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by Tane Woodley


What is deglobalisation, can it occur, and if it can, how might this affect New Zealand?

Since the 1980s there has been a growing consensus that a new age of global integration has arrived, one of steadily increasing political and economic amalgamation. Borders would be opened, and then abandoned, allowing the free movement of people, capital and goods. The powers of the nation-state would weaken, as vital economic decisions would be made elsewhere, while supra-national bodies such as the United Nations (UN) and the World Trade Organisation (WTO) made binding judgements on matters affecting national interests. Transnational issues such as climate change, terrorism and the mobility of capital would create problems too big for nations to deal with. States might even give way under this onslaught, and become irrelevant or extinct. Technology supported this trend, partly through the growth in telecommunications use and information technology, and partly through faster and more reliable means of transporting goods and people in ever greater numbers. Trade volumes increased greatly, as did the speed and size of the global financial markets. This was all seen to be as inevitable as it would be beneficial, at least by many corporate leaders, economists and politicians. Thomas Freidman, the New York Times columnist wrote about “…the inexorable integration of markets, nation-states and technologies to a degree never witnessed before”. [1] At a UN conference in 2000, Kofi Annan stated “It has been said that arguing against globalization is like arguing against the law of gravity.” [2] Tony Blair, a staunch proponent of globalisation wrote as recently as this year that “Complaining about globalization is as pointless as trying to turn back the tide.” [3]

And yet, is this actually the case? Is globalisation as unstoppable as it seems? The inevitability of globalisation might be the received wisdom of our time, a consensus among a wide range of experts and commentators. But received wisdoms have been wrong before, from the belief that the sun orbited the Earth, to the theory that the inevitable march of history would result in a proletarian revolution and the creation of a worker’s paradise. Stephen Toulmin wrote that “…the existence of a consensus is one thing: the soundness of this view, the reliability of the historical assumptions on which it depends, are something else.” [4] Consensus concerning globalisation may have been achieved, but just how sound are the assumptions on which this has been built?

The aim of this paper is to analyse the mechanisms of how globalisation is achieved, whether these can be reversed, and if they can, what the effects might be on New Zealand. For reasons of space I will not be discussing the merits of globalisation and whether it is a positive or negative force; its benefits and costs are outside the scope of this paper. To achieve this aim, I will outline the nature of globalisation, and look at its history, requirements and outcomes. I will then discuss the nature of deglobalisation, assess whether it has ever happened in the past, and whether it may reoccur. This will include an examination of the causal factors of deglobalisation. I will then discuss New Zealand’s situation in the world and what exports and imports it relies on. Finally, I will look at how any deglobalisation that does occur may affect us. Globalisation might be the way of the future, but then again, it might not. Few things in this world are truly inevitable, and it may be that globalisation is not one of them.

In order to discuss the nature of deglobalisation, we must first consider globalisation. There are many definitions, but the one I’ve chosen is from Charles Tilly, who wrote;

«Let us first get globalisation right. Each time a distinctive set of social connections and practices expands from a regional to a transcontinental scale, some globalisation is occurring.» [5]

I’ve chosen this definition because it moves the debate about globalisation from one of right or wrong, to a discussion of what it actually is. Concentrating on globalisation as a set of social connections and practices covers more than just the economic and political dimensions that most current definitions are based on. A further advantage of Tilly’s definition is that it also defines deglobalisation, which shall be stated later in this paper.

Tilly analyses three main waves of globalisation. [6] The first started around 1500, when Europeans began their great voyages of discovery while the Chinese and Arabs expanded into the Indian Ocean and throughout Southeast Asia. The Ottomans extended their empire across the Balkans and the Middle East. The first truly global trading network was established in this time, as European ships sailed between their home ports, the Americas, Africa and Asia, crossing the Atlantic, Pacific and Indian Oceans. This first wave established trading networks, and in some cases lead to the migration of significant numbers of people, such as the European settlement of the Americas. [7] The second wave of globalisation took place from 1850-1914, expanding the networks already established. The development of the European and Japanese empires formed the world into a smaller number of states, bringing huge areas under the control of a single political, legal and economic system; the map below shows the situation in 1900, where a handful of nations control most of the earth’s surface;


Map sourced from http://history.binghamton.edu/hist130/maps/1914.htm


This time there were huge movements of people, as tens of millions emigrated, often to other continents. [8] Using their military, industrial and organizational power to the fullest, Westerners established their dominance over every part of the world. The trade and economic networks were massive, carried by a huge fleet of steamships and trains, making it possible to transport bulk goods across the world for the first time in history. [9]
The third wave of globalisation began after the end of the Second World War, and continues up to the present day. Intercontinental migration is proportionately lower than the previous wave, but movement is faster with the advent of airliners and new communications technologies. Capital in particular has developed the ability to flow around the world quickly and in huge quantities. [10] Trade has also increased greatly, [11] while companies have expanded, leading to a rise in the number and size of multi-national corporations. Political integration has progressed too, with the establishment of a large number of multilateral organizations such as the UN. Civil society has expanded to the global level, with the creation of worldwide NGOs such as Oxfam and Greenpeace, while cultural trends, products and jargon have spread around the world, mainly from the United States.

