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Larry Elliott : Welcome to The Balmy Days of Another Edwardian Summer

[Larry Elliott is the Guardian's economics editor.]

Crinoline and croquet are out. As yet, no political activist has thrown themselves in front of the royal horse on Derby Day. Even so, some historians can spot the parallels. It is a time of rapid technological change. It is a period when the dominance of the world's superpower is coming under threat. It is an epoch when prosperity masks underlying economic strain. And, crucially, it is a time when policy-makers are confident that all is for the best in the best of all possible worlds....

History does not always repeat itself. It may be different this time, with the second age of globalisation avoiding the pitfalls of the first. There are those who point out, rightly, that modern industrial capitalism has proved mightily resilient these past 250 years, and that a sign of the enduring strength of the system has been the way it has apparently shrugged off everything - a stock market crash, 9/11, rising oil prices - that has been thrown at it in the half decade since the millennium. Even so, there are at least three reasons for concern. First, we have been here before. In terms of political economy, the first era of globalisation mirrored our own. There was a belief in unfettered capital flows, in free trade and in the power of the market. It was a time of massive income inequality and unprecedented migration. Eventually, though, there was a backlash, manifested in a struggle between free traders and protectionists, and in rising labour militancy.

Second, the world is traditionally at its most fragile at times when the global balance of power is in flux. By the end of the 19th century, Britain's role as the hegemonic power Finally, there's the question of what rising oil prices tell us. The emergence of China and India means global demand for crude is likely to remain high at a time when t.

If supply constraints start to bite, any declines in the price are likely to be short-term cyclical affairs punctuating a long upward trend. In those circumstances it would be the height of folly to assume that there will be no economic consequences or that there will not be an intense - perhaps even bloody - struggle for the resource that more than any other has shaped the modern world.