Soaring energy prices mean soaring transport costs, which have a potential to cancel much of the global integration the world has witnessed since the world wars.

During the past 120 years, the world has witnessed three waves of global economic integration. The first wave of global integration (1870-1910s) was triggered by falling transport costs and reductions in tariff barriers.

This wave ended with three decades of devastating political nationalism and protectionism. Extreme political nationalism and economic protectionism triggered two devastating world wars. By 1950s, exports as a share of world income were down to about 5 percent. In the process, 80 years of globalization was cancelled out.

In the postwar era, Washington was the architect of the second wave of globalization, which was driven by the new international multilateral institutions. For developed economies, this wave was spectacular. It was only with the third wave of globalization around 1980 that a large group of developing countries, led by China, broke into global markets.

In 1980 only 25 percent of the exports of developing countries were manufactures; in the late 1990s, the corresponding figure was 80 percent.

By the 1990s, the leading emerging economies took off in service exports, as well. The shift was driven by liberalization of trade and investment and continuing technological progress in transport (containerization, air freight) and communications (digitization, the Internet).

The new "flat world" made possible greater specialization and higher productivity. In the past, developed countries traded primarily with each other. Now industries have grown more concentrated geographically (think of Detroit's car industry or Hollywood's movie industry), but also more dispersed (the great car factories in China, Bollywood in India).