If globalisation is happening, then the question is what makes this possible? What gives humans the ability to carry out these activities on such a scale? Four factors are needed for globalisation to occur, some of which have already been mentioned. They are;

  1. Faster, more reliable, more extensive international transport
  2. Faster, more reliable, more extensive international communications
  3. Greater movement of goods, people and/or capital
  4. Opening of borders, the relaxation of government controls, and multilateral agreement

Each of these factors is relative, in that they only need to be more extensive and widespread than what went before, rather than meeting some absolute requirement. They are also inter-connected. Improvements in communications and transport are needed to make it physically possible to establish and maintain the expanded ‘social connections and practices’ that Tilly discussed, whether these be trade and business networks, government control of far-flung colonies or the communications of private citizens with friends and family. This may then result in an increase in the movement of goods, people and capital, and the establishment of transcontinental connections. Open borders and the relaxation of government controls allow these networks to be made, and these policies are maintained by multilateral agreement (sometimes enforced, sometimes agreement by absence of action, but agreement nonetheless). These factors are neatly summed up by Eric Hobsbawm, who wrote “…this has … been made possible both by technological revolutions in transport and communication, and by the lengthy period of free movements of the factors of production over a vast area of the globe… This has also led to a massive wave of international and inter-continental migration…” [12]

Transport is a vital component of globalisation, and has been a key factor in all previous waves. Trans-oceanic ships had been developed before 1500, such as the longships used by the Vikings to settle Greenland and Iceland, or the waka used by the Polynesians to settle the Pacific. But these societies lacked the resources to turn their maritime prowess into truly global networks. The Europeans managed to do this, partly through ships that were superior to those of the Vikings and Polynesians, partly because they had the population and resources to sustain their expansion. The galleons, brigs, clippers and steamships of Europe led to an increase in shipping capacity, range and speed. This allowed a steady increase in the quantity and types of goods transported, the number of locations that these could be traded from, the numbers of people who could emigrate and the speed with which this could be done. Without these ships, followed in time by continental railroads and passenger aircraft, globalisation as we understand it would have been impossible. Today these networks are sustained by huge fleets of ships, aircraft and freight trains, which move vast quantities of goods and large numbers of people every day.

Communications are the second key element driving globalisation, especially in the present time. Anthony Giddens, an advisor to Tony Blair, stated “If there’s one element driving globalization, it’s communications.” [13] He’s referring to the increasing range and scale of communications networks, from satellite links to fibre-optic cables to the increase in wireless internet access to the use of cell-phones and laptops. These devices build on previous advances. Sailing ships carried messages to the East Indies in a year where before it had taken several to travel by land. The telegraph sent signals across North America in days, instead of six months by ship. The telephone further increased the speed of point-to-point communications and the range of possible recipients. The result of this continual advance has been the ability to maintain contact with an ever more widely dispersed network of people, whether for business or pleasure. This ability to integrate the activities of people on different continents has made globalisation as we understand it possible.

For globalisation to occur, people need to make use of any advances in transport and communications. In the past they have done so, in many ways and from many parts of the world. They have left their homes to seek better lives in other countries, often on the other side of the world; New Zealand history since 1830 is a prime example of this. Goods (and now services) are also moving globally. In ancient times these were small, luxury products such as spices, silk and perfumes. The improvements in transport made it possible to move bulk items like sugar, cotton and tobacco by the end of the 17th Century. Now our trade networks are transporting raw timber logs, mineral ores and bulk grain. [14] This increase in the volume and range of goods has happened because people have seen opportunities to do business, and have seized them. As a result world trade has expanded massively, with world exports rising from $308 billion in 1950 to $3,554 billion in 1992 (in 1990 dollars). [15] Equally impressive is the rise in the volume of capital moving across national borders. The daily turnover in foreign exchange markets has increased from $15 billion in 1973 to $1.5 trillion dollars in 2005. [16] Organised crime syndicates have exploited globalisation to smuggle drugs, weapons and people on a mass scale. Transcontinental networks are established to procure, transport and then distribute contraband. These networks are held together by often very sophisticated communications. Every conceivable method is used to transport their ‘cargo’; airliners, cargo ships, trains, trucks, postal systems, speedboats and more besides. The profits of these illegal industries are huge; the annual trade in women for sex is between US$7 and US$12 billion dollars alone, [17] while the international drug trade is valued at $321 billion a year. [18] The UN estimates that 6-800,000 people are trafficked annually. [19] Profits are then laundered through the global banking system, as this is the only way such vast volumes of money can be ‘cleaned’ and then legally used.

