2011 will be a hard year for globalisation. 2008 showed that our global era can bring faster growth, but faster declines too – as a crisis made in America spread quickly. 2009 saw the benefits of a global response, but in 2010 divisions returned. Asian growth bounced back, but advanced countries were mired in high unemployment. 2011 will see further divergences. In spite of evidence that Keynesian policies worked (China being the pre-eminent case) and austerity led to predictable contractions, much of Europe is pushing austerity anyway. The moment of coordinated macropolicies aimed at recovery is a faint memory.

Worse, America’s quantitative easing is now viewed as an update of the policies that marked the Great Depression. The world is waking up to the way exchange rates can be used in self-promotion at the expense of others – discouraging imports and enhancing exports. America says its monetary?policy promotes investment by lowering interest rates, not exchange rates. But emerging countries claim their interventions are to build up reserves, not protect against volatile capital markets.

Such beggar-thy-neighbour policies didn’t work in 1930s, because countries responded in kind. Today the same will happen. Indeed, emerging markets are already responding to unwanted funds with capital controls, taxes on capital gains, exchange rate interventions and lower interest rates. The result? More uncertainty in financial markets, greater fragmentation of capital markets, and a marked reversal in globalisation.