1897 AND 1997

The century the earth stood still

True, we have aeroplanes, medicines and microchips. But is today’s world really so very different from the
world of 100 years ago?

ONE summer morning this year, the streets of London were thronged with witnesses to a royal procession.
Many of them would have seen the queen, dressed in black to mark an untimely death. Elsewhere in the world,
the Russian government struggled with economic reforms: having been held back by an inefficient, even
barbaric, economic system, Russia had fallen far behind. In the West, Canada and America continued old trade
quarrels about fish and timber. And The Economist, in an article on the remarkable growth of China's trade,
cautioned that the numbers were incomplete: because so much went through the conduit of Hong Kong, it was
hard to tell with whom Chinese commerce was in fact conducted.

An odd assortment of headlines from 1997? Actually, no: they were stories in the news of 1897. The main
difference was in the reasons for the royal processions. This year's was the cortège of Diana, Princess of
Wales; the one in 1897 celebrated Queen Victoria's diamond jubilee. (Victoria wore black in memory of her
beloved husband, Prince Albert.)

It would, of course, be daft to claim, especially on the basis of a couple of anecdotes, that the world of 100
years ago was no different from today's. Stark differences are easy enough to find. But the principles of
economics, the ebb and flow of global politics, and simple human nature have not changed all that much in a
mere century. When one looks back a century, what surprises is not how much the world has changed, but
how little.

Distinctions with differences

Start, however, with the differences, and with a map of the world in 1897. In 1897, vast swathes of land were
coloured red: the British empire was at its height. The British were embroiled in a “scramble for Africa” with
other imperial powers, notably France and Germany. Today, by contrast, Britain has turned into a
second-division political power. Imperialism is now a dirty word, and the empires themselves are in shards.

In economics, the differences between 1897 and 1997 are, if anything, more striking still. Materially, the
world as a whole is far richer: America's GDP per head, adjusted for inflation, is more than five times as big
as it was 100 years ago; even poor India has seen its GDP per head double. Think, moreover, of the everyday
things which in 1897 had not been invented, or were yet to enjoy widespread use. Top of the list, perhaps, is
the motor car, which first chugged out of factories only in 1895—the same year as moving pictures were first
shown. Alexander Graham Bell's first telephone call had been made only in 1876. The first aeroplane flight
would not be made until 1903. Contrast all this with 1997's car-clogged streets and busy airports, the stream
of films from Hollywood, the billions of telephone calls and the rise of the Internet.

These technological differences are reflected in the make-up of business and the economy. Among the 30
firms now in the Dow Jones Industrial Average is only one from a century ago—and even that, General
Electric, has changed beyond recognition, with nearly 40% of its profits now coming from financial services.

The modern Dow contains an aircraft maker (Boeing), a car maker (General Motors), giant retailers (Sears,
Roebuck and Wal-Mart), a mighty media company (Disney), consumer-products firms (Coca-Cola,
McDonald's and Procter & Gamble) and finance houses (American Express, Travelers and the venerable J.P.
Morgan). And many would argue that the 1997 Dow is itself an outdated indicator of modern America's
corporate strengths. AT&T, IBM and Hewlett-Packard are in, but not those symbols of 1990s capitalism,
WorldCom and Microsoft. By definition, moreover, any list of big American firms misses out the myriad
small computer companies, biotech firms and consultancies of all types that are a part of 1997's economy.

Plus ça change
1897 AND 1997
The century the earth stood still

So, yes, things have changed a lot. Who could deny it? Peer at 1897 from a slightly different angle, however,
and similarities begin to emerge, too. Now as then, there is one undisputed superpower. Then it was imperial
Britain; in 1997, although it has no territorial empire, it is the United States. The challenges facing the two
look similar. Britain's position a century ago seems unassailable at first glance: it had colonies everywhere,
plus ships and naval bases aplenty to defend them. Yet there was a rising threat from Germany. The Germans
had their own imperial ambitions, which, with rapid industrialisation, they could begin to afford. Germany's
merchant and naval fleets were growing rapidly.

Today America's position seems similarly unchallengeable. The only other military superpower since the
second world war, the Soviet Union, has collapsed, and its main successor state, Russia, is weak. The rising
economic power of the post-war period, Japan, is constitutionally barred from military adventures. Yet there
is one country which could challenge American might in the early 21st century in the way that Germany did
Britain's in the early 20th: China. It is already a huge economy, and is quickly becoming a richer one. It has
territorial claims, over Taiwan and the Spratly Islands, which if pressed would upset America's allies and
interests in East Asia. Only last year, America and China had a stand-off over Taiwan.

