The Cliff at the Border1Lant PritchettI begin with Keynes famous description of the world (well, London, well, upper middle class London) at the apex of the “first globalization” just before that world’s tragic end in the carnage of World War I, dividing his text into four sections:What an extraordinary episode in the economic progress of man that age was which came to an end in August 1914! …in[to] 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; What better description could there be of the benefits to the sovereign consumer of the liberalization of goods (note already his awareness of the role of income inequality in this, these are available to the “middle and upper classes”). This description is even truer today, as technical advance has put even more “conveniences, comforts and amenities”—like air travel, cell phones, medical care, air conditioning—on offer and globalization of the trade in goods has augmented this—leading to goods of amazing variety (e.g. foods from every corner of the earth), availability (e.g. fruits year round), and low cost. The material lifestyle of the middle class of rich countries today far exceeds that of the nobility of centuries ago. …he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the 1 This is a contribution to the volume, Equity and Growth in a Globalizing World, edited by Ravi Kanbur and Michael Spence and is based, very loosely, on comments at a session sponsored by the Growth Commission on globalization. I would like to thank Michael Clemens for comments on a preliminary version.world, and share, without exertion or even trouble, in their prospectivefruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. Again, a wonderful description of the glories of the liberalization of capital—interestingly both equity and debt, and with more extensive bond markets that even exist today (the “townspeople” of relatively few “substantial municipalities” are able to issue bonds internationally, or so much more prosaically, invite people to “couple their fortunes” with their “good faith”). But again today, one can, with the click of a button, “adventure [your] wealth” into index funds of Indian stocks or Brazilian bonds. 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 dispatch 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. Often overlooked in favor of the much more widely cited passages about Londoners enjoying the “products of the earth,” this is an excellent description of the mobility of people. Notice that the travel is “without passport or other formality.” Notice also the sensitivity (or lack thereof?) to the inter-personal distribution of income and to who these benefits of globalization are available tucked into just how one gets foreign exchange for travel: one “dispatches” one’s servant of course. This liberality has not been recreated, in two senses. Even for the elite of the world there is not longer travel without formality—even as a traveler from the most powerful nation on earth and with sufficient funds, I can attest to the need for constant “formalities” to travel. But more importantly, at least within certain areas there has alsobeen free mobility for all people—up until roughly 1914 there were open borders for the movement of labor from Europe to not just the Americas, Australia, and New Zealand but also to Latin America, and for the citizens of Great Britain to other British Colonies, and more complex flows (e.g. some voluntary, some restricted, some forced) elsewhere within the Empire as well (e.g. the movement of Indians to Africa and the Caribbean) These three passages illustrate the first point I wish to make. The world of the first great globalization came to an end, or at least the beginning of its end, in August 1914. As we all know, the end of this first globalization was followed by some extremely nasty bits of history, with two extremely bloody “world” wars, the rise of Leninism/Stalinism in Russia—with brutality and famines and a staggering loss of life orchestrated by the state--the rise of Fascism in Europe—with the attempted genocide of Jews, a staggering loss of life orchestrated by the state. Keynes himself, conscious of the world having lost the first peace, was instrumental in attempting to win the second peace by establishing institutions following World War II to recreate the globalization that has created the previous “extraordinary episode in the economic progress of man” and avoid calamities. In this, the world has been fantastically successful in recreating two of the three liberalities. But in the 30 years between 1914 and 1944 (the Bretton Woods conference) apparently all appetite had disappeared for the third element of the first great globalization. There was no attempt to recreate the globalization of labor markets, no creation of institutions of encourage and manage that process, no equivalent of the WTO or IMF for the movement of people2. 2There was in fact an International Organization for Migration set up (which still exists) but the objective of that group was to facilitate the return of refugees, rather than having the broader policy agendas of the institutions intended at Bretton Woods (the WTO taking more than 50 years to acquire independent organizational status).This, combined with the movement for de-colonization following World War II has led us all into the grand