Our attention was bound to come around to the first age of capital,
those years that stretched from Britain's repeal of the Corn Laws in
1846 to the outbreak of the First World War. For once we had entered
into a great controversy about the integration of global finance and
markets in our time, that first global economy became a very usable
past.

In a way, it came rather too easily. By a leap of faith, by
imaginative historical analogies, the Internet became for us what the
railroads were for that earlier age. Today's heady belief that
commerce has tamed conquest and made wars unthinkable can also be
located back in that era. So when the evangelists of globalization
trumpeted the birth of Pax Kapital, the historically-minded, and
particularly those most skeptical about the claimed novelty of our
times, headed straight into the past, into that First Global Economy.
There they saw the precursors of the present moment: transnational
capital, mobility of labor, a global monetary authority attained
through the functioning of the gold standard, and, most vivid of all,
the titans of industry who loomed larger than princes and the rulers
of states. They also saw rack and ruin and illusion. Then, too,
nations thought they had tamed the beast--only to be overtaken by
war, the destruction of markets, and the shredding of economic
liberalism.

It was with this story that the influential and popular economist
Paul Krugman launched his column in the New York Times. For his
maiden voyage on January 2, 2000, the economist-turned-pundit chose
to write of that First Global Economy. We have been here before, he
warned, and the seemingly "unstoppable logic of growing trade and
investment" could again be undone. "To some extent", Krugman wrote,

"The First Global Economy was a casualty of war. The Panama Canal and
the Western Front both went into action in August 1914. . . . But the
truth is that even before 1914, though the volume of trade and
investment continued to expand, the globalist idea was on the
defensive. Intelligent men might explain that wars were no longer
worth fighting and borders obsolete; a sophisticated cosmopolitan
elite . . . might move freely between continents; but the political
foundations for a global economy were never properly laid, and at the
first serious shock the structure collapsed."

"I speak to my daughter-in-law so my neighbor can hear me", goes an
Arab maxim. Which is to acknowledge that all these journeys into the
past are, of course, meditations on our time, on our Second Global
Economy, to use Krugman's term, and ruminations about our own fate.
States smashed the liberal world in 1914, the "commanding heights"
were claimed by political men, and the regulatory state emerged out
of the wreckage of a global time of troubles. No age exactly repeats
what has gone before, it must be granted right away. But increasingly
we are writing our world, and reading it, into the way the First
Global Economy was put together, and then came apart.

Raging, Tearing, Booming

Often enough, we are reading that world through the lives of great
men. In the age of Bill Gates, Steve Case and Warren Buffett (the
"Oracle of Omaha"), it is natural to think of John D. Rockefeller,
J.P. Morgan and the Rothschilds. Those giants of finance lorded over
a global economy sustained by Pax Britannica, underpinned by the
ideology of free trade, transnational in its sources and movement of
capital. But even they could not prevent the ground from being pulled
from underneath them as political support cracked and the
liberalizing gains of six to seven decades were irretrievably lost.
They are the characters that act out the plot.

The best portrait of the Gilded Age has been sketched for us by the
historian and writer Jean Strouse in her magnificent biography,
Morgan: An American Financier. A biographer at once tireless and
possessed of a delicate touch, Strouse has captured a seminal figure
in American economic history against a rich and crowded and
tumultuous background. Her work will stand as one of those books that
do justice to a single, important life, but place the subject in a
whole, big world. Now and then a life illuminates an age, and it was
J.P. Morgan's luck and fate to come into his own as America itself
was being remade.

Born in 1837, Morgan stepped into the family's merchant banking
business to work with his father, Junius, at a time of great economic
transformation. A single national economy was being created by
railroads, and thousands of miles of track were being laid down. The
U.S. population would double between 1870 and 1914, while the
national wealth would increase fourfold. It was a time of rising per
capita incomes, a roaring bull market, and a speculative fever in
land and stocks. The dash for riches had begun in the immediate
aftermath of the Civil War. It was, as Ron Chernow put it in a rich
biography, Titan: The Life of John D. Rockefeller, Sr., a time of
"outsize dreams. . . . A new cult of opportunity sprang up, producing
a generation of business leaders for whom work was the greatest
adventure life afforded." Money was in the air, and all sorts of
possibilities danced about: "A perfect mania for patents and
inventions swept America, as everybody tinkered with some new
contrivance." Men were through with the past, and with tradition.
This was the world that Mark Twain--who gave us the term "the Gilded
Age"--described as the "raging, tearing, booming nineteenth century."

