Paper for the Symposium “Institutions and Economic Development”, University of Otago, 18-19 March (Also draft of chapter for “Distance Looks Our Way”.)
Keywords: Globalisation & Trade; Political Economy & History;
Introduction
The Royal Society of New Zealand has awarded me a Marsden Grant to study globalisation. The ultimate output will be a book. This paper presents a draft of one of its chapters. Because it is a conference paper, it is necessary to say something about the context in which the chapter takes place. The study is based on five primary principles.
1. Globalisation is the economic integration of economies – regional and national economies.
2. Globalisation began in the early nineteenth century, so the phenomenon is almost two centuries old. Since globalisation an historical phenomenon, focusing on just the last few decades throws away a rich source of insights.
3. Globalisation is caused by the falling cost of distance: transport costs, plus the costs of storage, security, information, and intimacy. This gives a driver for the globalisation process. Costs of distance are a trade cost, like tariffs but larger. So one can use the economic theory of tariffs to model globalisation.
4. Globalisation is not solely an economic phenomenon. It has political and social consequences.
5. The policy issue is not being for or against globalisation, but how it can be channelled to give desirable outcomes.
Underpinning this analysis are some major developments in international (and regional) trade theory in recent decades, particularly with the addition of economies of scale. Currently the best exposition is The Spatial Economy: Cities, Regions and International Trade by Mashia Fujita, Paul Krugman and Anthony J. Venables. It a very exciting development because the new theory gives a geographical dimension to economics which thus far as been largely missing. We can now start thinking systematically about economic activity in space.
Unfortunately, the modelling becomes very complicated because of the mathematics which underpin economies of scale, It is frequently analytically intractable, and one has to depend on plausible simulations rather than pure mathematical intuition. The book I want to write is for a much wider audience than mathematically trained international trade theorists. How to get around the complexity?
Its structure is as follows. The Part I develops the Fujita, Krugman and Venables model, using a minimum of mathematics. Once the economic underpinnings have been established, the Part II of the book explores political and social consequences such as nationalism, sovereignty, policy convergence, cultural convergence, and diasporas. The Part III looks at various options for nations in a globalised world. To engage with the reader, each chapter is based upon a particular historical experience., typically focusing on a single country.
The book reflects the structure of the first course in economic history which I took. Each seminar appeared to be based upon a particular country or topic, but in fact each studied article was also chosen to raise a theoretical issue, giving the course a balance of economic theory, economic history, and geographical diversity.
The course was run by Barry Supple, then professor of economic and social history at the University of Sussex, but as one of the overseas guests at this Symposium. There are few greater tributes to a teacher than that a course taught almost forty years still resonates with one of its students. I present today’s paper in honour of that teacher. Those of you familiar with the University of Sussex of my, and Barry’s, time will recognise this is a very Sussex paper with a strong theoretical disciplinary underpinning, a broad range of interdisciplinary interests and, I hope, a little wit.
Here beginneth the first chapter of the Part II: ‘The Globalisation of Time: The Problem of the Meaning of Sovereignty’
Local Time and International Time
Five minutes after nine o’clock, Big Tom, the clock above the quad of the Oxford College of Christ Church strikes some 101 times, a signal to the 101 men of the original foundation that curfew begins. That time is set by the sun, rather than British Standard Time (a.k.a. railway time), for the sun arrives five minutes later at Oxford than Greenwich 100 kilometres to the east.
Two hundred years ago every locality had its own time, and such aberrations – if that is the right way to describe them – went unnoticed. Watches were not accurate enough, so arriving in a new town, the traveller would simply recalibrate its time against the town clock, just as we do today when we cross a boundary between time zones. Accuracy was not only infeasible but hardly necessary, Would it matter if a London visitor arrived five minutes early to a meeting in Oxford?
It would matter if it were the wrong day, so calendars developed thousands of years of years earlier. Our began Roman times – hence July and August after a couple of caesars. It was taken over by the Roman Catholic Church, with its present form settled by Pope Gregory in 1582. The Gregorian calendar was immediately adopted by Catholic countries, but others were more reluctant. Britain, afraid of a papist heresy, adopted it in 1752, Russia in 1917 after the Revolution.
A nice example of the confusion is that Shakespeare died on St Georges Day, 23 April 1616. But that is by the earlier, Julian, calendar. His Gregorian calendar date was 3 May, Not that it matters, the day is a convenient one to celebrate the man. (And who knows what day that St George died, assuming he ever lived.)