The final component of what makes globalisation possible is agreement amongst governments, about the openness of borders and trade. Sometimes open borders are forced on nations, as happened to China during the two Opium Wars. [20] Today most nations open their borders fairly willingly, and volunteer to join multilateral institutions such as the WTO, which currently has 149 members. [21] While there are some exceptions to this rule (such as North Korea), most nations today take part in multilateral events, whether through the United Nations, at WTO trade talks or in regional forums such as the European Union, ASEAN and Mercosor. [22] Defence arrangements such as the North Atlantic Treaty Organisation (NATO), sporting links such as the Olympic Games, and treaties on the use and division of the seas, airline routes and space are also facets of globalisation, as governments allow and regulate the increasing connections between nations.

If globalisation is the expansion of a “…set of social connections and practices … from a regional to a transcontinental scale”, then what exactly is deglobalisation? Tilly defines deglobalisation as;

«Each time an existing transcontinental set of social connections and practices fragments, disintegrates or vanishes, some deglobalisation occurs.» [23]

Tilly’s definitions of globalisation and deglobalisation sit side by side, as the two processes are happening simultaneously, with expansion of some practices and the fragmentation of others. If expansion is happening faster than fragmentation, then we are globalising. If the reverse is happening, then we are deglobalising. What can cause deglobalisation? In a reversal of those factors leading to globalisation, the main factors causing deglobalisation are;

  1. Anything that stops, slows or reduces international transport
  2. Anything that stops, slows or reduces international communications
  3. Anything that prevents the movement of goods, people and/or capital
  4. Anything that closes borders, and results in a reduction in multilateralism

Any of these deglobalising factors can happen, and they often do. Transport speed, capacity and range can be reduced by the closing of transit routes during wartime, fuel shortages (due to wartime restrictions or oil shocks) or a downturn in the global economy such as the Great Depression. Communications networks can be reduced by the wartime cutting of telecommunications lines and jamming of broadcasts, regulation and censorship of content [24] or the failure of trans-oceanic cables or satellite link-ups. The movement of people, goods and capital can be curtailed by the reduction in transport and communications, but can also result from the closing of borders, increasing regulation of immigration, the erection of trade barriers, capital controls and conflict between or within nations. [25] The willingness of governments to allow transcontinental connections can vary depending on whether this is perceived to be in the nation’s (or the ruling elite’s) best interests.

Globalisation should not always be regarded as an inevitability. John Ralston Saul, in his book The Collapse of Globalism makes the case that the world was more globalised in 1914 than it is now. He notes that prior to World War One, Europe was integrated to an unprecedented degree; taking Germany as an example, she was the best customer of Russia, Belgium, Italy, Norway, Holland and Switzerland, the second best of Britain, Sweden and Denmark and the third best of France. She was the primary supplier to Russia, Italy, Romania and Austria-Hungary and the second largest to Britain, France and Belgium. Germany had 1.25 billion pounds in foreign investments, a vast sum for the time. [26] Through their extensive empires, the merchants and bankers of the European powers were able to freely and easily invest almost anywhere in the world. [27] Ralston Saul also discusses the openness of the borders, quoting John Maynard Keynes who wrote that “The inhabitant of London … could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality…” (Saul’s emphasis). [28] What people took for granted then is inconceivable now, the passage of international borders without passports. [29] Even where visas are not currently required (the European Union or between Australia and New Zealand) this is restricted to citizens of certain nationalities. [30] There was mass movement of people within Europe as well; British accounts of the First World War often mention German soldiers who worked in Britain before the war, some of whom would ask after the English soccer results during lulls in the fighting! [31] Like today, this integration of trade, culture and economics was seen as inevitable and desirable. It was thought this would make full-scale war impossible. Norman Angel, a British activist wrote in 1911 that “…international trade and finance has become so interdependent and so interwoven with trade and industry that … political and military power can in reality do nothing”. [32] Yet of course, despite the greatly integrated nature of the world economy in 1911, political and military power did reassert themselves in 1914, and among other things, proved conclusively that deglobalisation can occur.

