Keywords: Globalisation & Trade;
I originally undertook to talk about commercialization, but I have recently been working on another, although closely related, question – globalisation. I hope you will forgive me if that is what I talk about today, because it is very much on my mind. I will start by defining globalisation; then talk about two earlier periods of globalisation to see what lessons we can learn from those; then I will talk about some of the current issues.
The London Economist defined globalisation as ‘international capitalism’. This is not a helpful way to think about the problem. Instead I try to reduce the notion of globalisation to a relatively neutral idea, to avoid individuals react positively or negatively, or possibly stop thinking at all, rather than trying to work through it with all its complexities.
I define globalisation as ‘the economic, political and social consequences of the reduction in the cost of distance.’ At various times in the history of mankind, distance has become cheaper, in various ways. Much travel or transport we now accept as normal were once very expensive. For example many here will have flown to London (now taking only about 26 hours) at a cost which is quite small compared to the cost of the flight when I first did it 35 years ago. Then it took over two days, and cost around $2,000 return, much the same as it does today, except the purchasing power of money has reduced over the period. If you have a child living in Britain and something goes wrong you can fly there in a hurry. One of the reasons your child may live in Britain is because it is much cheaper to get there than it once was. And maybe you can afford to visit Britain (or wherever) quite frequently to visit your friends.
This example of the reduction in the cost of distance applies to the physical movement of a person, and also to the transport of goods. It also applies to information. Today, if you want to read the London Times or the New York Times you can do so on your computer in New Zealand within hours of publication. One now has access to information in a whole range of ways, and it is far cheaper quicker to move than the physical bodies of books and newspapers took in the past.
So if once upon a time distance was very expensive, today it is considerably cheaper for many sorts of personal travel, goods, and information. The consequence is economic, social and political change: changes which are both beneficial and detrimental.
About 2000 years ago the Roman Empire gave peace to a large part of the Middle East and Europe, so it became much easier to move around the various parts of the empire. Paul, for instance, could wander around the Mediterranean visiting various Jewish communities who had moved from Palestine seeking opportunities elsewhere. There was less chance of being disrupted by pirates. Civil peace meant you could move from Palestine to, say, Ephesus, and set up a in business there.
Although it is harder to document, there is also evidence of the movement of capital; one could take your savings from one place and move them to another. With some commonality of language and the ability to communicate across boundaries, ideas which may once have been confined to a particular place, including the arts and philosophy, could spread throughout the empire. Greek philosophy (from 200 or so years before) penetrated the Eastern Mediterranean.
When the costs of distance goes down it becomes easier to trade. Palestine, at the junction of the Middle East and the Eastern Mediterranean was a crucially link in the expanding trading patterns. Accounts of the time hint at economic transformation and a prosperity which financed, for instance, Herod’s temple.
The theological debates that arose were part of that economic transformation. One is struck how the vast majority number of reported saying of Jesus are related to the economy or use the economy as an image, including vineyards, sowing grain, the parable of the talents (a story about investment) and the good Samaritan. The story of the widow’s mite is about the value of money. The widow gives her dollar. The rich man his $100. The rich man’s gift may have been worth 100 times that of the widow’s in financial terms, but Jesus is suggesting that its value should be measured in terms of the sacrifice made in the making the gift. Globalisation is directly behind the story of Caesar’s coin, for the globalisation from Rome is generating an international currency.
These theological debates were taking place at the time not just with Jesus and his followers, but also among other religious groups, for instance the Sadducees, the Pharisees, the followers of John the Baptist, the Essenes, and other parties who were trying to change the ways in which people thought and behaved. So the globalisation of Pax Romana 2000 years ago, had a major impact on the world both directly and through its impact on the foundations of Christianity.
The period from about 1850 to 1940 is recognised by many scholars as the greatest era of globalisation, at least among European nations. Pax Britannica affected only part of the world, but it allowed people to move many thousands of miles. Distance was still costly, if cheaper, so most migrants had little chance to return to or even visit their home country. Trade increased, and capital flowed even more freely than people. Ideas like the Bible and western values travelled too.