The capital markets--domestic savings, and American securities sold
in European markets--had a brand new world to finance and to invent.
It was not merciful, that new world, and it was not ordered: it was
propelled by buccaneer capitalism at full throttle, and the railroad
business epitomized the chaos. There were unsupervised, good lines
competing with lines laid down by speculators. From the outset of his
remarkable career, Morgan abhorred that kind of chaos. His instinct
was for order. He was for "true" valuation. (The kind of valuation,
disconnected from profits, that has--until recently--been driving the
Internet market ever higher would have been anathema to him.)

Morgan's initiation into the world of market volatility came in the
depression of 1873, a six-year decline that shattered the boom of the
post-Civil War economy. Fittingly, it began with trouble in the
railroads, spread to the banks, and exposed the weakness of an
economy fueled by speculation and unsecured debt. When the
government's leading private banker, Jay Cooke & Co., failed, panic
overtook the capital markets. In Strouse's summation:

"Demand dried up. Businesses contracted, cut wages, and laid off
employees. Railroad construction dropped from 7,500 miles in 1872 to
1,600 in 1875; by the following year half the roads in the country
were bankrupt. . . . Investment capital disappeared; foreigners lost
$600 million in the United States between 1873 and 1879."

The "captains of industry" then stepped forth to shape the new order
of things. John D. Rockefeller and Andrew Carnegie came to dominate
their industries, butt out rivals, and build great industrial
empires. The firm on 23 Wall Street--Drexel, Morgan & Co.--had been
spared the turmoil, and picked up the business of banks that had gone
under. But Pierpont Morgan had emerged out of that crisis with a
preference for a "guided" form of capitalism and a dread of
unrestrained competition. The nation had no central bank to oversee
and regulate the supply of currency and check economic panic; Morgan
now had a view of the role that awaited him. An eastern banker who
understood the capital markets of Europe and the need of a debtor
nation to keep its finances in order, he sought more disciplined
fiscal conditions: a sound dollar, the reduction of Civil War debt,
the growth of domestic savings, and the return of the United States
to the gold standard, which it had abandoned in 1862. This put Morgan
in the cross currents of a great struggle between the interests and
outlook he represented and the advocates of easy money, who came
together from the distressed economies of the South and the West to
form the Greenback Party. The Treasury/Wall Street alliance that
would become a lightning rod for populists for decades to come had
made its appearance, and Pierpont Morgan had played a significant
part in forging it.

When Morgan subsequently stepped beyond his old concerns with the
railroads and government bonds into the realm of industrial
securities, he did so in a grand fashion. In 1901 he put together the
deal that purchased Andrew Carnegie's steel business, consolidated
the industry, and created that great giant, U.S. Steel. A tidal wave
of mergers in the economy worked its way through the land between
1897 and 1904, and the consolidation of the steel industry, now the
nation's pre-eminent manufacturing concern, was part of this larger
transformation. The sale of Carnegie's steel business was a
straightforward proposition. Carnegie, who was leaving the world of
industry to take up philanthropy, scribbled on a piece of paper his
asking price: $480 million, twelve times the annual earnings of his
company. Morgan accepted it without any quibble. His mastery now
loomed larger than ever in the nation's economic life. That
incomparable chronicler of his time, Henry Adams, wrote, "Pierpont is
trying to swallow the sun."

"The First Thing Is Character"

A great shift had indeed taken place, and Morgan had labored hard to
bring it about. The United States had grown wealthy, and it could now
finance its own securities and buy up the equities of its industries.
Where once Morgan, and his father before him, had focused on
channeling British investment westward across the Atlantic, the
banking world in New York and other domestic sources of investment
had overtaken foreign financing.

On the face of things, the trustbusters and the laws on the
books--most notably the Sherman Antitrust Act of 1890--should have
had Morgan and his philosophy of consolidation on the run. The
small-scale, rural-based antebellum economy was gone for good, urban
labor unrest stalked the land, and the muckrakers wrote their exposés
of ghastly deeds by the wealthy. But the truth of economic life was
more subtle.

