It is no wonder that globalisation no longer works. It came about without any sensible plan. The paradigm of the invisible hand — the market will sort everything out in the best possible way — was once again in full force here. Yet history could have taught us. There was a Globalisation 1.0. And its end was clear enough.
I. Globalisation 1.0 — the forgotten experiment
The late 19th century up to 1914 was the first complete global economic system: free movement of capital, global trade, the gold standard as a common monetary order. London as the financial centre, British merchant fleets on every sea, capital flowing unhindered from continent to continent. In many respects, the integration of the world economy around 1900 was deeper than in the 1980s — measured by the ratio of foreign trade to GDP, by the volume of capital flows, by the freedom of labour migration.
It ended in two world wars and a world economic crisis. The causes were complex — but in cybernetic terms the pattern can be described clearly: a system without sufficient negative feedback fell into positive feedback loops. Trade wars that reinforced one another. Financial crises that spread across interconnected markets. Political tensions fuelled by economic imbalances. The cruise control without brakes — this time global, with correspondingly global consequences.
The lessons of this experiment were put into institutional practice after 1945. Bretton Woods created fixed exchange rates and capital controls. The GATT regulated world trade with clear rules. The IMF and the World Bank were to ensure stability. Embedding the market in political structures was an explicit aim — not in spite of liberalism but as its precondition. In 1944, in "The Great Transformation", Karl Polanyi had shown why an unregulated market destroys the society that sustains it. The architects of Bretton Woods had understood this.
II. Globalisation 2.0 — the lessons forgotten
From the 1980s onwards Globalisation 2.0 began — and it systematically dismantled precisely the negative feedback that had been built in after 1945 as the lesson of Globalisation 1.0.
Uncontrolled freedom of capital movement replaced the Bretton Woods capital controls. Flexible exchange rates became an object of speculation instead of an instrument of stability. The WTO rules protected freedom of trade — but no labour, social or environmental standards. The result was a global system that enabled competition, but only in one direction: downwards. Wages, taxes and environmental standards became matters of locational competition — a global race to the bottom without a floor.
The legitimation was the paradigm of comparative advantage: every country produces what it does best, and trade creates prosperity for all. The theory was elegant. It had only one catch — it presupposes that capital and the means of production remain national. In a world in which capital flows freely and production chains are organised globally, it no longer holds. But the paradigm remained. The invisible hand would sort it out.
One could have learned from Globalisation 1.0. It was not done — because the Megamachine has no institutional memory. Every generation of designers starts afresh. The lessons of their predecessors are ideology, not experience.
III. What the invisible hand has wrought
The results of Globalisation 2.0 are visible today. China as the workbench of the world — not because comparative advantage willed it, but because an authoritarian state systematically managed wages, environmental standards and its exchange rate, and used the WTO rules without providing the corresponding concessions in return. Deindustrialisation among the Western middle classes — the jobs that disappeared were not replaced by better ones but by service jobs with lower pay and less security. Global supply chains without resilience — made visible when Covid in 2020 showed that protective equipment could no longer be produced in the country that needed it.
And the political consequences: Trump, Brexit, the rise of protectionism everywhere. These are not irrational reactions — they are the symptoms of a society that bears the costs of globalisation without receiving its promised benefits. Dahrendorf's democracy gap in its purest form: decisions on global trade rules were taken in WTO committees, far from democratic control, with predictable distributional effects for which nobody wanted to take responsibility.
IV. Globalisation 3.0 — or the retreat
What is happening now is not a planned retreat — it is unplanned disintegration. America is withdrawing not because it has conceived an alternative, but because domestic political pressure will no longer bear the costs of globalisation. China is building parallel structures — its own payment systems, its own supply chains, its own multilateral institutions — not out of ideological conviction but out of structural logic. Europe stands in between without a strategy of its own.
The paradox: the problems that Globalisation 2.0 has created — climate change, pandemics, financial instability — require more global cooperation, not less. But the political capital for this cooperation has been destroyed by the distributional effects of globalisation itself. The Megamachine has undermined the conditions for its own regulation.
A Globalisation 3.0 that learns from the mistakes of the second would have to repeat what was understood after 1945: free trade needs negative feedback. Open markets need common standards — upwards, not downwards. Global risks need global institutions with real enforcement mechanisms. This is not a new idea. It is the idea of Bretton Woods — which in Globalisation 2.0 was dismissed as ideology and done away with.
Whether it comes to this does not depend on the quality of the ideas. It depends on whether the structural forces that made Globalisation 2.0 possible and profited from it are willing to allow negative feedback that limits their profits. We know the answer to that question from the cruise-control paper.