Commanding Heights

Chapter 1: Prologue [2:45]

NARRATOR: As the 20th century drew to its close, and our new century began, the battle over the world economy intensified. Some people feared globalization and questioned the benefits. Others welcomed it.

RICHARD CHENEY, U.S. Vice President: Millions of people a day are better off than they would have been without those trade developments, without globalization. And very few people have been harmed by it.

NARRATOR: As the terrible events of September 11 drove the world deeper into a recession, new questions emerged about the perils of the new world economy. Can our now deeply interconnected world surmount a global downturn and rise above other crises? And is global terrorism the dark side of the promise of globalization?

BILL CLINTON, U.S. President, 1993-2001: You can't get away from the fact that globalization makes us interdependent. So it's not an option to shed it. So is it going to be on balance positive or negative?

NARRATOR: This is the story of how the new global economy was born, a century-long battle as to which would control the commanding heights of the world's economies -- governments or markets; the story of intellectual combat over which economic system would truly benefit mankind; the story of epic political struggles to implant those ideas on the nations of the world.

JEFFREY SACHS, Professor, Harvard University: Part of what happened is a capitalist revolution at the end of the 20th century. The market economy, the capitalist system, became the only model for the vast majority of the world.

NARRATOR: This economic revolution has defined the wealth and fate of nations and will determine the future of the planet.

DANIEL YERGIN, Author, Commanding Heights: This new world economy is being driven by technological change and by political change, but none of it would have happened without a revolution in ideas.

NARRATOR: Tonight, the battle of ideas that still divides our world.

Chapter 2: The Old Order Fails [8:11]

NARRATOR: Air-raid sirens sound the alert. German bombers will pound another British city tonight .

Onscreen title: Cambridge University, 1940

During the blitz, the two most important economists of the age shared air-warden duty on the roof of King's College, an English gentleman and an Austrian exile -- personal friends, but intellectual rivals. How their battle of ideas still shapes our life and society is our story.

John Maynard Keynes helped the allied governments defend freedom by planning their wartime economies. Friedrich von Hayek thought government interference in the economy was a threat to freedom.

DANIEL YERGIN: The debate over market forces, whether you have economy that's based upon prices or on state, planning has been at the very heart of the economic battles of the last 100 years. For decades, the ideas of John Maynard Keynes dominated the economies of the Western world.

JOSEPH STANISLAW, Co-Author, Commanding Heights: Keynes felt that the market economy would go to excesses, and when things were in difficulty the market wouldn't work. Therefore the government had to step in. Hayek felt that the market would eventually take care of itself.

DANIEL YERGIN: It was only when Hayek was a very old man that his ideas began to prevail and the world began to change.

NARRATOR: At the start of the 20th century, Hayek and Keynes had witnessed the first age of globalization. Every day life was being transformed everywhere. Technologies like the telegraph and the telephone revolutionized communications. Steamships and railways made the world a smaller place. Tens of millions migrated without the need for passports.

Keynes described this global market in which trade flowed freely.

JOHN MAYNARD KEYNES: The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.

NARRATOR: Hayek summed it up more succinctly.

FRIEDRICH VON HAYEK: We did not realize how fragile our civilization was.

NARRATOR: The murder of an Austrian archduke by a terrorist triggered a world war. It would be almost 80 years before there was once again a truly global economy.

World War I destroyed 20 million lives. It laid a whole continent to waste. There was blood and carnage amidst the beauty of the Italian Alps, where the armies of Austria and Italy were fighting.

Friedrich von Hayek served in the Austrian artillery. He was only 17 years old -- still a schoolboy. The fighting was ferocious. He experienced retreat and defeat.

FRIEDRICH VON HAYEK: The decisive influence was really World War I. It's bound to draw your attention to the problems of political organization.

NARRATOR: He vowed to work for a better world.

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