The politicians in Washington, the bankers in New York, and the
industrialists throughout the heartland knew better than to launch a
full-scale war between capital and political power. A run on the
banks and a downturn in the economy in 1907 put on visible display
the need for a politically sustainable economic strategy. A shortage
of capital and money supply had triggered the crisis; between January
and March of that year the Dow Jones average lost 25 percent of its
value. At the hub of the rescue effort stood Morgan. A lifetime of
experience had brought him to the fore, and he stanched the wound.
Gold reserves successfully solicited on European markets, Treasury
resources, and the vast reserves of U.S. Steel carried the day. But
the brush with disaster had been close; the country was in need of a
more elastic money supply and of banking legislation to protect
against panic-driven damage. An aging private banker had only put off
that moment of reckoning.

Beyond his banking acumen, the one characteristic that shaped Morgan
was a belief in progress. America was being re-invented, and this
newness appealed to him. Morgan was a worldly and progressive man at
home on both sides of the Atlantic, fluent in French and German, and
familiar with the capitals of Europe. He bridged the divide in
American society between old and new money: he had the pedigree of
the former, but the meritocratic work ethic of the latter. He had the
prescience to bankroll the early work of Thomas Edison, and his home
in New York was the first to be entirely illuminated by Edison's
lights. Morgan also loved books and rare manuscripts, and was an avid
collector of art. He represented in his person both the authority of
capital and the need for its regulation. Is there a more fitting
tribute to him than the fact that the Federal Reserve System, the
nation's central bank, was launched in the year of his death, 1913?

Pierpont Morgan had not been wildly rich when he died. He left behind
an estate of some $80 million. John D. Rockefeller, who never cared
for the financier and his flamboyant style and cigars and his grand
tours of Europe and Egypt, and who thought that the collecting of art
was something both egotistical and useless, was bemused to know of
the estate Morgan had left his heirs. "And to think he wasn't even a
rich man", the industrialist said of the banker who cast such a large
shadow over his world.

Jean Strouse did not set out to rehabilitate or prettify the image
and legacy of Morgan--the robber baron, the heartless banker, the
snob, the man with rhinophyma (excess growth of sebaceous tissue)
whose deformed nose became the cartoonists' fodder. But by the time
she has finished telling of this remarkable man and his love of
order, and of his acceptance of responsibility for his country's
solvency during times of crisis, by the time she has told of his love
of travel and of his sexual and romantic entanglements, she delivers
us an affecting portrait.

In a profound passage Strouse suggests that she had arrived at some
sympathy for her subject in a surprising and unexpected way. The
giants of big business, she writes, had won political ascendancy and
shaped modern America. But the populists and the muckrakers had won a
victory of their own: they got to write the story of that turbulent
time, and so won with their pens and exposés the battle of historical
narrative. John D. Rockefeller may have created a big industrial
empire, but his nemesis, the tireless researcher and debunker Ida
Tarbell, got to write the history of Standard Oil and so to shape for
generations the public perception and profile of Rockefeller. Morgan,
too, Strouse tells us, was depicted as a predator who "robbed
America's farmers and workers to line his own pockets." Generations
had fallen for that view of economic history. It was high time, this
gifted and exacting writer observes, to tell a fuller history.

Morgan's was a simpler world than ours, of course. He was never in
doubt about the basis of a workable economy and, ultimately, for him
the essence of it all was moral. Shortly before his death, Morgan was
called before a congressional committee with strong populist
leanings. It was one of those eagerly anticipated appearances, for
the aged banker was both star witness and would-be villain. Lawyers,
clerks, politicians, reporters and casual visitors all came to
witness the grilling. The old man resolutely stood his ground. The
counsel for the committee was politically insistent, eager to show
the hegemony and power of Morgan, and the long reach of his money.
"Is not commercial credit based primarily upon money or property?",
the lawyer asked. "No sir; the first thing is character", Morgan
replied. "Before money or property or anything else . . . because a
man I do not trust could not get money from me on all the bonds in
Christendom." Might we be lucky enough to have Morgan's likes in this
second Gilded Age?

