It is early July 1914 and the financial markets are calm. Traders assume that the recent assassination in Sarajevo is a localised event that will have no lasting ramifications. There have been disturbances aplenty in the Balkans since the turn of the century and the expectation is that the death of Archduke Franz Ferdinand will be, like all the others: a footnote in history.

It was only later in the month, after Austria delivered its ultimatum to Serbia, that the markets woke up to the threat of a war involving the great European powers. Bond yields rose; there were fears that debts would go unpaid. The stock market in London closed in early August and did not reopen until early the following year. In Britain, the Bank of England and the Treasury managed to avert a full-scale panic but things were never quite the same again.

Although nobody at the time was aware, the six weeks from Sarajevo to the outbreak of the first world war marked the end of the inaugural era of globalisation that had London and the gold standard at its heart. There had been occasional panics, some of them serious, but the international economic order seemed as stable and secure as the international balance of power. The next 30 years saw the end of the gold standard, the collapse of global trade, a marked reduction in migration flows, the rise of protectionism and the biggest depression the world has ever seen. Annual growth rates per person in the 12 biggest western European countries fell from 1.33% between 1870 and 1913 to 0.83% from 1913 to 1950.

The decline could have been even more pronounced had it not been for technical progress. The first half of the 20th century saw the launch of innovative products – such as the motor car and the aeroplane – and the wider dissemination of advances pioneered in the second half of the 19th century – such as electricity and modern plumbing – that had the potential to boost growth by increasing productivity.

But these innovations were only fully exploited once the right infrastructure was in place. That meant the physical infrastructure – the highways and the suburbs – and the financial architecture, including reform of the banks, the International Monetary Fund and the Bretton Woods fixed exchange rate system based on the dollar. Between 1950 and 1973 GDP per head in the 12 biggest western European nations increased by 3.93% a year on average.

Roll forward 93 years from 1914. It's July 2007 and there have been a few tremors in the financial markets. A few hedge funds have hit problems with their investments in US sub-prime mortgages but most traders are blissfully unconcerned. The assumption is that any difficulties are localised, minor and soluble. There is nothing to suggest this will be any more serious than the peso crisis in Mexico, south-east Asia's meltdown, Russia's default or the bursting of the dotcom bubble.

Again, the optimism was unfounded. When the financial markets froze up in early August 2007 it created the conditions for the near-collapse of the western banking system 13 months later.

Certain conclusions can be drawn from these two incidents.

We know far less than we think we do. In retrospect, it was obvious that the financial markets were in a highly fragile state in 2007, just as historians can find umpteen reasons why the assassination in Sarajevo led to war. Warning signs were ignored, with disastrous consequences. The foreign secretary, Sir Edward Grey, was right with his famous 1914 warning: it was a long while before the lamps came back on again: more than three decades of war, slumps and rule by brutal regimes ensued before it could be said that the crisis was over.

The after-effects of the 2007-08 crash also linger. The question is what happens next. The default assumption is that the global economy has had its near-death experience but is now on the mend. The financial system has been repaired, public debts are being reduced, the eurozone has been saved. Apart from the fact that most of us are a bit poorer than we were in 2007, life goes on as before. There has certainly been much less of a root-and-branch rethink of the prevailing economic model than there was after the first oil shock in 1973.

There are, though, some who worry that 2007-08 was merely the warm-up act for an even bigger crisis, made all the more inevitable by the failure to embrace more radical reform. The former prime minister Gordon Brown is one concerned by the failure to understand that global problems – growth, financial stability, climate change – require global solutions. A second crisis would certainly make a long period of turbulence much more likely.

What would emerge at the end of such a period? There are those who think the events of 2007-08 mark a watershed, the end of a period of phoney growth based on debt, over-exploitation of the planet and the last gasp of technologies approaching obsolescence. Larry Summers, a former US treasury secretary, says we may be facing secular stagnation. The US economist Robert Gordon says the new wave of technological advances, such as IT, are not nearly as significant in boosting productivity as the big advances of the late 19th and early 20th century – running water, electricity, the internal combustion engine. Gordon believes US growth could be as low as 0.2% a year by 2100.

Gerard Lyons, once chief economist at Standard Chartered before becoming an adviser to London's mayor, Boris Johnson, has a rather more upbeat view. While not playing down the many risks – including growing inequality and climate change – Lyons argues in his new book, The Consolations of Economics, that the global economy could eventually emerge stronger from its recent travails.

Lyons makes a strong case, and he has history on his side. The global economy has regenerated itself before and it can do so again. It is premature to say that the new wave of innovations will have less impact on productivity than those identified by Gordon as having a transformative role in the first half of the 20th century. It is certainly not too early to identify a reconfiguration of the global economic balance of power: with Asia, Africa and Latin America all becoming relatively stronger while Europe and North America become relatively weaker.

But the lessons of the 1914-45 period are that this rebirth can be a long and painful process. And it will only happen if the fundamental weaknesses of the model are addressed. The mood now is like that of the 1920s – a hankering for the lost days of Edwardian summer.

• The Consolations of Economics by Gerard Lyons; Faber & Faber; £16.99