The First World War fragmented or destroyed many of the transcontinental connections established in the previous 70 years. Transport links were cut (trans-European railways, or the Allied naval blockade of Germany) or interdicted (German U-boat operations against Britain). Communications were similarly affected, with the cessation of direct mail and telegram services across Europe and the sheer difficulty of maintaining commercial and personal ties with enemy citizens. The movement of goods, people and capital was interdicted as a result, and passports became a requirement for entry into other nations. [33] Investments in enemy countries were forfeited on all sides, especially German and Austrian ones. And the greatly integrated economy of pre-war Europe was forced to reform itself, each nation needing to become more self-sufficient, as essential products and goods that had once come from the enemy had to be produced at home. [34] While there were some steps forward in terms of globalisation (such as the faster development of aircraft), the First World War marked a period of deglobalisation, and the end of one of (if not the) most integrated periods in human history.

So if deglobalisation is possible, and has actually happened previously, what factors might cause a reoccurrence in modern times? I believe that there are four inter-related potential causes for deglobalisation in the short to mid-term (2-20 years). They are;

  1. An increase in international trade barriers
  2. Global energy shortages
  3. An increase in nationalism/regionalism, and unilateral action, and
  4. Increasing conflict

These factors are linked and can reinforce one another. Nationalist governments might see it as in their interest to break multilateral trade agreements and raise tariffs, or global energy shortages might lead to conflicts over energy resources.

The international trade system is a centrepiece of the current globalising trend. The idea is that global markets, freed of narrow national interests by deregulation and privatisation of public assets, will increase the levels of real wealth around the world by creating ‘waves of trade, which will ‘in turn unleash a broad economic tide of growth’. This growth would then ‘raise all ships, including those of the poor’. [35] Ultimately, according to the globalist theory behind this push for increased trade, everyone would be free and prosperous, poverty would be eliminated and conflict would be ended. The WTO states on its website that among other things, trade will “…result [in] a more prosperous, peaceful and accountable economic world.” [36] Governments therefore need to lower their trade barriers, allowing foreign companies into their home markets, and companies need to make use of the improved communication and transport networks to operate on a global scale. This is largely what has been happening, as the growth in trade has shown. Companies and corporations have been growing in size and scope, merging with former rivals and diversifying into other areas, in order to cope with the vast scale of these new global markets. [37] Multi-national corporations are, and continue to be, strong forces for pushing regional social connections and practices up to a transcontinental level. Companies previously operating at the national level find new opportunities overseas, and may be forced to by their opposition, which often now include foreign companies moving into their home markets. One example of this is Fonterra, which owns leading local brands in Chile and Australia, as well as a number of recognised global brands (such as Anchor and Anlene); its five biggest international brands are worth US$330 million. It trades in 140 countries and has production facilities in thirty-five. [38]

With the increase in global trade has come a vast increase in the inter-connectedness of the world economy. But trade does not always go forward, especially if people begin to doubt that increasing trade will lead to increasing real wealth around the world. Protectionism has a longer history than that of free trade, and can be revived in the right circumstances. Politicians can and will raise barriers if they perceive this to be in their nation’s interests. [39] The recent collapse of the negotiations in the Doha Round of the WTO trade talks is an indication that trade is not all-powerful. While this is not a retreat from the current level of trade, it is a stumbling block to further growth and the resulting globalisation that this would bring. Pro-trade advocates, such as The Economist, are concerned that this collapse might founder the entire trading system; “In the long run, the lack of commitment to multilateral trade that sank the Doha round this week will also start to corrode the trading system as a whole.”, and “…this week’s debacle constitutes the biggest threat yet to the post-war trading system.” [40] Pascal Lamy, the Director General of the WTO, after the breakdown in negotiations warned that “Failure would also send out a strong negative signal for the future of the world economy and the danger of a resurgence of protectionism… We have missed a very important opportunity to show that multilateralism works.” [41] The WTO and The Economist are concerned that the lack of support for a multilateral agreement will adversely affect world trade by leading to more bilateral and regional treaties, which will start to compartmentalise the world. Barriers might be reduced between countries and within regions (such as the European Union) but will remain high to outsiders. And as The Economist points out, “…the more bilateral deals are in place, the harder it will be to pull of a multilateral one.” [42]