* * *

If Morgan's odyssey was so thoroughly American, the tale of European
finance was the tale of the House of Rothschild. From the Judengasse
(Jews' Lane) of Frankfurt, this extraordinary family rose, over the
course of the nineteenth century, virtually to invent the
international bond market, and to tower over European finance and
diplomacy.

The tale of the Rothschilds is the stuff of legend: a dealer in rare
coins, one Mayer Amschel Rothschild (the family name comes from the
German for "red shield", for the placard on the door of their house
in Frankfurt) works his way out of the ghetto in the late years of
the eighteenth century, and his five sons are dispatched to the
capitals of Europe, in time to become Europe's wealthiest financiers.
This is the material that the young and prolific Oxford historian
Niall Ferguson works in his sprawling two-volume economic history of
the Rothschilds.

There is a certain amount of "buzz" surrounding Ferguson--he is
thought of as something of an inheritor of the mantle of the late
A.J.P. Taylor. This work, an "authorized" history based on Ferguson's
full access to the Rothschild papers, is a major accomplishment and a
tribute to his talent and tenacity as a historian. It is an
overwhelming work, however, not particularly easy to read. Ferguson
has not really assimilated his own historical material. He presents
it raw, and drowns the story in the details at times. The sort of
talent--the eye for things that matter, the "feel" for history--that
gave Fritz Stern's Gold and Iron (1977) and David Landes' Bankers and
Pashas (1958) their place as classics in the annals of historical
writings on international finance is not to be found in Ferguson. His
is big, plodding history, so crowded with characters--four
generations of Rothschilds and countless statesmen who relied on
Rothschild loans--as to preclude intimacy with the players.

Seizing Their Chance

Ferguson writes that the tale of the Rothschilds is a "single
myth"--a myth of "immense wealth, of meteoric social ascent; of
limitless political and diplomatic power, and of some enigmatic
ultima ratio connected with the family's religion." He gives us the
elements of the myth--the details, the loans given or denied to
warring European states--and for this gift readers of
nineteenth-century finance should be grateful. They will have to
supply their own sense of the pathos of the story, though, for this
kind of texture eludes Ferguson's touch.

The two great revolutions that created the modern European
world--France's Revolution of 1789 and the Industrial Revolution
pioneered by Britain--gave the Rothschilds their chance. France's
revolt had shaken up the old systems of privilege and exclusion, and
opened new possibilities for the Jews of Europe. When the
revolutionary armies of France overran Germany, they literally
demolished the Jewish ghetto of Frankfurt. For Mayer Amschel and his
children, a much bigger world was suddenly within reach. Just a few
years later, the patriarch of the family sent the most capable of his
sons, Nathan, to represent the family in Britain. Arriving in 1800 to
be a merchant in the textile industry, he was that country's--and
perhaps the world's--single wealthiest individual at the time of his
death in London in 1836. Three decades later in France there were
estimates that the fortune of his brother James amounted to 4 percent
of France's GDP. The Rothschilds would partake of the glories of that
"long century" in European history, from the Revolution of 1789 to
the eruption of the First World War, and be seared by the populism
and anti-Semitism that shadowed the emancipation of the Jews. As
capital replaced land as the source of power, and as aristocracy
yielded to commerce, the Rothschilds were both beneficiaries of that
change and a lightning rod for the disgruntled and for every wave of
nostalgia and reaction that swept over the raw social landscapes of
the time.

"Money is the god of our time", the Jewish-born German pamphleteer
and poet, Heinrich Heine, wrote in 1841, "and Rothschild is his
prophet." For the Rothschilds, this gibe, and all it implied, was the
underside of their success. They were cosmopolitans--there were
Rothschilds in London, Paris, Frankfurt, Vienna and Naples--and they
had the world at their disposal. They prospered in international
bonds, and made a good deal of their money on exchange rate
differentials among the various European markets. They were the
creditors of rulers. Governments had begun to run large deficits,
railroads were criss-crossing the Continent, and the Rothschilds sat
astride the world of finance and diplomacy. In an age of secrecy and
tightly held information, too, the Rothschild family network
delivered handsome dividends. Theirs was a formidable, perhaps
impossible combination: they were simultaneously the friends of
rulers and the agents of a revolution in finance and production. They
could never do right by their detractors; to the progressives they
were friends of reaction, to the believers in blood and soil and
nationalism they were the harbingers of a cosmopolitan culture,
merciless capital and an economy severed from national roots.

