'In 1910 the British journalist Norman Angell published a book called "The Great Illusion". It's thesis was that the integration of the European economy, and by implication the global economy too, had become so all-embracing and irreversible that future wars were all but impossible. The book perfectly captured the zeitgeist of its time and fast became a best seller.
In some respects, the early 20th century was a period much like our own – one of previously unparalleled global trade and exchange between nations. Human beings appeared largely to have outgrown their propensity to mass slaughter, and everyone could look forward to to a world of ever increasing prosperity. War, Angell compellingly argued, was economically harmful to all, victors and defeated alike. Self interest alone could be expected to prevent it happening again.
Young men read the book in their thousands, mostly agreed with it, and then willingly marched to the fields of Flanders to take part in the most destructive conflict the world had ever known. When the First World War failed to resolve matters, they did it all over again in a second one.
So when people argue, as they often do, that globalisation makes the great regional conflicts of the past unimaginable in today's world, think of Norman Angell and his Great Illusion. Free trade, it seems, is no guarantor of worldly peace. None the less, it plainly helps, which is one of the reasons why the present outbreak of protectionist posturing and backdoor trade restrictions so desperately needs to be countered…
The historical parallels should not be stretched too far, of course, but the sabre-rattling from China over the disputed Senkaku islands contains some worryingly familiar themes. Sabre-rattling is hopefully all it will amount to. With the Chinese economy slowing fast, and a difficult leadership transition still to navigate, the frenzy of anti-Japanese feeling very much fits Beijing's domestic purposes. In a land without state-sponsored religion, nationalism is the new opium of the people.
Even so, territorial disputes such as these have a nasty habit of spinning out of control. We've already seen some extreme positions adopted by both sides. In a number of Chinese regions, the military has been put on "combat readiness", while the Chinese Academy of International Trade has been vocal in calling for economic retaliation. The Chinese government says a breakdown in trade between the two countries would do Japan a lot more harm, adding that Japan relies on China to keep its economy afloat and to counter "irreversible" decline.
As it happens, it's far from clear that the Chinese are right about this. The fall off in global industrial production that took place in the wake of the Japanese tsunami is powerful evidence of just how vital to the global supply chain Japan still is. Much of the Chinese electricals and automotive industry would grind to a halt without access to Japanese components.'