In addition, the world's citizens in 1897 were, like those of today, coming to terms with recent changes in
national frontiers. Germany then was a recent creation, having been unified only a few decades before;
today's Germany has been one country only since 1990. The collapse of the Soviet Union has splattered new
countries across Eastern Europe and Central Asia, and the break-up of Yugoslavia has left several successor
states in the Balkans. Similarly, in the late 19th century, as the Ottoman empire crumbled new states emerged,
among them Bulgaria, Romania, Serbia.

And just as people in 1997, busy absorbing novelties from the Internet to Tamagotchi, are amazed at the pace
of technological change, so were their forebears. In “Fins de Siècle” (Yale University Press), a book of essays
about the ends of centuries from the 14th to the 20th, Asa Briggs, a British historian, remarks on the sense of
wonder with which many in the 1890s regarded the inventions of their age. People then felt they were being
inundated with new gadgets. Apart from the motor car, films and telephones (mentioned already), there were
radio and X-rays and electric light-bulbs to excite the minds of 100 years ago—all of them milestone
technologies.

Then as now, cultural debates bubbled. Far more even than a few years ago, there is heated debate about the
rights of homosexuals—just as there was a century ago. As if to make the parallel clearer, Oscar Wilde's trial
was in 1895; a film about the great writer and wit, “Wilde”, was released this autumn. And as for journalism,
compare the disdain with which the Daily Mail was greeted by some on its first issue in 1896 (“a paper
produced by office boys for office boys”, according to the prime minister of the time) with the criticisms of
today's tabloid press.

Has-beens and now-ares

If, however, the greatest differences between 1897 and 1997 are in economics, so are the most obvious
similarities. Based on calculations by Angus Maddison, an economic historian, a list of the ten biggest
economies in 1897, ranked by GDP adjusted for differences in purchasing power, contains exactly the same
names as in 1997, with one change: Spain's replacement by Brazil (see chart). A century ago, America was
already the world's biggest economy—as it is now. More surprisingly, China was second—as it is now.

The richest parts of the world in 1997 were also the richest in 1897. In a book published in 1995* Mr
Maddison divided the world into seven regions and ranked them by GDP per head. The order in 1900 was
much the same as in the 1990s. The top group he calls the “offshoots” of Western Europe (America, Canada,
Australia and New Zealand). Next came Western Europe itself, Eastern Europe, Southern Europe, Latin
America, Asia, and Africa. The rankings have changed a few times in the past 100 years. But now the order is
1897 AND 1997
The century the earth stood still

just as it was in 1900, save that Southern Europe is richer than Eastern Europe. And this is in spite of the
remarkable rise in the past few decades of several East Asian countries; much of the continent is still poor,
and so this growth has not yet been enough to take Asia as a whole past Latin America.

Go below the level of broad regions and look at the wealth of individual countries, and a more complicated
pattern emerges (see table). Both in 1897 and 1997 most of the richest ten countries in the world (measured
by GDP per head after adjusting for differences in purchasing power) were “offshoots” or in Western Europe.
But there are some striking changes. The only Latin American country in the top ten in 1897, Argentina, has
dropped away. So has the top dog a century ago, Britain, to 14th (in a cluster of Western European countries
with very similar income levels). Most remarkable, though, is the rise of two tiny Asian tigers, Singapore and
Hong Kong, and the creation of an Asian giant, Japan.

Japan and the tigers provide another point of comparison. The most exhilarating economic tale of recent years
has been the breakneck expansion of East Asian economies, even if lately Malaysia and Thailand have been
blown at least temporarily off course. A century ago, a similar economic explosion was going on in Japan,
which was beginning to make itself felt as an economic power.

Japan's economic statistics for that period are every bit as breathtaking as those of today's Asian tigers. Its
industrial production doubled between 1884 and 1897, and virtually doubled again by 1913. Its coal imports
in 1897 were six times what they had been in 1890; by 1913 they were eight times as high again. The
Japanese merchant fleet, less than 100,000 tons in 1890, weighed 439,000 tons by 1897 and topped 1m tons
in 1906. Japan had only 4,800 kilometres (3,000 miles) of railway in 1897, not much more than Turkey. But
that was five times more than in 1887; and the 1897 total doubled by 1912.

Some country, of course, is always growing fastest. To many people, what really distinguishes today's world
economy from earlier eras' is the extent to which national economies are interwoven. Newspaper articles
goggle at the ease with which the capital markets can switch huge sums of money between countries and
currencies: and no wonder, when foreign exchange markets turn over $1.2 trillion a day.

