In 1930 the great economist John Maynard Keynes wrote an amazingly prescient essay, Economic Possibilities for our Grandchildren. It was, remember, an era of stockmarket crashes and depression, trade wars and competitive devaluation, a grim economic situation that laid the foundations for the authoritarian politics of that decade and the subsequent world war.
As Keynes noted: "We are suffering just now from a bad attack of economic pessimism." But the essay went on to argue that the upheavals were in fact the "growing pains of over-rapid changes, from the painfulness of re-adjustment between one economic period and another". He predicted that recent technological advances – the spread of electrification and growing use of cars, for example, much hyped in the 1920s – would ensure that real average incomes would increase eightfold in a century. He got it just about right. Keynes's conclusion was that the difficult problems in human society are not economic, but political. It's a lesson that needs to be kept firmly in mind when trying to work out what the impact of this frightening new state of war against terrorism will have on long-term trends in the world economy.
Earlier critics of economic globalisation, including luminaries such as Norman Mailer, have drawn bitter comfort from the assumption that the terrorist attacks will have derailed the process of increasing global economic linkages. But have they? And more importantly, should they be allowed to?
The immediate result has certainly been a blow to short-term growth prospects, with the postponement of the annual IMF and World Bank meetings which had been due in Washington next week. That at least rescues the opponents planning demonstrations against the Bank and Fund from their dilemma about whether or not to go ahead with a confrontation that might have ended in lesser violence.
On the other hand it does make more difficult the next stages in the incremental reform in the management of the financial markets and world economy under way for the past three years. Protesters claim the adverse consequences of globalisation have been getting worse, when, in fact, the powers-that-be have made great strides (composed mainly of lots of small and obscure steps) in introducing reforms. Of course more progress is desirable; it might be delayed, depending on how much senior officials can do by conference call instead of face-to-face in Washington.
We do not yet know how severe an impact the terrible blow to the world's pre-eminent financial centre is having on financial markets, confidence and economic growth. To be optimistic is hard, despite the Federal Reserve's prompt and symbolically important interest rate cut. There were signs that American industry had made a rapid inventory adjustment to the halt in growth and was bumping along the bottom before the economy picked up again, perhaps next year. There must be a risk now that instead the US economy has been jolted into recession, and with it the rest of the world.
There has been just one bit of good news: China this week got the green light to join the World Trade Organisation this year, and the WTO meeting in Qatar is to go ahead. Opening one of the biggest markets in the world to increased trade, and continuing discussions about a further round of trade liberalisation, will be highly beneficial.
If there is a severe economic slowdown ahead, the politics of globalisation look ominous. It will provide critics of market capitalism with plenty of fresh ammunition. The bursting of the dot.com bubble and sharp US slowdown last year energised the campaigners who believe new technologies and globalisation have been malign (and mainly American) forces; a further economic setback will only convince them even more that they are right.
They are utterly wrong. Managed well, technology-driven globalisation offers the best hope of increasing and sharing prosperity more fairly. Yet even those who, like me, believe this, have to accept that some hostile political reaction has put the reduction of poverty and inequality firmly on government agendas. It has also emphasised the valid point that all healthy capitalist economies do not have to conform to one model, that there are many varieties.
Even so, the protest movement ignores inconvenient evidence that some things have been improving, and it lacks a positive agenda. Having failed to repudiate its extremists, it is also discredited by the street anarchy in Seattle and Prague, Copenhagen and Genoa.
If now both pro- and anti-globalisers can agree the global market economy is a process shaped by all participants, not a system imposed by just a few, there would be real hope for continuing reforms. In the wake of last week's atrocities it is clear that on both sides of the existing debate about globalisation are well-meaning people who at heart share the same basic values, of democracy, freedom, peace and human dignity.
As Keynes said, in the very long run the technological forces already under way will transform the economy, little as we might be able to imagine it from this grim moment in history. But how much better it would be not to repeat the dismal 1930s. Indeed, trying to avoid that would seem an important stand to take against the terrorists who chose as their target one of the key symbols of the global economy.
Diane Coyle's new book on technology and globalisation, 'Paradoxes of Prosperity', is published this week by Texere (£17.99, $27.95)Reuse content