It was the perceptive Heine, deeply ambivalent about the House of
Rothschild, who best caught this strange duality at the heart of the
family enterprise. He saw that the family dubbed the bankers of
reaction and the financiers of the Holy Alliance were the bearers of
a deep, revolutionary undertaking:

"No one does more to further the revolution than the Rothschilds
themselves . . . and, though it may even sound more strange, these
Rothschilds, the bankers of kings, these particular purse
string-holders, whose existence might be placed in the gravest danger
by the collapse of the European state system, nevertheless carry in
their minds a consciousness of their revolutionary mission."

There was indeed a great irony surrounding the rise of the
Rothschilds, one of no small measure of interest to readers today who
are tempted to think that a new age of finance has come--and has to
come--at the expense of the state. The House of Rothschild prospered
as bankers to states and princes. Carl, the third- youngest of the
sons of Mayer Amschel, who had also come to England to practice the
"rag trade" (textiles), attained wealth and power by solving the
riddle of supplying Wellington's armies with the gold bullion they
needed to prosecute the war against Napoleon. War financing was the
first big break for the Rothschilds. As Ferguson puts it, it was the
Rothschild gift to make cash available at reasonable rates to an army
on the march.

The next big break came their way from Prussia. In 1818 the
Rothschilds underwrote a loan to the Prussian state that proved a
watershed in European finance. The loan was made in sterling, not in
thaler, and the interest was to be paid in London, not Berlin. In yet
another innovation, the loan was issued not just in London, but in
Frankfurt, Berlin, Hamburg, Amsterdam and Vienna. With that Prussian
loan, the creation of an international bond market was well under way.

Modus Operandi

The claim that the Rothschilds were bankers of reaction was off the
mark. They were conditional supporters of the states of the Holy
Alliance, more active in the affairs and finances of Austria than
they were in Prussian or Russian affairs. On the whole, however,
their preference was for constitutional monarchies that could be
counted on more reliably to honor loans and securities. Deep down
they were skeptical about all states, but their heavier presence in
London and Paris should convey something of the way they judged their
customers. The attitude of the brother who oversaw the Paris
operation, "the Baron" James, is a fair reflection of the way this
banking dynasty viewed the uncertainties of politics. He was
inclined, Ferguson writes, to "salute whichever flag was run up the
mast after the storm."

In a perfect world, the bankers backed the winning coalition of
states, and all the family branches were on the same side of the
divide. Such perfection was at hand during the Crimean War, which
must mark the zenith of Rothschild influence. But this good alignment
of the stars would not materialize again in the decades and conflicts
to come. The wars of unification and of nationalism that would follow
tested the Rothschilds and their family unity in unexpected ways. The
Franco-Prussian War of 1870-71--to cite but one, singular, important
case--pitted Rothschilds on opposing sides of the war. In Frankfurt,
Mayer Carl von Rothschild was swept up in the cause of the rising
German empire, whereas the Paris Rothschilds were French patriots,
with two of their younger members serving in the Garde Mobile. It was
not easy to maintain a multinational financial dynasty in the age of
nationalism. An Anglo-French axis came to predominate in the
Rothschild empire, and the houses in Vienna, Frankfurt and Naples
became increasingly marginalized. (The one in Naples was shut down in
1863; the Frankfurt operation was wound up in 1901.)

Governments were the Rothschilds' business partners, but governments
and princes made for risky, unpredictable business. The Rothschilds
had no taste for Louis Napoleon Bonaparte and his Second Empire, for
example. They suspected that his adventure would come to grief. But
they had to tread carefully in his world if their French base was to
survive. Conversely, they admired and had a healthy measure of fear
for Bismarck--the "terrible", "inexorable" Bismarck, the "great
highway robber", as one of the Rothschilds described that imposing
figure. But the Rothschilds had very little leverage over him, for
Prussia was less indebted, and hence less open, to their influence.
That great enterprise of states, war and warmaking, was hazardous to
the Rothschilds as a family, but was not unprofitable to business. It
gave the family's work its edge.

