Abstract Of Research Proposal for Marsden Fund Application 14 February, 2003.

Diminishing Distance: New Zealand in a Globalising World

Keywords: Globalisation & Trade;

Globalisation is the greatest challenge that economies and nations in the world economy face today. It impacts on where people can work and live, what jobs are available, where investment occurs, and the ability of the nation state to control its destiny – the very foundations of nationhood. It generates both prosperity and disruption, with an uneven impact. Globalisation is not new. It was as significant – some argue moreso – in the nineteenth century international economy. New Zealand is a response to that globalisation, and its destiny is intimately tied in with future globalisation.

There is a plethora of studies on the globalisation but very few attempt to define and study it in any rigorous analytic way. Instead, they usually accept some phenomena, policies, or institutions a fact and write about their implications. Why these phenomena occur are rarely considered. Instead this research proposal is premised on an analytic foundation that globalisation is the consequence of reductions in the costs of distance. Falling transport and related costs change where industry can function and where people can live. Their effects are reinforced by economies of scale (the increased market from lower distance costs enables the reaping of falling costs as production scale increases, and the concentration of production in fewer plants) and increased factor mobility (an increased ease with which capital, labour and technology can relocate itself geographically).

The intellectual novelty of this research proposal – the extraordinarily powerful analytic insight – is that there is an analytic analogy between the impacts of the costs of distance and the impact of tariffs, so that standard international trade theory can be modified (apparently with little loss of generality) to provide the foundation for analysis. However, advanced versions of the models are necessary. As well as incorporating economies of scale and factor mobility income, distributional implications have to be addressed, as does intra-industry trade (the same product is exported and imported between two countries as when Germans but Renaults and the French buy Volkswagens – about a quarter of world trade today is IIT, up from almost nothing 50 years ago). Recent research shows under these more general conditions, outcomes such as the location of industry between different nations may not be as determinant as in the traditional international trade models. (This has the very important policy implications of to what extent – and how – can a country exploit this indeterminism to its own benefit?)

Additionally, in the last decade economists have given increasing attention to institutional frameworks (such a laws) and common understandings (such as social trust) at the national level. This perspective extends to their international equivalents such as the IMF and the WTO, albeit they are early (and not always just and democratic) ones. Thus the analytic foundations provide the basis for the issues which are the popular concerns. It is possible that those foundations will also assist understanding of some non-economic phenomenon such as international diplomacy and military activities. Cultural impact is another dimension (the applicant has one paper accepted for publication on this topic), as is nationalism and ethnicity.

The project will publish further learned articles building on past work and contribute to public debate. However, the long run intention is to produce a book, tentatively titled Diminishing Distance: New Zealand in a Globalising World. Although the orientation for an international audience may result in a lower profile on New Zealand, the work will be continually informed by the particular perspective of New Zealand (whose experiences are especially illustrative of the globalisation phenomenon), together with the rigorous use of the underlying theoretical models.

The proposed structure of the book (which gives an indication of the research program and its coverage) is Part I: introduction; Part II: nineteenth and twentieth century globalisation; Part III: trade; Part IV: capital, investment, finance; Part V: labour mobility, diasporas, nationalism; Part VI: technology; Part VII: distributional issues; Part VIII: national sovereignty, taxation, regulation, policy independence (illustrated by the future of the welfare state); Part IX: supra-nationality, the future of sovereignty; Part X: responses – from national, community, and individual perspectives.