While God may be a mathematician, he or she was not particular interested in integers – not to mention elegant non-primes with many useful factors – when the orbit of the Earth was determined. The 365 days and a bit annual cycle, involves some calendar tinkering of which leap year is the best know, if the annual cycle is to reflect the movements of the sun and seasons (climate change aside), while the moon’s non-integer cycle is recorded but ignored. With divisors of only 73 and 5, the calendar divisions are complicated too. Computers use a daily measure, which they convert into the Gregorian Calendar for mere mortals.
In 1792, in the heady days after the French Revolution, the Republicans replaced the Gregorian calendar with one of 12 equal 30 day months, plus five or six extra days a year. Weeks were of ten days, which meant that rest days were less common (apparently increasing work intensity after the peoples’ revolution was not confined to the Soviets). Days were divided into 10 hours, of 100 minutes and 10,000 seconds. Napoleon returned France to the Gregorian calendar in 1806. He was not having any of his troops turn up on the wrong day for battle.
He, and other commanders, used clocks to coordinated troop movements. They did not need an international standard, but navigation did. By one of those curious twists of science – preceding Einstein’s notion of space-time by centuries – time became location, and accurate location required accurate time.
Any point on a globe requires two coordinates to uniquely identify it. The distance in degrees from the equator – the latitude – is relatively easily measured by using the height of the sun and a sextant. The second coordinate proved much harder to measure.
The natural second coordinate is the longitude, the great circle from pole to pole around which the earth spins. Various methods were used to determine which longitude a ship was on. Dead reckoning on the rough rude sea does not work, because the ship’s speed could not be measured accurately and there was drag from current and wind. Astronomical sightings were not accurate enough either. One can but marvel at the navigational achievements of the Polynesian and Viking seafarers.
Accuracy was important. It was not just a matter of calling into the wrong harbour on a coast, wrecking though that can be. The location of the sub-Antarctic Auckland Islands 460kms to the south of New Zealand (latitude 50’ 16” to 51’ 19” south: longitude 165’ 32” to 166’ 39” east) were at first plotted some 56kms out of position on maritime maps, despite the availability of chronometers. Ships sailing through the ‘furious fifties’ (the latitudes of 50 to 59 degrees south), confident of their navigational skills but hindered by poor visibility and bad weather, ran aground against the sheer basaltic cliffs on the western coastline, sinking the ships and travellers.
The eventual resolution to longitude measurement was an accurate clock, set on a particular longitude, transportable without error through heaving seas (or on a rolling mule’s back). By looking at its time at the local noon, the local longitude could be calculated. In Oxford the clock calibrated to Greenwich would show 12.05 at noon. Since the earth spun 360 degrees in 24 hours, or a quarter of a degree a minute, Oxford had to be 1.25 degrees (1′ 15″) to the west of Greenwich.
Clock accuracy was a big challenge. Eventually Englishman John Harrison constructed a sufficiently precise chronometer. James Cook’s expeditions confirmed its accuracy. Chronometers became standard on all ocean going shipping, reducing the costs of distance by providing more secure navigation and, usually, accurate maps. Telegraph, radio and satellites were to improve the accuracy even further.
This did not solve the problem of every town having its own time. A few minutes matter a lot when running a railroad. In 1853 fourteen people died when a couple of trains on America’s Providence and Worcester Line slammed into each other on a blind curve because, it was said, a conductor had a slow watch. Railways required a consistent standard time, although late nineteenth century French passengers faced three: station courtyard and departure lounges set at Paris time, platform clocks set to give the traveller a margin of error, and the local time outside in the town. For it took many countries almost to the end of the nineteenth century before they got a nation wide system of time.
Moreover, countries insisted on their own standard times, lacking international coherence. In 1897 France was 9 minutes and 21 seconds ahead of Germany despite being to its west. As telegraph cables ringed the earth the chaos could only increase. Given they transmit information almost instantaneously, once the convention had been agreed, they made its implementation simple.
As usual, international agreement did not come easily. International conventions setting scientific standards began in the mid-nineteenth century. The Convention for the Metre of 1875 was the first great one, the international standard being housed in France. In Washington in 1884 the World Time Conference set the prime meridian, from which longitude would be measured, at the Greenwich Observatory. In effect its sun time became world time, with each country able to set a local time (or times, in the case of long east to west ones like Canada, Russia or the United States).