Though the radical pamphleteers and anti-Semites loved to write of
the Rothschilds "holding the world in the hollow of their hands",
there were things other than Bismarck beyond the power of
underwriting bonds and of finance. Now and then the Rothschilds
entertained ideas of using the carrot of finance to tame the fury of
anti-Semitism in Russia, or to secure greater sympathy for the Jews
from the papacy, but such hopes were in vain. In Russia, the winds of
anti-Semitism blew at will. St. Petersburg was not Rothschild turf;
they had no one on the ground there, and the Romanov court remained
inaccessible to them. Nor was the Vatican susceptible to the bankers'
entreaties. The papacy took Rothschild loans, but strenuously
resisted granting the limited measures of Jewish emancipation in Rome
for which the Rothschilds pleaded. The papacy presented the
Rothschilds with a cruel choice between loyalty to kin and faith on
the one hand and the hard-headed realities of finance and power on
the other. In Ferguson's words: "Given the choice between boycotting
the Vatican--thus losing their monopoly over the Pope's external
borrowing--and accepting defeat over the Jewish question, the
Rothschilds opted for the latter."

Outflanked by Change

It is said that the widow of Mayer Amschel once discounted the
possibility of a European war in no uncertain, prideful terms. "It
won't come to war; my sons won't provide money for it." Decades
later, the left-leaning writer J.A. Hobson, in his influential book,
Imperialism: A Study (1902), wrote in similar terms. A major war, he
observed, could not "be undertaken by any European State . . . if the
house of Rothschild and its connexions [sic] set their face against
it." This was the same Hobson who had described the Boer War as a
conflict engineered by international bankers "chiefly German in
origin and Jewish in race."

When the Great War threatened, the power of finance was unable to
avert it. This was a hurricane beyond the control of bankers. Natty
de Rothschild--grandson and namesake of Nathan--who had risen to the
peerage in 1885, foresaw a "horrid" war of unprecedented brutality
and duration. He died in 1915, before the consequences of his dark
vision were fully realized. He was the last of the Rothschild giants;
there would be impressive descendants, some of them men of character
and drive, but the obituary given him would be the last of its kind
for one of his family. "The death of Lord Rothschild is an event
which not even the war can overshadow", the editorialists of the
Western Morning News wrote. The luminaries of British life were there
to see him off: David Lloyd George, Arthur Balfour and Herbert Samuel
among them. The chief rabbi's sermon, a few weeks later, described
him quite simply as the "foremost Jew of the world."

This was the kind of eulogy Natty de Rothschild would have savored.
He shared with all the descendants of Mayer Amschel fidelity to the
faith. The Rothschilds were not particularly pious, but they remained
proud bearers of Judaism as a culture and a source of identity. One
stray case aside, conversion to Christianity was anathema to them.
They had retained Mayer Amschel's admonition that the desertion of
one's faith was nothing less than a crime. The Rothschilds went
through doors that had previously been bolted shut against Jews, and
they had done it as men and women of their faith.

The world that the Rothschilds mastered and knew was giving way by
1914. The financing of the Great War had shifted westward: the City
had lost out to New York, and the Rothschilds had never managed to
crack the American market. "That blasted country", as the Rothschilds
called the United States, was in the main terra incognita to them. It
had its own peculiar business culture, rambunctious and
decentralized. It lacked a national bank, akin to the Bank of England
or the Banque de France, with which the Rothschilds could build a
working relationship (Andrew Jackson had seen to the destruction of
the Bank of the United States). The world over, family banking was
being outflanked by joint stock companies. The cohesiveness of
transnational elite culture, which was the mainstay of the
Rothschilds, was eroding by the day. The fourth and fifth generations
of the Rothschilds could not master these deep changes in world
finance and politics. The "guns of August", and the brutal history
that followed, were one long obituary, a grim farewell to that age.

