The author is a professor of history and international affairs at Princeton University

Today’s rebound in inflation was initially driven by massive fiscal planning and supply chain disruptions during the pandemic. It will certainly last longer now due to military conflicts and additional disruptions to supply chains. Rising food and fuel prices could spark discontent, protests and even revolutions around the world. Does this mean the end of globalization, pushing national inflation even higher?

In the early 2000s, policymakers and academics identified the relationship between globalization and the transition to low inflation in rich industrial countries, then emerging markets in Asia, and eventually even Latin America, where inflation has always been a way of life. The global labor market drives down wages in rich countries, while poor countries want currency stability.

Federal Reserve Chairman Alan Greenspan explained in 2005 that globalization and innovation are “essential elements of any paradigm that can explain the events of the past 10 years,” otherwise known as the Great Moderation. Until 2021, current Fed Chairman Jay Powell is still referring to “persistent deflationary forces, including technology, globalization, and perhaps demographic factors.”

These forces have not ceased to function, but in order to be used effectively, they require effective government action. This is where history offers lessons.

To understand why our future is not necessarily so bleak, and why globalization may not end with a pandemic or war in Ukraine, look at decisive turning points in the past. They are inflationary, but they push the world toward more, not less, globalization.

Modern globalization manifests itself as two distinct events. The first began in the mid-19th century, but was interrupted by the First World War, following a desperate attempt to reinvigorate globalization with a stronger institutional framework. This failed in the Great Depression. Then, the new globalization took off in the 1970s. Both of these reasons started with shortages and a surge in inflation.

The opposite of globalization can be found in times of conflict and war, when economic advantages play a zero-sum game and fiscally driven inflation pushes up prices. Two world wars interrupted globalization. Now we are going through a conflict of the 21st century, which might be considered a return to the era of world wars and the Cold War.

Both modern globalizations were driven by technology and involved huge productivity gains in transportation. The steam engine opened up continents and seas with railroads and ships. Containers reduced the cost of shipping goods after the 1970s. But these innovations existed long before the moment they had an economic impact. As early as the 1770s, Matthew Bolton and James Watt began building operational steam engines. car carrieroften considered the first container ship, launched in 1931.

It requires a specific set of circumstances to achieve the transformative characteristics of innovation. This was accompanied by a break in the sharp price increase. The new technology will pay off due to the shortage of conditions. The adoption of innovations also depends on policy choices: removing barriers to business, but also requiring consensus around a stable, internationally applicable monetary framework, be it the gold standard of the late 19th century or the modern inflation targeting of the late 20th century.

Before that, currency and price surges occurred in every era. In the 19th century, this stemmed from a combination of new gold supplies and banking innovation. More than a century later, inflation followed the same trend, followed by a push for globalization to ease scarcity, followed by a prolonged period of deflation. The Great Inflation of the 1970s began with an overheated economy, which encouraged the OPEC cartel to act. Shortages and rising prices have undermined confidence in the government, necessitating a rethink of policy. The new vision involves monetary stability and the government’s renewed focus on core missions.

It was inflation that helped create the new policy environment in the mid-19th century and the 1970s. As the economic and political costs of inflation become more apparent and damaging, finding ways to quell inflationary pressures seems more attractive.

To be sure, the deflationary cures—more globalization and more effective government—are temporarily uncomfortable. But it drives the world to seize technological and geographic opportunities that were once overlooked or ignored. In short, we can look forward to a post-conflict future with some degree of hope.