Economic unity is route to prosperity

Globalisation is dead. So declare many pundits - some in joy and others in despair. The terrorist attacks on the US have, they argue, undermined the confidence on which international economic integration depends. But rumours of the death of globalisation are exaggerated.

The events of September 11th apparently pose a threat to the integration of the world economy. As Mr Stephen Roach, chief economist of Morgan Stanley, noted last week, the global economic integration of the late 19th and early 20th centuries ended in the chaos of two wars and an intervening great depression. But even before that, the rise of an array of collectivist ideas - nationalism, imperialism, socialism, communism, fascism and racism - had undermined belief in a liberal world economy.

Similar forces seem to be at work today: anti-globalisation protesters supply the anti-liberal fervour; financial markets provide the economic instability, and terrorists provide the conflict. According to the prophets of doom, history is set to repeat itself.

However, the opposition movements of the late 19th and early 20th centuries were rigorously thought out, embodied in well-organised political movements and supplied with apparently coherent alternatives to liberalism - protectionism, planning and state ownership. By these standards, the anti-globalisation movement of today is infantile. It offers no intellectually coherent or politically organised alternative.

Similarly, the financial instability of the past decade bears no comparison with the great depression. Most importantly, "terrorism of global reach", in the words of US president George W. Bush, has brought the current and prospective great powers - the US, western Europe, Russia, China and India - on to the same side. The US has learnt, once again, that its greatest strength lies in its historically unique capacity to create global institutions and lead multilateral coalitions.

No compelling reason exists for the death of economic integration. Would a retreat from globalisation, if not predestined, be a desirable response to the terrorist threat? The answer is "no".

International economic integration did not cause this form of terrorism. Nor would its disappearance end it. The right response is to make the process of integration work better for more people, demonstrating fruitful co-operation in the coalition of states that recognises the threat to order posed by terrorism on such a scale.

This perspective is not universally shared. In a recent article in British magazine the New Statesman, Prof John Gray, of the London School of Economics, argues that the end of globalisation is inevitable and desirable. Globalisation, he argues, is a deluded secular creed, similar to Marxism.

"For market liberals," he declares, "there is only one way to become modern. All societies must adopt free markets."

Prof Gray sets against his Aunt Sally of globalisation a utopian form of laisser faire that he claims is an alternative.

"As far as possible, rules on trade and the movement of capital should be left to multilateral agreements between sovereign states. If countries opt to stay out of global markets, they should be left in peace. They should be free to find their own version of modernity, or not to modernise at all."

So they should. That is, of course, exactly how the world is organised. The World Trade Organisation is a multilateral agreement among sovereign states. Nobody has to join it, just as nobody has to borrow from the International Monetary Fund or the World Bank. Nobody needs to participate in trade and nobody has to have open financial markets. But few governments can get away with turning their countries into North Korea.

Governments may "opt to stay out of markets" but enslaved peoples detest the poverty that results.

A collapse in international economic integration is unnecessary. It is certainly undesirable. It would take away the most powerful opportunity for widening prosperity that the world can offer.

In the current climate, a newly invigorated and re-engaged US can achieve great things, as it did in the seminal decade after Pearl Harbor. A start needs to be made with agreement on a focused liberalising agenda for a new round of multilateral trade negotiations at the ministerial meeting of the World Trade Organisation at Doha, Qatar, next month.