While Greenwich time may seem natural today, the location of the prime meridian was bitterly fought over. Some of the proposals were nutty or nostalgic, but the science requirements reduced the choice to Berlin, London (Greenwich), Paris and Washington. The Germans, preoccupied with unifying their domestic time dropped out, and the Americans sided with London, thus releasing observatory circle for their Vice-President’s dwelling. The French argued vigorously and ingeniously for Paris (and also for the adoption of decimal time). But eventually 21 of the 24 countries at the convention favoured Greenwich, with San Domingo dissenting and Brazil and France abstaining. Factors such as that 70 percent of the world shipping already used Greenwich and its anti-meridian going through Baring Strait and not crossing land may have been persuasive (although it cleft in two the Pacific Islands which would become Kiribati).
Today, time and date are so routine with international commerce, science, and travel depending upon it, that we rarely give a thought to an earlier world in which there was little coherence of time and date. The same is equally true for standards of weights and measures. But in this routine, there is a question of national sovereignty.
International Time and National Sovereignty
The international establishment of the notion of sovereignty is often attributed to the 1648 Treaty of Westphalia. The core of its international governance system was the principles of the state and sovereignty. The world was divided into territorial parcels each to be ruled by a separate government. The state was ‘sovereign’, exercising comprehensive, supreme, unqualified, and exclusive control over its territory. ‘Comprehensive’ meant that the state had jurisdiction over all the affairs in the country; ‘Supreme’ meant that it recognised no superior authority; ‘Unqualified’ meant that its right to total authority over its territory was treated as sacrosanct by other states; ‘Exclusive’ ruled out joint sovereignty.
Of course the Westphalian order is a historical phenomenon, and it is not hard to see how these principles, including the implicit notion that the territories are eternal, have often been breeched. However globalisation means it may not be practical to exercise sovereignty in the way that was envisaged 350 years ago, in a world in which there was little international economic intercourse between sovereign states. We get a sense of the difficulty by considering the amount of freedom a country has to choose its standards of time, weights and measures.
Typically countries legally determine their standards, and have the de jure power to change them. A sovereign country could pass legislation enacting a different calendar. Some have their own calendars, although typically they are only used for ceremonial purposes. For practical purposes the Gregorian calendar is used. In any case, the two main exceptions – the Jewish and Moslem calendars – also have a seven day week cycle, so the practical translation is not difficult. There is a Chinese calendar, yin-yang li, which continues to have ceremonial significance – including the Chinese New Year being a day for the Chinese to celebrate their identity in Western countries. China adopted the Gregorian calendar in 1912.
In principle, any sovereign country could divide its day any way it wishes, but even the French have not adopted decimal time, because the conversion system to international practice would be too complicated – for the human mind (although computers find it a cinch).
The international convention allows time zones different from Greenwich time, but calibrated to it. In practice the difference is exact hours (or sometimes half hours) thus creating a set of time zones in the world. Again every country has the de jure power to use a different time standard from Greenwich Mean Time, just as Oxford did when it used sun time. In practice they do not. They may change the time in the time zone – as when the British switch to summer time – but the new time is always anchored to GMT.
(In 1995 Kiribati, fed up with the scattered islands divided into two days, decreed that the International Date Line would henceforth run along the many-cornered eastern boundary of the republic, giving the date line a very noticeable eastward protrusion from the 180 degree meridian, the antemeridian to Greenwich. There is no international convention for the date line. The de facto line is determined by the unilateral choices of time zone by those countries next to it.)
So whatever de jure powers a country may have, its de facto ability to set time, and weights and measures, is circumscribed by international practice. San Domingo may have voted against Greenwich Mean Time, but you may be sure that its time practices conform to it. Only a country completely isolated from the rest of the world could do otherwise.
An interesting exception is that a large country like the United States may have its own system of weights and measures. The US is one of the signatories of the Convention of the Metre, so it acknowledges the Paris based system. But domestically it uses the American standard foot, and its own distinctive volume and weights, albeit calibrated with the metric system.
Some countries waited until the twentieth century before adopting the International System of Units based on metre, kilogram, second, ampere, kelvin, mole, and candela. New Zealand did so between 1970 and 1976, the seven-year timetable aiming to reduce the cost of the transformation. The change, which caused considerable hardship to older people and expense to business, might have been justified by arguing that the metric system is intrinsically simpler than the imperial system. But, instructively, the justification for the decision to change was almost entirely on the necessity to keep in steps with overseas trading partners. While New Zealand has the de jure power to return to the imperial system or something else, its de facto powers over weights and measures is more limited as long as it wishes to participate in international intercourse.