Other recent barriers to trade have been the imposition by the United States of tariffs on steel products (up to 30%) in 2002, which sparked a major trade dispute with the European Union, [43] Chinese tariffs on car parts, [44] and continuing disputes about US and EU subsidies for their farmers. Another hindrance to trade is the (re-)emergence of Buy Local campaigns around the world, aimed at increasing consumption of domestic goods and services. These campaigns have the potential to reduce the demand for foreign goods and services, and may have a negative impact on trade, though at present their effect seems negligible. New Zealand is restarting such a campaign, while the United Kingdom, United States and other countries have something similar. [45] The issue of food miles is one further potential impediment to trade, and is linked with Buy Local campaigns, especially in Europe. Food miles track the amount of energy required to produce food, from the ‘plough to the plate’, including transport inputs. [46] New Zealand has been especially targeted, due to the long distance from Europe and, possibly, because of its success in European markets. The food miles issue has some validity, but as a recent study points out, New Zealand producers use less energy than their European counterparts, even including the transport inputs. That this might be true is less important however, than the possibility that food miles might be used to bar trade, as local farmers exert their political influence to stop competitive foreign produce. [47]

Trade doesn’t appear to be slowing down, despite the stalling of the Doha Round. Nor do trade disputes, Buy Local campaigns or government restrictions seem to be able to slow or stop the growth in trade. However the potential does exist that trade can stall or even retreat, and that if it does, the opportunities for people and corporations to reach across national borders will be reduced, supply/demand links may be broken and deglobalisation will occur. At present this is not a likelihood, but the possibility remains.

If globalisation depends heavily on transport to operate, that transport in turn requires inputs. A key input for transport of all forms is energy. Most cargo ships, freight trains and long-distance trucks, and all aircraft, rely on petroleum products to power their engines. The United States consumes about 20 million barrels of oil a day (25% of world production), two-thirds of which is used by the transport sector. [48] In New Zealand, 85% of oil use is for domestic transport. [49] Any sustained increase in the price of fuel or any decrease in its availability will have a large and negative impact on the transport systems that globalisation relies on. The ‘canary in the mineshaft’ is the aviation industry, where fuel makes up approximately 40% of operating costs. Aviation kerosene averaged US$0.55 a gallon in January 2002, rising to US$1.02 in January 2004, and sitting around US$2.15 in August 2006. [50] This is being passed onto consumers in the form of fuel surcharges and fare increases, such as Air New Zealand’s 10% increase in May 2006. [51] Some airlines are already struggling. [52] Airfares are still affordable to most people in the developed world, but a sustained price rise will begin to put them beyond the reaches of an increasing proportion of the population. Fuel costs for other modes of transport are also rising, especially truck transport, for which fuel is a large component of the operating cost. [53] This in turn is hitting manufacturers and producers with increased costs, making it more difficult to conduct business over longer distances. The fuel price has not risen as high as it did during the oil shocks of the 1970s, so the impact has been less noticeable. [54] But a sustained price rise would result in a degree of deglobalisation, as imports become more expensive.

The question is, what might cause this price raise? There are two main potential causes. One is geopolitical, either the use of oil as a political weapon or the effects of conflict on the production and transport of oil. The second is the phenomenon known as Peak Oil, the theory that oil production will peak, and then fall into an inexorable decline.

Oil is a strategic commodity for every nation in the world. Desperate for oil, both Germany and Japan specifically targeted oil-rich regions in World War Two. [55] President Carter, faced with the Iranian Revolution and the Soviet invasion of Afghanistan in 1979, declared that the United States would use “…any means necessary, including military force”, to keep the oil flowing from the Persian Gulf. [56] This became known as the Carter Doctrine, and was used to authorise the US escort of oil tankers during the Iran-Iraq War and the deployment of US troops to Saudi Arabia during the 1990s, for the first Gulf War and beyond. [57] In response to the 1973 Arab-Israeli War, Arab oil producers imposed an embargo on the US, which produced the first oil shock, [58] quadrupling the price and leading to a global recession. The second oil shock in 1979, caused by the Iranian Revolution and the loss of its oil production, resulted in a near tripling of the price. [59] The oil shocks hurt producers as much as consumers, by encouraging conservation and production in the rest of the world, which collapsed the oil price in the 1980s. As a result, oil has not been used as a political weapon since. This situation may change, as oil producers note the very tight supply situation, reflected in an oil price hovering between US$60-75. In recent months, Iran has come under a lot of pressure regarding its nuclear programme, but one factor in everyone’s minds is that Iran produces 5% of the world’s oil, and covers the Straits of Hormuz, through which 20% of the world’s oil flows. [60] The Saudi ambassador to the United States, Prince Turki Al-Faisal stated in June 2006 that a conflict with Iran would send prices spiralling upward; “The idea of somebody firing a missile at an installation somewhere will shoot up the price of oil astronomically.” [61] Armed with missiles, mines, submarines and warships, Iran could block the Straits for a considerable period. The threat alone would stop oil tankers sailing, as insurers refuse cover to such vulnerable and expensive ships.

