Finance and the economy

During the late nineteenth and early twentieth century, Great Britain and Germany were the leading powers in the world, which was as globalized as it is today.

As the economist, John Maynard Keynes, put it:

What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914! The greater part of the population, it is true, worked hard and lived at a low standard of comfort, yet were, to all appearances, reasonably contented with this lot. But escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep;

He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighboring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.

The era between 1871 and 1914 was referred to as the Belle Époque.

This first modern globalized order came to a halt after World War I which began in 1914.

After the end of World War I came World War II, the Cold War and the division of the world into the First World, the Eastern Bloc and the Third World.

Most countries preferred to stay relatively isolated from each other. Protectionism and nationalism ruled the day.

However, since the 1970s, a new era of globalization has started. This has involved the supreme importance of finance to the world economy. Today, the financial markets in the US, China, Europe etc and intimately tied to each other. The world economy is dependent upon the financial markets of these major players.

Could we in 2017 be living in another Belle Époque? This is the million dollar question and it remains to be seen.