Twenty years ago tomorrow, a much younger, leaner and more far-sighted version of this columnist walked into the Soviet Bookstore on Unter den Linden boulevard in downtown East Berlin and purchased what he was certain would become a collector's item: a hardbound copy of Karl Marx's Das Kapital in the original German and re-printed that year, right there in the capital of a doomed German Democratic Republic.
Not two kilometres away at Potsdamer Platz, East Germans were flooding through the newly breached Berlin Wall, marking the end of the Cold War and the triumph of free-market capitalism over communism and its state-controlled economies. West Berlin's sidewalks were overflowing with East Berliners queuing at banks to collect 100 Deutsche marks of "welcome money" and then fanning out across the city in shabby clothes to marvel at the cornucopia of western consumer opulence that lay before them: brightly packaged snack foods, gleaming modern appliances, motorcycles bulging with chrome. They carried off whatever they could afford, unsure if the Wall might not close up again the next day and communism march glumly on.
It was obvious, though, that it wouldn't. And watching the "Osties" shamble along the sidewalks in their shabby clothes, or drive through newly opened checkpoints in their decrepit little Trabants and Wartburgs to the cheers of the "Westies", it was also clear that Germany, and the rest of Europe, would never be the same. What was not apparent until much later was that the rest of the world would be forever changed, too. And not just because the fall of the Wall ended a bitter ideological feud that threatened the world with annihilation. We tend to forget now in an age of random religious terrorism, but we used to live daily with the grim inevitability that one day thousands of intercontinental ballistic missiles armed with multiple nuclear warheads would rain down and vapourise us in the name of the proletariat.
The fall of communism unleashed a new wave of globalisation, for good or ill, and with it a plague of "globalistas", of bankers and lawyers and English teachers and, yes, journalists, who rode in triumph upon the global economic boom as it coursed across the emerging-market landscape. They flogged their degrees in Singapore and Prague, Shanghai and Moscow, Saigon and Dubai. Long before BlackBerries and Facebook made one's location a mere detail, we free-market carpetbaggers rollicked on the front lines of commerce as barriers to trade and investment melted away before us.
Until now. The crisis has revealed that globalisation was not some inexorable force, opposed only by corrupt political interests and tie-dyed isolationists. It was the manifestation of a new conflict: the cage match between capitalism and communism had given way to a roller derby between monetarism and mercantilism. Alan Greenspan, the former chairman of the Federal Reserve and uber-monetarist, has blamed the end of the Cold War for the conditions that led to the crisis. After the "Osties" came an invasion of cheap, semi-skilled labour, of Polish plumbers and Czech au pairs that overwhelmed the ability of policymakers like him to use interest rates to stabilise prices.
But the biggest source of disinflation came not from Gdansk, but from Guangzhou. The fall of the Soviet bloc sent shockwaves through the communist leadership in China. Just five months before, it had used tanks to put down its own People Power revolution in Tiananmen. Beijing's answer was to adopt Japan's model of export-financed, state-directed, rapid-fire industrial development. This turned China into the world's sweatshop and provided the Wal-Marts of the world with such a glut of cheap manufactured wares that even as economic growth accelerated, prices did not seem to rise. Central bankers such as Mr Greenspan, who use inflation as their main gauge of price stability, stood back even as asset prices - stocks, commodities and especially property - kept soaring.
Adding fuel to the fire were the mercantilist nations of Asia and the Gulf. To keep their currencies from rising with their trade surpluses and thereby slowing export revenues, they have been taking the dollars paid for their products and instead of spending them, have lent them back to the US. This has suppressed long-term interest rates, blunting the impact of any effort the Fed might have made to control cheap dollars. It has also paradoxically suppressed the buying power of the very workers that China's communists and Asia's other one-party states were supposed to represent.
As a result, long-term interest rates stayed low, profits came easy and asset prices kept soaring, creating a series of destabilising bubbles that culminated in the US housing bust and the worst global recession since the Great Depression. But Mr Greenspan's version is only half the story. The flip side is that instead of raising interest rates, the Fed after Berlin began a long trend of pushing them generally lower to stave off a recession, support the Soviet bloc's integration into the global economy and then keep the party rocking. The result was an investment boom in the former Soviet bloc, then in South East Asia. After the September 11 attacks in the US and the collapse of the tech bubble, the Fed began lowering rates again, this time fuelling a global bubble of dollar liquidity that sparked asset-price and investment bubbles across Asia, emerging Europe, the Middle East and Africa. What we globalistas were riding was a tsunami of cheap dollars, and we surfed each wave as they swelled up with asset prices and crashed in ruin on each emerging market's shore.
And so here we are. Free-market capitalism and globalisation were doing a lousy job of delivering equitable growth, it must be said. The rich got richer, the poor and the middle class got poorer. We have woken to the need for social safety nets and for sharper governance. But 20 years after we wrote communism's obituary, governments have been forced to intervene heavily in their economies, taking control of vast chunks of manufacturing and finance. Moves are afoot to regulate every aspect of commerce right down to wages, to tax every ATM withdrawal. Protectionism is rising. The age of the globalista, it seems, is fading.
Karl Marx's manifesto beckons from my bookshelf. If only I could read German. warnold@thenational.ae
