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Especially after 187O, when the major European powers became steadily less friendly toward one another, the sense of one national identity competing against another was a powerful stimulus to many of the great inventors of the time, especially in Germany. Technical advances could save the fatherland. German, British, and French engineers tried to outdo each others in steel, chemicals, and electrical engineering, knowing full well how important this knowledge was to national security. Some of Germany’s greatest inventors (Fritz Haber, the inventor of the nitrogen-fixing process, immediately comes to mind) were also ardent nationalists. Governments increasingly encouraged and subsidized research and development for national-security purposes.
The Cold War has had similar effects, and one might call this competitive creativity “the Sputnik effect”: The shocking fear that the United States might fall behind in the “competition for technology” with the Soviet Union stimulated research and development in the United States after 1957 like nothing else. Indeed, some economists have been tempted to view competition between nation-states as comparable to the healthy and cleansing competition between firms in the free market. This is a simplification, because competing firms do not start wars against each other. But it has a kernel of truth.
A stronger version of this theory relies on what I have called “Cardwell’s Law,” after the British historian Donald Cardwell. This law states essentially that every society, when left on its own, will be technologically creative for only short periods. Sooner or later the forces of conservatism, the “if it ain’t broke don’t fix it,” the “if God had wanted us to fly he would have given us wings,” and the “not invented here so it can’t possibly work” people take over and manage through a variety of legal and institutional channels to slow down and if possible stop technological creativity altogether. Technological leaders like 17th-century Holland or early 19th-century Britain lost their edge and eventually became followers.
Many feel that the United States in 1993 is on the verge of succumbing to Cardwell’s Law. After having led the world technologically for most of this century, the United States is gradually conceding many industries, from automotive to consumer electronics, to other nations. In many ways, reading Business Week today reminds one of the British press around 1900. An urgent sense of “we are not what we used to be” permeates the writing. It is as if technological creativity is like youthful vitality: As time passes, the creative juices gradually dry up, and sclerosis sets in. Societies become increasingly risk-averse and conservative, and creative innovators are regarded as deviants and rebels.
From a global point of view, the historical process can be likened to a relay race: Each society carries a torch for a short time before it hands it on to the next bearer; but all bask in the light. As long as there is a society to hand the torch to the next one, once the current bearer has worn itself out, technological progress can continue. There is thus safety in numbers: If there are enough states whose institutions are independent of each other, a replacement is likely to be found when the institutions of a technological leader turn against innovation, as they almost inevitably will.
The exact form that technological reaction will take differs from society to society. In some cases, reactionary governments simply close economies off to the rest of the world, and an iron bureaucracy either suppresses innovation altogether or channels it in directions deemed worthy by the rulers. This happened in Tokugawa Japan, Qing China, and Communist Albania; it is happening in Myanmar (Burma) and North Korea today.
In other cases, vested interests will use violence to block progress. The Roman Emperor Tiberius is reported to have executed an inventor who claimed to have come up with unbreakable glass, out of fear for his interests in glass making. Nineteenth-century inventors often fled for their lives to escape vengeful artisans. Professional trade associations, craft guilds, and regulations ossified the production process and made it impossible to deviate from established rules. Labor unions, with some exceptions, have been traditionally hostile to machines, which they feared would take their jobs.
In our time, well-meaning environmentalists, greedy product-liability lawyers, and feather-bedding unionists are contributing to the problem. Simply put, Cardwell’s Law works because technological creativity is a delicate and fragile flower that needs just the right institutional environment to thrive. Yet in a truly dialectical manner, its very success usually destroys the environment it needs to survive.
If the global village is to consist of coordinated institutions and unified laws (and not just the free movement of goods and people between different countries), technological progress could disappear altogether from our world, because by definition there would be no one to take over once Cardwell’s Law took full effect. This has happened before: The Roman Empire, the closest the “world” ever got to a global village, was surprisingly uncreative technologically and was rescued from complete stasis only by non-citizens living outside it. Much the same can be said about the Chinese Empire in its last centuries. For its citizens, it was “the world,” and its repressive institutions encountered no outside competition. The result was that the Chinese fell rapidly behind more creative societies, and they were in for a rude awakening when the proud empire was humiliated by its defeat in the Opium Wars of the 1840s.
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