Trade Winds.

A Future Perfect: The Challenge and Hidden Promise of Globalization, by John Micklethwait and Adrian Wool-ridge, New York: Crown Publishers, 386 pages, $27.50

At last--a sensible book about globalization. International economic integration is a phenomenon drowned in hype: Cheerleaders talk breathlessly of a world without borders, while doomsayers rage against the supposed tyranny of uncontrolled market forces. John Micklethwait and Adrian Woolridge, two reporters for The Economist, have succeeded in cutting through both sides' bombast. In their engaging and clearheaded guide to the shrinking of the planet, they show that different parts of the globe are shrinking at very different rates and that the whole process has along, long way to go.

However fast they have grown, international markets remain the exception rather than the rule in contemporary economic life. Analysts at the renowned consulting firm McKinsey have estimated that only about 20 percent of world output is currently subject to global competitive pressures. Even when they are allowed to operate, the forces of global competition are much more attenuated than most of us think. In that connection, Micklethwait and Woolridge cite an eye-opening study of Canadian trade patterns. Canada and the United States boast the world's largest bilateral trading relationship. A common language and strong cultural ties link the two countries. Tariffs have been eliminated by a free trade agreement. And still, trade between Canadian provinces is 12 times greater than trade between provinces and American states, after correcting for differences in the trading units' size and distance. The bottom line: National borders still matter a great deal.

Despite all the loose talk about their imminent demise, the nation-states that defend those borders are still very much alive and kicking. The authors point to the experience of their native Great Britain, where from 1979 to 1997 Conservative governments strove to limit the size of the bloated public sector. In the end, all they managed was to budge government spending from 43 percent of gross domestic product down to 42 percent.

In the United States, Microsoft's travails reveal the fatuousness of the claim that governments are powerless in the face of footloose capital. "Companies are much less mobile than people believe," Micklethwait and Woolridge remind us. "One reason why the federal government can harass Microsoft is because it knows that the computer company will not move elsewhere."

The Internet, with its contempt for distance and its resistance to top-down control, makes an appealing metaphor for the rapidly integrating world economy. But it is a deceptive one if taken too literally. Those of us under constant e-mail bombardment may think our plight a universal one, but half the world's 6 billion people have yet to place their first phone call. Two-thirds of them still survive by tilling the soil. The world economy, considered as a whole, remains more preindustrial than postindustrial. Micklethwait and Woolridge perform a valuable service by making clear that globalization, far from an accomplished fact, is a process only just getting under way.

Though they debunk globaloney in both its triumphalist and apocalyptic variants, Micklethwait and Woolridge are by no means neutrals in the raging globalization debate. They mount a stout defense of international markets--a defense that is all the more effective because it is not Panglossian. Globalization has not benefited everybody, they frankly acknowledge. They divide the unfortunate into three broad categories: the "has-beens," who work in declining and no longer competitive industries; the "storm damage," who are rocked by the volatility of international finance; and the "nonstarters," the desperately poor who have yet to be touched by global wealth creation.

But it is wrong, they argue, to focus only on the losers when the winners so greatly outnumber them. "Deng Xiaoping's decision to open China's economy in 1978," they recall, "helped some eight hundred million peasants more than double their real incomes in just six years, arguably the single greatest leap out of acute poverty of all time." Meanwhile, the cure for what ails most of the world's suffering billions is not less globalization but more: "The only places where the losers massively outnumber the winners are in countries, such as Cuba, that have shut the door on globalization completely."

Micklethwait and Woolridge strengthen their brief for globalization by putting the phenomenon in historical context. It is a task that doubtless comes naturally to writers for The Economist. Their magazine, after all, was launched in 1843 to campaign for the repeal of Great Britain's protectionist Corn Laws. The success of that campaign three years later secured British commitment to free trade and thereby laid the political foundations for the world's first great episode of globalization--the dramatic expansion of trade and investment flows worldwide during the decades prior to World War I. As Micklethwait and Woolridge note, the extent of international economic integration a century ago, though on the whole less than now, was impressive nonetheless.