In addition to the use of oil as a geopolitical weapon, there is the effect that conflict has on oil production. Oil infrastructure is inflexible, dispersed and in many cases, fairly fragile. [62] Pipelines in particular are very hard to protect, and very easy to damage or destroy. Any conflict in an oil-producing area will invariably reduce oil production, as infrastructure is damaged, skilled technicians are evacuated and investment evaporates. Oil is a prime objective in conflicts. In many nations, the oil industry is such a valuable resource that the local elites have a large stake in it, making it a valid and key target for rebels and opponents. [63] Nigerian production has suffered over the past two years due to attacks by bandits, strikes and resistance by disenfranchised locals. This has lowered oil production by 10-25 % on occasion, and the situation is steadily worsening. [64] Iraq is another example, where pipeline and refinery attacks are common. Iraq has never fully recovered from the First Gulf War; she produced 2.8 million barrels per day (bpd) in 1989, slumping to 0.46 million bpd in 1994, before reaching 2.6 million bpd in 2000. [65] Since then Iraqi production has dropped down to 2.0 million bpd, [66] and is hovering between 2.1 and 2.47 million bpd. This instability in oil producing nations has put a ‘security premium’ on the price of oil, one analyst putting this at US$25 a barrel. [67]

Peak Oil has gained an increasing amount of attention in the last two years, as the price of oil has climbed. Because oil is a non-renewable resource, the rate of exploration and discovery of new fields rises to a peak, and then falls away as humans discover all that can be discovered. This in turn will lead to a rising rate of production from the discovered fields, which will then drop away once the fall in production from existing fields is no longer matched by the addition of new fields coming on line. This has been observed at the level of individual oilfields and nations; US discovery peaked in the 1930s, followed by a production peak in 1970. The above graph, shows this on a world scale, noting that global discovery of new fields peaked in the late 1960s, and has continued to decline since. That peak production will happen on a global scale is no longer disputed; even optimists such as the International Energy Agency predict a peak in global production. [68] The debate is now about when it will occur, and what the effects will be.

Peak Oil isn’t about the end of oil, rather it is about the end of ‘cheap oil’. Our current social, economic and political arrangements rely on vast quantities of petroleum, currently 80 million bpd, demand for which is increasing roughly 2% per annum. There has to be sufficient supply to meet this demand and keep the price low, otherwise the laws of supply and demand will lead to a huge price rise. Without cheap, affordable oil, our society and economy cannot function in its current form. Humanity has passed the point where it is discovering as much as is being consumed; we are now relying on what has been found in previous decades to fuel current consumption. One important point to note is that peak production generally occurs when half the oil that will ever be extracted has been produced. Marion King Hubbert, the geologist who devised this theory used it to predict the US peak in 1970. When he made his prediction in 1956 he was ridiculed, but in 1973 he was vindicated when it became clear to everyone that US production was irreversibly declining. [69] Hubbert’s theory has been used to predict when global peak production would occur; the range is from 2005 to 2037 or even 2065. Most of the ‘pessimists’, mainly geologists, tend to put it prior to 2015. The optimists, primarily economists and politicians, opt for the later dates. [70]

Adjustments can be made in response to a sustained increase in the price of oil, but these are expensive and extremely disruptive, as the oil shocks of the 1970s proved. Thirty years later, the world is more reliant on oil than ever. [71] Oil is used extensively in agriculture, especially in the developed world, and is used to transport food from the farm to the table everywhere. Any shortfall will lead to food shortages and potential famines. This will increase globalisation to a point (increased demand for foreign foodstuffs to supplement domestic production), but will likely be exceeded by a matching shortage of transport fuel to move bulk stocks of food long distances, or to even grow them in the first place. Most people believe that technology will solve the issue for us, but all of the proposed alternatives have serious flaws as potential replacements, and even combined, it is difficult to see how they can do so. [72] One factor that escapes most people is that any post-petroleum energy source will have to be built using oil-powered machinery. But this is unlikely to happen until the market signals demand it, and by that stage oil will be in short supply and hugely expensive. [73] So the replacement system for oil, all the production facilities, distribution networks and the machinery that will use this new fuel, will not be built and ready when they are actually needed. If Peak Oil does arrive sooner rather than later, if there are no real alternatives and if even the limited alternatives are not in place, then it is hard to see how this can be anything other than extremely disruptive, not just to globalisation, but to humanity as a whole.