As well as the peace there were major technological changes. Developments like the telegraph and later the cable, plus the railways, enabled people to connect and to trade. Imagine two towns some distance apart, each of which traded wheat. Over time, given the ability to use the telegraph to establish what each town was charging for its wheat, and with the railway to reduce the cost of moving wheat from one town to the other, arbitrage moved the prices closer together.
With the advent of refrigeration by 1882 New Zealanders discovered how to move dead meat and, later, dairy products tens of thousands of miles without any marked loss in quality. Refrigeration technology complemented with steamships and the ability to use the telegraph to find out how much product was needed in Britain enabled New Zealanders to produce here and sell successfully in Britain 12,000 miles away. British migrants could continue to do much the same things as they did in Britain, but make use of a superior climate. If that reduction in the cost of distance had not occurred New Zealand would today be a much smaller – and probably more impoverished – society.
The migration from Britain had benefits for the British at home. There were now fewer workers, and their wages rose. So they got cheaper food and a larger share of the nation’s production. Slums were less overcrowded. But this globalisation process also had its downside. Some people suffered greatly, amongst whom were the British hill farmers who found the prices for their meat, wool, and dairy products undercut by New Zealand sheep meats and had their livelihood diminished.
During the 19th century economic activity shifted from agriculture to manufacturing, for it was also a period of industrialisation. Manufacturing processes, once performed at home, moved to increasingly larger factories. So our ancestors moved from their villages into the vast slums of industrial Britain and Europe. We picture the extraordinary destruction of the environment, polluted air and water, billowing smoke stacks, ‘dark satanic mills’. Economic historians still debate whether living standards rose or fell over the period. It probably rose for some, fell for others. Deteriorating conditions caused many to leave home and travel to the other side of the world. The process of industrialisation led to much personal trauma and environmental damage. Nevertheless eventually we all have been beneficiaries, even if our ancestors suffered.
Over time we learned to harness the new technologies and take advantage of the new opportunities provided by industrialisation. Factory Acts preventing the use of child labour, regulations and public infrastructure were developed to deal with the disposal of waste and public hygiene. Means of public income protection and support developed: workers compensation started in Germany as a response to factory accidents in the late part of the nineteenth century. (It was introduced to New Zealand in 1901.) So gradually – step by step – the tiger unleashed by nineteenth century globalisation and industrialisation was tamed. Mankind learned to control the forces and make them work in our interests. Fascinatingly much of the resistance to the forces and the controlling of them was inspired by spiritual movements. Not just the traditional churches but also anarchists, syndicalists and Marxists (which initially – as conceived by Karl Marx – had a profoundly spiritual basis). Even so, in Britain it has been said that the struggle to control industrialisation ‘owed more to Methodism than Marxism.’ On the European continent, Catholicism often occupied a similar moderating influence.
So, however awful some of the effects of 19th century industrialisation were, we learned to control it and to benefit from it. Admittedly some Utopians longed for a return back to the 18th century way of doing things, but even the most nostalgic did not really want to give up their new advantages. Maybe things have not changed too much in this regard. I am reminded of a friend of mine who lived at Waitati to the north of Dunedin, who when visiting the city would complain bitterly about what a terrible town it was – totally polluted – contrasting it with the pleasures of unspoiled rural life. And then he would get into his car and drive over the Kilmog with smoke pouring from its exhaust!
But nostalgia was insufficient to resist the economic forces unleashed in the nineteenth century. A better life came from our learning to control them.
Conventional wisdom says that globalisation receded from the beginning of the First World War until after the second one. In some ways it did. For instance restrictions were applied to labour movements – the big migration flows into the United States were virtually cut off in the 1920s- while capital movements were also restricted and trade suffered from the imposition of import controls and tariffs. There were even attempts to restrict ideas.