EVERY AGE, every great edifice, begets its own nemesis, and in the end is undone by the very forces it unleashes. The received wisdom is that the first age of capital was undone by the onset of a global war. But in truth, as the more careful economic historians tell us, protectionism, illiberalism and regulation predated the outbreak of war. Liberalism and declining tariffs were being reined in long before 1914. By the end of the 1870s, protectionism had reared its head. What "convergence" took place in the Atlantic economy after 1870, we are told by the economists Kevin O'Rourke and Jeffrey Williamson in their methodical and careful work, Globalization and History, was less a function of trade liberalization and declining tariff rates than of the decline in transportation costs and of the overall yields of technological advance. Outside such strongholds of free trade like England and Denmark, economic liberalism had run into the very resistance its success had stirred up. Tariff rates were going up and prot ectionism was ascendant throughout the Atlantic economies.

Our own times offer no built-in resistance to the historical process of liberal success and illiberal backlash. There is no iron law that decrees the triumph of the market. Since 1989, economic liberalization has had the upper hand ideologically. American-style globalization--minimum government expenditures, fiscal discipline, free trade, mobility of shares and capital--has had behind it the success of the American model and the power of the American imperium. American triumphalism has played out against a background of retrenchment in Europe and Japan, and against a wider sense that the regulatory state has had its day and has lost.

But this kind of triumph is by its very nature short-lived. It must continue to rely on the success of the American example, and on the willingness of Pax Americana to shore up the global trading system and to keep it going. Economic ideas are fickle. No victory in that domain is irreversible, or beyond the power of contingency and performance. It is patently obvious that a good deal of globalization's and liberalization's success has derived from the long and remarkable bull run of the American economy. But as the issue of valuation has arisen once again in the American economy, and as the NASDAQ has lost roughly half of its value from its heights in March 2000, the triumphalism has begun to recede, and the faith in markets has given way to a subdued anxiety of reckoning.

A decade ago, economic liberalization was measured against the wreckage of socialism and the failure of the import substitution model in the ruined landscapes of the Third World. Its supremacy was therefore easy to see. It is by a different light that the model will be judged today: the light of its own performance and imperfections. And the battle between those who stress the continuity of the present with the past and those who stress the novelty of this world will be settled as all such great duels are settled--material history will prevail, the scribes and the chroniclers will follow.

At some point in the future, some muckrakers, a few historians with patience, an Ida Tarbell or two and a Ferguson or a Strouse will rummage through our time. They will know better than we can know now how this political economy played out. They will pick over the legacies of our titans, and they will hold up to the light of scrutiny the sort of things our pundits said about our time and its illusions. If the history of ideas is any guide, the chroniclers of the future will be reading their world into ours as well.

Coda: On December 22, 2000, J.P. Morgan (the bank) voted itself out of existence. It was sold to Chase Manhattan for $31.8 billion. The Financial Times reported that the balloting, which took place at the company's old headquarters on 23 Wall Street, had happened "coolly, quickly, and with hardly a hint of sentiment." A Wall Street eccentric, a shareholder by the name of Evelyn Davis, gave the occasion a touch of flair. She turned up dressed in black--Chanel black, she said--because she was in mourning. "It was left to the mourning Ms. Davis to predict that--rather than rolling over in his grave--the bank's founder, J. Pierpont Morgan, would rise from the dead to lay a curse on the merger", the dispatch from the Financial Times read. We do not know if Evelyn Davis was right; what is easy to ascertain is that the old-fashioned capitalism of Morgan had endured and stood the test of time, created value and profits for its shareholders. What will survive of today's edifice, of those countless companies "built to flip", to use the language of the New Economy, remains to be seen.

At a time when the tech fortunes in the United States lost $3.3 trillion over the course of six months in the year 2000, the cold gaze of Morgan, and the unsentimentality of his successful peers, could have been salvation and corrective in the wild ride that the capital markets have taken of late. From what is known of Morgan and Carnegie, it should be easy to guess what they would have thought of the entrepreneurs pitching to them the wild schemes of e-commerce--the e-tailers of groceries and airline tickets, "one-on-one auction sites", the "content providers", and the whole lot. It should be easy to imagine them seeing through the fakeness of an economic paradigm that disconnects price from earnings, that declares itself done with the very notion of profit itself as the yardstick of value.

Fouad Ajami is Majid Khadduri Professor and Director of Middle East Studies at the Paul H. Nitze School of Advanced International Studies, Johns Hopkins University. He is author of The Dream Palace of the Arabs: A Generation's Odyssey (Pantheon Books, 1998).