A sustained energy price rise, whether due to geopolitics or a geologically imposed shortfall, will have dire effects on globalisation. Transport networks will become more expensive, and this will reduce the incentives and opportunities to create and maintain them. There will be more incentive to focus on home markets, to reduce transport costs, and as foreign competition disappears. People will find their lives more constricted, with fewer opportunities for international travel and fewer opportunities to maintain relationships. Many businesses, either exporting to foreign markets, or relying on foreign suppliers, will collapse or be forced to contract. As transport is a key factor in globalisation, and this becomes much more difficult, then globalisation itself will begin to reverse. A global energy crisis would almost certainly create a great deal of deglobalisation.

Since the mid-1980s, it has been fashionable to assert that the nation-state is receding and that it is becoming less relevant in the face of globalisation. In 1990 Eric Hobsbawm wrote that the future will “…see ‘nation-states’ and ‘nations’ or ethnic/linguistic groups primarily as retreating before, resisting, adapting to, being absorbed or dislocated by, the new supranational restructuring of the globe” (My emphasis). [74] In 1995 Kenichi Ohmae published End of the Nation-State, and in 2000 Jean-Marie Guehenno published the rather similarly titled The End of the Nation-State. [75] On the face of it the evidence seems to support this assertion. Nations were signing away powers and rights to multilateral bodies such as the IMF, binding themselves with international treaties, and allowing multi-national corporations to conduct business across their borders with impunity, even when this caused some degree of economic pain for sectors of their community. Capital controls were relaxed, and now foreign direct investment moves in and out of most countries with ease. There has been more emphasis placed on multilateralism in international affairs, on UN resolutions to legitimise national actions (such as the sanctions on Iraq in the 1990s) and on alliances to give the appearance (if not always the substance) of multinational operations.

While this may be true, there are also signs emerging of a reversal in this trend, that the nation-state is not going to disappear into the annals of history, but is rediscovering its power. Long written off as a defunct and dated force, nationalism is making its reappearance around the world in both negative and positive ways. The result is a step back from multilateralism, an increase in unilateral action and an increase in regionalism. The latter might seem contradictory, but small and medium size nations lack the strength to act unilaterally, so banding together with neighbours to protect each others interests makes sense. While this is still a multilateral arrangement, it is a step back from globalisation, with nations concentrating their political and economic energies within regional blocs.

Nationalism was the prime cause of decolonisation, which broke up the European empires after World War Two, a key component of the previous era of globalisation. Even as Eric Hobsbawm was writing about the fading importance of nationalism, the peoples of Yugoslavia, the Caucasus and Eastern Europe were busy showing that it was still something of primary importance, even worth fighting and dying for. Having gained their freedom, the last thing that the nations of Eastern Europe were interested in “…was melting their new nation-states into continental or global systems that might weaken, as opposed to strengthen, their national authority’. [76] When ten of these nations joined the EU in 2004, they did so to protect their independence, not to surrender it to a European federation. [77] The wars in the Balkans were an extreme assertion of nationality, peoples who had lived fairly peacefully with each other for decades now killing each other because of ethnicity. And in the Former Soviet Union, ‘autonomous’ republics took the opportunity to free themselves from Russian control, again dividing along national and ethnic lines. These newly independent nations have been eager to acquire the trappings of modern statehood, including membership of the United Nations, NATO and the WTO, but are determined to set their own course. An example of this is the Eastern European stance on Iraq. Their military contribution to the ‘coalition of the willing’ is as much about independence from Russia, Germany and France as it is about building democracy, fighting terror or improving relations with the United States. [78]

Nationalism is also expressing itself through an increasing degree of unilateralism in other parts of the world. The US response to the 9/11 atrocities is a good example of this. The US used UN Security Council Resolution 1441 to legitimise the invasion of Iraq in 2003, but this was attacked by opponents of the war as giving insufficient authority for the use of force. Regardless of this, the US and Britain invaded, citing the urgent need to find and destroy Iraqi weapons of mass destruction (WMD). The legality of this action is not relevant to this paper; that the US felt that its interests were better served by independent action without a clear UN mandate is. As Colin Powell said, “We will act even if others are not prepared to join us.” [79] At the same summit that Powell made this comment, Mahathir Mohamed ‘rightly boasted of Malaysia’s success following a national regulated model’ in response to the ‘Asian crisis’ of 1997. When the international money markets collapsed the currencies of several Asian nations, including Malaysia, Mohamed’s government had successfully responded with capital controls, tariffs and other ‘protectionist measures’ that were anathema to the tenets of globalisation. [80] Similarly, negotiations for the Multilateral Agreement on Investment were halted by the OECD in April 1998, when national governments began to perceive that this would bind them without binding the private sector. [81] In Chechnya, the Russians refuse to allow international peacekeepers and aid agencies into what they regard as a domestic (national) matter, while the Chechens are fighting for their own nationhood. Nations also push back globalisation by breaking up international criminal syndicates trafficking across borders. While this is a never-ending task, the repression of these criminal networks creates deglobalisation by breaking transcontinental/international connections. In his book, The End of Globalism, John Ralston Saul makes a strong case that the nation-state is not dead, and is in fact reviving itself in many different ways around the world. By raising trading barriers and capital controls, by acting unilaterally, by retaining power within the state, the nations of the world are resisting the advance of globalisation, and demonstrating that they have the ability to ‘turn the clock back’, to deglobalise if this is in their national interest.