However distance costs continued to reduce. I recently attended a conference on Musicology where the topic for discussion was the first performance of the New Zealand Symphony Orchestra. Where did the players learn about full symphonic performance? Some may have travelled to Britain and heard symphony orchestras there. But many players had never heard a full symphony live before. The French horn player, for instance, had never heard a live orchestral performance featuring his instrument. However they had listened to gramophone records. Music had been transformed by the reduction in the cost of distance – in this case by the transportation of it in gramophone records. Perhaps it is not as good as hearing a live symphonic concert, but recordings are a viable substitute, and a lot cheaper and more practical than travel. (Our children are experiencing the same phenomenon when the download music from the Internet, which also reduces the cost of distance.) Radio, too, was enabling the transmission of information much more quickly. Films widened access to theatre. Motor vehicles were becoming more common through this period. So there were reductions in the cost of distances globalisation in the interwar era too.
Reducing the costs of distance in a region.
Given reductions in import controls and tariffs on manufactured goods, and the extraordinary change in the cost of distance, whether internal or external, kinds of globalisation have become more pervasive. Its effects can be seen everywhere.
You can see it clearly on the landscape in Taranaki. Once a map of the region was covered in about 100 dots which represented dairy factories. Initially it was costly to ship milk any great distance so the dairy farmer took the milk to the nearby factory. As the roading network improved, together with the introduction of bigger and more powerful tankers, the costs of distance became less important. Fewer factories were needed. Today throughout the Taranaki there are towns whose location only makes sense only in that once they existed to service the now defunct local dairy factory. The factory may still be there, but it is abandoned or converted to some other use – perhaps housing an antique dealer. What happened to the town when the dairy factory closed? For most workers the new factory was still close, perhaps an extra fifteen minutes drive and so the effects of redeployment was not great. They would still tend to use their local shops, and so much of the town’s other economic activity would remain. It would grow more slowly than it did, or even contract. But the factory closure would not usually cause an abrupt disruption to workers and inhabitants. People could cope with this regionalisation – this minor globalisation.
Reducing the costs of distance in a nation.
We saw how lower costs of distance in a region caused some disruption,. Consider an example of the effects of a reduction in the costs of distance in a nation. I use the example of a brewery, because once the costs of transport was so high every town had one – a bit like dairy factories in the Taranaki. Over time, they became concentrated into a single factory in each region. But the process did not stop there.
Not far from where I live in Wellington there used to be a brewery. Today it is a supermarket which sells beer manufactured in Hastings. Modern roads, modern tankers, and economies of scale in the production process mean that it is cheaper to manufacture the product in a single factory. The product is maybe cheaper for the consumer. But what of the brewery worker? Unlike the Taranaki dairy worker who could perhaps commute to work a short distance away, the shift of the brewery means the worker has to change locations or change jobs – a much less appealing prospect. Of course some workers may prefer to transfer to Hastings, and some may do so reluctantly and be pleased in retrospect that they did. While in no way diminishing the significance of the move, it is after all within the same national community. Even so many workers will be initially worse off from the local business closure and relocation.
But the nation as a whole may not be. More workers in Hastings get jobs, Hastings has more economic activity, and the tax the brewery and its workers pay still goes to the national exchequer. Consumers may be better off too, if the beer is cheaper (although there may be less competition). These gains offset (to some extent) the disadvantages to the individual worker and family. If the worker can be redeployed to a new job reasonably easily, the nation may be well pleased with the relocation of the business.
(In the discussion the issue of boutique breweries was mentioned. ‘Boutique’ suppliers arise where the economies of scale are not overwhelming and where there may be a demand for non-standard products or ones where there is a demand outside mass production – women’s fashion is an obvious example. However a boutique supplier may also depend upon lower national transport costs. There is a case to be made that consumer preferences for variety will see an increase in boutique suppliers for some, but not all, products and services – although of course many large scale suppliers will respond by diversifying their outputs. Even so the boutique supplier may be national or international, so that is no guarantee that a region or nation can compensate for a loss of a large scale business by the increasing the number of boutique suppliers.)