Because it is larger, the US has more de facto sovereignty. Not only is the economy over a fifth of the world’s total production, but it exports only 10 percent of it, half the international average, so it is a much more self-sufficient economy. Even so, as one American industrialised drawled, ‘I export in metric: I import in American’.
Running two separate measurements systems can have its problems. The Mars Climate Orbiter spacecraft burnt up in the Martian atmosphere in October 1999 because the acceleration data for controlling its thrusters had been provided in pounds of force (the US standard unit) but entered into the space craft’s computer as newtons (the SI unit). Little information was obtained from the trip, so most of its $US240 million cost was wasted.
Some might argue that conventions on time, weights and measures have a scientific underpinning, whereas most conventions do not. The scientific underpinning is only to a degree. The Gregorian calendar has a host of cultural assumptions overlaying any science, which is why the French revolutionists wanted to abandon it.
But ‘non-scientific’ conventions are also necessary. Consider the aborted Multilateral Agreement on Investment (MAI). Any country which is accepting foreign investment, even reluctantly, needs a framework so that foreign investors know exactly what is expected of them.
Currently this is largely carried out on a country by country basis. Why not have a common set of rules? In 1995, the OECD Council tried to reach an agreement which would provide a broad multilateral framework for international investment with ‘high standards for the liberalization of investment regimes and investment protection and with effective dispute settlement procedures’. It was to be a free-standing international treaty open to all OECD Members, who are some of the main net investors, and to non-OECD Member countries who are typically the main net debtors.
Of course any country had the de jure power not to agree to such an investment convention, but had it been adopted, those concerned with effectively attracting foreign investment would have be unwise to opt out, since the potential investor would be deterred by the uncertainties that a different institutional arrangement generates. In practice a country might accede to the convention, with particular reservations, or offer a more generous deal to investors. But once adopted by sufficient countries the MAI would be the framework for all, even implicitly for those which stayed outside.
As it happens, the MAI was not adopted. The debtor countries dissented, and the OECD found there was not quite the internal consensus it had assumed. It is said citizen protest killed the treaty. This is probably an exaggeration, The likelihood is that a proposal for a broad multilateral framework for international investment will arise again, and if it is managed more sensitively than on the last occasion, it will be adopted by sufficient countries to force the remainder to accept the inevitable and accede to it too, with possibly some dissenters.
Typically the smaller economies face the an invidious position that any international convention does not meet all their needs, Individually and collectively they work to make it a better – less lopsided – arrangement. But in the end each has to judge whether the benefits of being in a bad agreement are superior to the detriments of not being in it. While this appears to be an exercise in de jure sovereignty, in fact there is much less choice.
Some big economies – characterised by being both large and high income – may have more de facto sovereignty than small economies should be no surprise. But even they have not the full de jure autonomy. Economic intercourse has some analogies to marriage. The sovereign individual takes on a relationship which reduces her or his sovereignty. He or she does so because they calculate that they are better off despite the loss of full sovereignty.
But entering into economic intercourse is not a one-off affair. Each sovereign country is continually entering into arrangements which limit its de facto sovereignty. Of course it has the de jure sovereignty to withdraw even where there is no explicit provision to do so. In practice such withdrawals are rare because it is better to be inside the tent than out.
But the arrangements may not be as fair to small countries as to the primary larger negotiators, even where there is one country one vote (as in the World Time Conference), or every country has a unilateral veto (as applies to most international trade negotiation rounds). It is the big countries who determine the agenda, Once the deal is agreed, the individual signatory has only the option of deciding whether it is better off in or out, not whether it is as well off as other signatories. If it judges there is a net benefit, it is likely to agree, signing away some more de facto sovereignty.
Conclusion
The globalisation of time shows that there can be practical reasons for a country adopting an international convention. Those reasons can be so strong that while there is a fig leaf of de jure sovereignty, the de facto reality is the country may have little option but to follow the international conventions over which has little influence.
Where will it end? Does globalisation mean that ultimately a country abandons all its sovereignty. This cannot be entirely true, for as the globalisation of time shows, there remains a rump over which the locals have some influence . How big is that rump, how significant is it? That question is explored in future chapters of the book.