“”Irrational exuberance”” was the catchphrase of the 2000 stock market meltdown. Despite the overwhelming faith in markets as democratized, decentralized forms of collective wisdom, the high-tech stock bubble grew and grew. Few saw the impending pop.
The same could be said of Sept. 11. Despite some casual lip service paid to Osama bin Laden by both the Clinton and Bush administrations, few thought he would or could carry out an attack as brazen as destroying the World Trade Center. The clues were there. The foresight was not.
The go-go ’90s were essentially brought to a close with two successive bouts of irrational exuberance. So were the go-go teens.
In June 1914, within days of World War I, the rate on British consols (the period’s benchmark securities) was a languid 3.6 percent, which certainly didn’t foretell impending doom. Inflation had averaged an innocuous 1 percent for the previous 25 years. The years immediately before the war were marked by technological innovation, increased global interconnectedness and economic growth. War was almost deemed obsolete.
Niall Ferguson, a Harvard historian, finds this disconnect between geopolitics and economics especially troubling. Just before World War I, none of the economic benchmarks showed anything out of the ordinary. Virtually until war broke out, “”the most well-informed people in Europe thought … that there was not going to be war.””
In today’s global economy, the similarities are striking. New York Times columnist Thomas Friedman has offered theories of conflict prevention based upon where McDonald’s sets up shop and, more recently, where Dell disseminates its supply chain. Despite the languishing of Europe, the world economy is buoyed by the rise of Asia and the nearly inexplicable resilience of the American economy. There are global imbalances certainly, but the feeling that there is smooth sailing ahead is prevalent.
Of course, that very well might be the case. Global capitalism works rather well. The intellectual underpinnings of the system – open markets, freedom of choice, placement of the individual before the state – are strong and stable.
But history shows that confidence in a global structure does not ensure its longevity. More than ever before, scholars are looking for threats to this system, seeking to uphold it.
The most recent crossing of paths has been the intersection of environmentalism and national security. Friedman calls these folks the “”geo-greens:”” geopolitical environmentalists. But this isn’t some fad. It extends to the highest echelons.
In late January, a conference was held in Washington, D.C., to promote plug-in hybrid vehicles as the silver bullet to America’s oil addiction. Environmentalists, national security hawks, futurists, politicians and business executives were there. The event brought together the likes of Jim Woolsey, Clinton’s former CIA chief, and Sen. Orrin Hatch, the decidedly un-green conservative senator from Utah – both responding to a common threat.
The current exuberance claims that globalization will make war obsolete. But oil is not a globalized commodity. In opposition to digital information, oil is geographically constrained, and a vast majority of supplies are controlled through state-owned companies. Oil is the foundation of the 21st-century global economy, but that foundation is still stuck in the 19th-century mercantilist mindset.
As unglobalized supplies dwindle, war will follow. We’ve already seen this transpire in Iraq. We may yet see it again in Iran.
Hence the recent love affair between national security hawks and tree huggers. Natural resources can never fully participate in a globalized economy. Therefore, the need arises to restructure our relation to them, especially oil. Environmentalists have been arguing this for years, but with the recent endorsement of the national security community, the political will may become unstoppable.
All the better. The global capitalist system is the best we’ve done to harness individual enterprise for the good of society. It ought to be preserved. To do so, we have to kick the oil habit.
Otherwise, our blind faith in globalization may just be another bout of irrational exuberance.
Matt Stone is a junior majoring in international studies and economics. He can be reached at letters@wildcat.arizona.edu.
