Reversing Globalization: Trade Policy Consequences of World War I
Author(s)
Horowitz, Shale
Abstract
How did World War I reverse decades of apparently irresistible economic globalization? Why, in particular, did World War I produce a worldwide surge in international trade protection? Three mechanisms are investigated: (1) The War diverted production and international trade in a way that strengthened protectionist coalitions of industries relative to free-trading coalitions. (2) The War reduced financial interdependence and altered exchange rates in a manner that advantaged protectionist coalitions. (3) The War altered military alliances and rivalries such that stronger national interests in trade protection developed. These mechanisms are examined for the five largest trading economies–Britain, France, Germany, Japan, and the United States. There is evidence of all three mechanisms operating. The first–involving war-induced diversion of production and international trade–appears to have had the largest and most consistent impact.