But the initial burst of globalization did not last. It was destroyed by the outbreak of World War I and the ensuing calamities of totalitarianism, the Great Depression, and World War II. In the postwar era international trade gradually resumed and expanded, but a truly global economy remained an impossibility: The communist nations sealed themselves off from international markets, as did much of the Third World. It is only in the past couple of decades--with the opening of China, the fall of the Soviet empire, and the abandonment by many developing countries of isolationist "import substitution" policies--that a global division of labor has reasserted itself.

Micklethwait and Woolridge cleverly encapsulate what they call "the fall and rise of globalization" by reviewing the twists and turns of John Maynard Keynes' posture toward the international economy. Keynes burst onto the scene in 1919 with his The Economic Consequences of the Peace, in which he rhapsodized about the prewar international order and warned (correctly) that the draconian provisions of the Versailles treaty were antithetical to the reestablishment of that order. By 1933, Keynes' faith in the possibility of a stable, peaceful international system was so badly shaken that he called for a turn toward "national self-sufficiency." "I sympathise," he wrote, "with those who would minimise rather than maximise economic entanglements between nations."

Yet by 1944 Keynes' faith was sufficiently restored that he played a leading role in creating the Bretton Woods institutions (the International Monetary Fund, the World Bank, and the General Agreement on Tariffs and Trade). Those bodies, for all their flaws, provided a framework for restoring "economic entanglements," at least among the nations of what came to be known as the Free World. What we call globalization today has resulted in large part from the collapse of the communist and Third World alternatives to that Free World international order.

This historical background puts the world economy in a very different light than the one that colors most people's understanding. Globalization is commonly portrayed, by friends and foes alike, as a process whereby market forces--turbo-charged by the microchip and the Internet--inexorably bend weakened governments to their will. But until relatively recently, most people in the world lived under governments that flatly rejected the verdicts of the marketplace. Why do they now pay attention? Yes, new information and communications technologies allow markets to operate more effectively, but that hardly matters when governments ban markets from operating at all. Why did many of them stop doing so?

The fact is that alternatives to markets--namely, central planning in various guises--were tried and found wanting. The common contention that markets are causing the retreat of the state is thus less true than the reverse: The collapse of statist policies has allowed market relationships to be restored. The enemies of globalization who rail against supposedly unchecked markets need to be reminded why those checks are being slowly but steadily removed: They were an unmitigated disaster for the billions of people subject to them.

To their credit, Micklethwait and Woolridge do not restrict their defense of globalization to narrow economic grounds. "Arguing that globalization is, on balance, not a bad thing and showing that it has generally enriched the world economically is certainly valuable," they write. "But the same could also be said for the lavatory or the lemon squeezer." They go beyond dollars and cents to make the case that globalization expands human liberty.

First, the authors trace the connections between economic openness and broader freedoms. In one evocative example, they recount how British capital controls during the 1960s imposed a travel allowance that severely restricted citizens' ability to travel abroad--an intrusion on personal liberty that would be considered beyond the pale today. "It is not coincidental that the pace of globalization has picked up with the spread of democratic rights," they note; "the two are symbiotic."

Micklethwait and Woolridge then go further to argue that globalization, by overcoming the "tyranny of place," deepens and enriches the exercise of individual freedom. Here they turn the tables nicely on communitarians like John Gray who bemoan globalization's assault on "the blessings of a settled identity." "John Gray himself," they respond, "happily abandoned the Newcastle working class into which he was born for the metropolitan intelligentsia. One of the many benefits of globalization is that it increases the number of people who can exercise Gray's privilege of fashioning his own identity."

The topics covered in this fine book range far beyond those I have touched on in this review. Among other highlights are intelligent discussions of the "failure of global government," the spread of American popular culture, and the currently modish anti-globalization backlash. If the book has a weakness, it is that the authors fail to bring the wide variety of subjects addressed within any overarching analytical framework. They sound some general themes but do not sustain them. As a consequence the book reads more like a series of set pieces than an integrated whole. But for someone interested in a smart and often witty overview of globalization in all its nebulous dimensions, Future Perfect makes for excellent one-stop shopping.

Contributing Editor Brink Lindsey is the director of the Center for Trade Policy Studies at the Cato Institute.