In a globalized world money flows like blood, coursing through interconnected veins and capillaries into the furthest corners, connecting up different parts in the most astonishing ways. Like blood, money can go toxic; and when it does, all those different parts are affected. And they put up barriers to infection.
Globalization has a reverse gear.
Until this week few British people knew that local governments had invested $1.3bn of their money in Icelandic banks. "What’s it doing there?" was the first question on many people’s lips as a row broke out between London and Reyjavik over Iceland’s refusal immediately to reimburse foreign investors following the failure of three of its banks. Britain has responded by freezing Icelandic assets in British banks.
The answer, of course, is that they were taking advantage of higher interest rates, moving their money to where it could best grow. And what could be more solid than Icelandic banks, with their "AA" rating?
Now we learn, for example, that the borough council of Cheltenham -- an upright town west of Oxford which is about as English as England ever gets -- has lost 12 per cent of its budget in the frozen lands at the top of the world. That’s a pretty tough thing for councillors to explain on the doorsteps. "We’ve got to cut our budgets hard back this year, Sir, because we lost your money in Iceland" is what they will prefer not to have to say.
You think I exaggerate? According to the Financial Times, "As police authorities have investments totalling over £95m in the Icelandic banks, this raises the prospect of the government’s crime-fighting programme being undermined unless funds are recovered."
The war of words between London and Reyjavik indicates what is likely to become more frequent as this crisis deepens: a retreat behind national boundaries, with politicians acting in defence of national interests. In the economy, this is called autarky; in politics, it is called nationalism. It means protectionist barriers, tariffs, state subsidies, nationalization of banks. It means a rhetoric which values the local over the foreign, the national over the cosmopolitan. The world stops being flat.
There are considerable benefits for politicians in this -- especially for ones that are less than popular. Gordon Brown, for example, suddenly looks every inch the statesman as he goes out to bat for Britain against those pesky Icelanders refusing to give us back what’s ours. (Some commentators are likening this crisis to Margaret Thatcher and the Falkland Islands war of 1982, after which her authority was secure.)
But nationalism quickly descends into murderous rivalry. Consider the historic parallels. From the invention of the propeller in the 1840s -- the nineteenth-century equivalent of the microchip -- to 1929, the world underwent a sustained period of globalization. Then came the Crash, and the Depression of the 1930s, and the rise of autarky and nationalism. Globalization went into reverse, and it took World War II to sort out the tensions and rivalries which nationalism created.
What’s to stop this happening now?
If there is one question American voters should be asking as they go to polls, it is this: as the clouds of autarky and nationalism begin to gather across the globe, who does the world need to be president of the world’s leading economy?
Not, I suggest, someone who beats the national drum but one who is able of rising above that temptation. The future peace of the world could depend on that choice.