Tariffs got you down? Brush off the 1930s playbook

NOW that Donald Trump has rendered irrelevant the iconic books that guided corporate thinking in recent decades – who still believes that the world is flat? – businesspeople are desperately casting about for guidance. In a recent column, I argued that US managers have much to learn from emerging markets. Today, I want to add that managers everywhere have much to learn from the interwar years.

The interwar period – marked by the turmoil of the 1920s and the depression of the 1930s – was the last great period of deglobalisation. The century between the defeat of Napoleon in 1815 and the outbreak of the World War I in 1914 was an era of pell-mell globalisation. International trade grew by 3.5 per cent a year. The gaps in commodity prices between continents declined by four-fifths. Sixty million Europeans migrated to the US. In 1913, foreign direct investment was 9 per cent of world output, a proportion that was not equalled until the 1990s.

The interwar years replaced seemingly unstoppable globalisation with seemingly unstoppable deglobalisation. The US had never shared Britain’s cast-iron commitment to free trade – in 1870 America, tariffs of 50 per cent were common – but between the wars, protectionism became rampant. Governments not only increased and extended tariffs, but also put a near halt to immigration. The annual migration rate to the US fell from 11.6 immigrants per thousand in the first decade of the 20th century to 0.4 per thousand in the 1940s.