Trade barriers have been falling, thanks in part to agreements such as the Uruguay round of multilateral trade
talks, completed in December 1993; rich countries' industrial tariffs now average only 4% or so. Partly as a
result, world trade has been growing faster than world output: the World Trade Organisation estimates that
trade in goods rose by 41% between 1990 and 1996, while world GDP grew by only 10%. The growth is not
confined to trade in goods: increasingly, people in one country use foreign banks and foreign telephone
companies. The ease with which people, goods and messages can flit around makes the world seem like one
big market. A person or a crate can fly from London to New York in a few hours. A phone call—which might
carry a voice message, data or e-mail—takes no time at all.

Globalisation? What's new?

All new, and momentous. But go back, for a moment, to Queen Victoria's jubilee procession of 1897. In “Pax
Britannica” (Faber), a snapshot of the British empire at its zenith, James (now Jan) Morris describes how,
before leaving Buckingham Palace, the queen sent a message to her subjects around the world. She did so in
slightly shaky Morse code, and her greeting—“Thank my beloved people. May God bless them”—was
carried by the cables which the British had laid all around the globe. It took a while by modern
standards—two minutes to Tehran—but it was global communication nonetheless.

To economic historians, indeed, the late 19th century was a period of globalisation bearing a strong
resemblance to our own. In a forthcoming book, Kevin O'Rourke of University College, Dublin, and Jeffrey
Williamson of Harvard University examine the late-19th-century economies of America and Western Europe.
Between the middle of the century and 1913, they point out, the gap between rich and poor countries
1897 AND 1997
The century the earth stood still

narrowed. And the ratio of rents to wages rose in America, where land was abundant and labour was scarce,
but fell in European countries such as Ireland and Sweden, where land was at a premium and there were
plenty of people. The reason, Messrs O'Rourke and Williamson say, was globalisation. As in the late 20th
century, trade was booming, driven upwards by falling transport costs and by a flood of overseas investment.
There was also migration on a vast scale from the Old World to the New.

Indeed, in some respects the world economy was more integrated in the late 19th century than it is today. The
most important force in the convergence of 19th-century economies, argue Messrs O'Rourke and Williamson,
was mass migration, mainly to America. In the 1890s, which in fact was not the busiest decade, emigration
rates from Ireland, Italy, Spain and Scandinavia were all above 40 per thousand. The flow of people out of
Europe, 300,000 people a year in mid-century, reached 1m a year after 1900. On top of that, many people
moved within Europe. True, there are large migrations today, but not on this scale. Governments today are far
more fussy about immigration; people are no longer free to migrate as they wish.

Capital markets, too, were well integrated. Only in the past few years, indeed, have international capital flows,
relative to the size of the world economy, recovered to the levels of the few decades before the first world
war. Astonishingly, more than 50% of Britain's net investment went abroad in 1885-94. Most of this wealth
poured into stocks and bonds, and was spent on infrastructure—railways, harbours, sewerage systems and so
forth. If that sounds familiar, so should the risks: Barings, a merchant bank, was rescued by the Bank of
England in 1890 after dabbling in South American securities; the same Barings went under in 1995 after a
trader in Singapore bet the wrong way on Japanese equity futures.

Most interesting, though, is Messrs O'Rourke and Williamson's observation that the globalised economy of
the late 19th century did not last. Between the two world wars, the flows of trade, capital and people
collapsed to a trickle. Even before the first world war, governments put up the shutters against migrants and
imports. But a “globalisation backlash” had begun as early as the 1870s and 1880s, as governments protected
industries which they saw as being at risk from international competition. America, Canada, Argentina and
Australia all raised tariffs; so did France, Germany and other continental European countries. France's tariff
on industrial goods was raised to over 25% in 1892, and its wheat tariff similarly two years later.

Might a comparable backlash happen now? The authors argue that it might, or at least that there is nothing
inevitable about continued integration. Frank Taussig, an American economist writing in the 1880s, noted
that American protectionists had argued 40 years before that high tariffs were needed “to shut out competition
from the ill-paid labourers of Europe, and to maintain the high wages of the labourers of the United States”.
Such arguments against “unfair” trade were common in Taussig's day. They are still common now.

Fins des siècles

Pick any two points in history, and plenty of similarities will undoubtedly present themselves, to be set
against the inevitable differences. Borders will be changing. Trade will be ebbing, or flowing. There will be
inventions, and arguments about the merits of progress and the morality of this and that.

So one must be wary of eerie but spurious similarities. History does not repeat itself. But it can teach. And
perhaps there is a lesson to be drawn from a final parallel: a century ago, the world stood at the doorstep of a
new time of prosperity, driven by fantastic new technologies, propagated by a flood of trade across borders,
and overseen by a great power that was, at the end of the day, a friend of freedom. And then the world
plunged backwards into the darkest morass it has known. Let us remember, and prevent.

* “Monitoring the World Economy, 1820-1992”. OECD, 1995. The tables also draw upon unpublished
papers by Mr Maddison.