Reducing the costs of distance internationally
Now it might be that one day the Hastings brewery might close and the company beer might concentrate its beer production in Australia, say Sydney. The impact on the brewery workers – and the nation – would be more severe than the shift from Wellington to Hastings. The worker is much less likely to move to Australia than to another New Zealand city, and this time the fiscal revenue moves offshore too. Thus the niggling problems we saw with the impact on a region or a nation, become more serious when a business moves offshore.
Now the shift may not be in a single direction. New Zealand increasingly supplies milk products to Australia, so the Hastings brewery worker may find a job in a Taranaki dairy factory. There will be disruptions as the economy shifts out of some industries and increases its scale in others. But the situation need not be disastrous if the new industries are creating as many jobs as the old ones are destroying. Some sort of economic change is inevitable if we want higher standards of living and to take advantage of new industries.
Now I skip over here the sort of policies a country might pursue to ensure it gets a reasonable share of the world’s new jobs. The point is that we tend to look at business closures, and not see them as related to the business openings. We tend to assume that our location – wherever we live – will suffer from globalisation and all the benefits are elsewhere. That cannot be true for the whole world. And it was not true for New Zealand in the nineteenth century, for it was one of the major beneficiaries of the reduction of the costs of distance from telegraph, steamships and refrigeration.
Even so, globalisation – the consequences of the reduced costs of distance – tends to concentrate particular activities into particular places, and so that other places stagnate, contract, and even die. There are ghost towns – ghost regions – all over the world. But there are also nodes of growth. Auckland has been one (just ask anyone from Dunedin). The concentration can be regional, national or international, and so can the depletion. It has happened in the past; it is happening now; it will happen in the future.
A new sort of globalisation?
If globalisation is not new, is today’s globalisation different? No and yes. No, because there are regularities and similarities. It is not even clear to the historians that this time the process is faster than occurred in the nineteenth century, or involves more fundamental technological changes. But yes, because this time globalisation involves more of the world – the nineteenth century globalisation was largely confined to those of European descent and their colonies, and it also involves more economic industries.
We divide economic activity into the three divisions: primary and other resource industries (including forestry and fishing); manufacturing industries; and service industries. Why the distinction?
Primary industries are characterised by being close to the key resources they use. Manufacturers can choose whether to be near the resources they use or to the consumer, and their location will be question of balancing those costs, especially where there are strong economies of scale in the production process. Service industries have been traditionally characterised by where they need to be in relation to the customer.
This definition of service industries is breaking down. In some cases – tourism education, and medicine for instance – the customer can sometimes travel to the provider. Even more important, with the reduction in transporting information costs, some services need no longer need be near to where the customer lives. Books can be bought from a retailing outlet offshore via the world wide web. My computer help desk is based in Australia. When I book an air ticket the call centre might be anywhere in New Zealand, or even overseas. (Apparently call centres in India are developing where the operators talk with the customer’s accent and have access to you local weather conditions so that they can pretend to be where the caller is.)
As confusing as these changes are, however, they may be no more so than for those in the nineteenth century when production activities – such as a brewery – that had been local since time immemorial moved away.
And like the nineteenth century industrialisation globalisation, again the tiger is rampant and unleashed. People are going to suffer. Workers in whole industries, communities in whole regions may suffer, as happened 150 years ago. The challenge today is that which are ancestors took up them. Not a nostalgic attempt to reverse the untamed forces – to pretend they do not exist – but a vigorous effort to harness them for the community interest.
Is there a spiritual response to globalisation?
If we take up that challenge we can be guided by the success of our ancestors. Significantly they tackled the task with a strong spiritual belief. This time resistors might not all be Christians – as I have said this time the process involves more than just those of European descent so it seems likely other faiths will be involved too. Moreover, it seems likely that resistance will come from more than just the conventional religions, but there will be a strong spiritual element in it, motivated by a social concern which is more humane and human, more spiritual than the unbridled tiger produces. May we have the courage to take up the challenge.