The final potential cause of deglobalisation in the modern world is conflict. This can be seen in the rise in the price of energy due to conflict in oil-producing nations, in the increased border controls imposed to combat the threat of terrorism and in the increased insurance rates shipping lines must pay through waters such as the Straits of Hormuz. Conflict can cause all of the factors that lead to deglobalisation (as experience from the two World Wars shows). Fighting can force transport to be routed around warzones, increasing costs and voyage times, it can destroy transport assets and it can also raise energy prices. Communication networks can be destroyed by the fighting, blocked or censored by the combatants and by increasing xenophobia. The movement of goods, people and capital is curtailed by border controls, fighting, lawlessness (endemic in many warzones) and the seizure of property. And governments and groups that are fighting are less likely to take part in or abide by multi-lateral accords of any type, especially if it might favour their opponents.

There are many examples of how current conflicts are causing deglobalisation. The ‘War On Terror’ is the most obvious. This ‘war’ has in many ways been created by globalisation, and is being fought by globalised means. The need to protect energy sources in the Middle East led the West to support dictatorships in all of the major oil producers, provided those governments ensured a steady flow of petroleum. [82] When US troops remained in Saudi Arabia following the first Gulf War, these reasons gave Al Qaeda sufficient cause to mobilise support in order to directly target the US on a large scale. Using the communities of Muslim emigrants spread throughout the West (a result of the post-1945 migrations) for cover and support, Al Qaeda used global transport and communications networks to move people, funds and equipment across the relatively open borders of the 1990s. This resulted in the devastating attacks in Africa, New York and Washington, Madrid and London. Global media networks are being used by both sides to spread their respective messages. The response has been strong, and while Iraq and Afghanistan have captured most of the attention, there have been impacts on transport, communications, borders and multi-lateralism; as Al Qaeda and its allies have used globalisation to their advantage, so the response has included deglobalising measures. The United States has greatly increased security checks at its airports and cargo ports, which has been attributed to the acceleration in the decline of visitors since 2001. [83] US government agencies are eavesdropping on private phone conversations and e-mail messages, authorised under new anti-terror laws such as the Patriot Act. [84] While this is unlikely to prevent mass use of telecommunications networks, it is a sign that governments can and will control the information passed along them. Unilateral US actions in Iraq were preceded by the invasion of Afghanistan in 2001. Though generally supported by the international community, this did not have the backing of a UN Security Council Resolution. Meanwhile, Al Qaeda continues to operate, discovery of one operation causing severe disruption to the aviation industry in August this year. [85] Any expansion of this ‘war’ can only cause further setbacks for the project of globalisation.

One example of a potentially deglobalising conflict is the dispute over the Spratly Islands in the South China Sea. The Chinese government estimates there are up to 130 billion barrels of oil in this region, potentially larger than the fields in Kuwait. [86] China, Taiwan and Vietnam claim the entire archipelago, while The Philippines, Malaysia and Brunei claim sections. Japan and South Korea are also concerned, as this is the primary route from the Persian Gulf for most of the oil they consume. [87] Since 1988 there have been a number of armed clashes which are relatively minor, but they demonstrate the seriousness with which these nations regard their claims to the islands. [88] None have withdrawn their claim, nor has the dispute been resolved, although in 2002 an ‘agreement on conduct’ was signed by all parties. [89] While this is an improvement in the situation, it doesn’t resolve the matter. An escalation in the conflict would result in a closing of this vital shipping route, disruption to the airline routes through the region, closure of the combatant’s borders and control of communications networks. Multilateral institutions, such as APEC (to which all the claimants belong) and ASEAN would be adversely affected. Japan and South Korea would certainly become involved in a matter of extreme national interest, and the US would likely come to the aid of its allies. While an escalation is unlikely in today’s climate, this can change, and the South China Sea has the potential to be, among other things, an example of how conflict can cause deglobalisation.

In any discussion of deglobalisation, some mention should be made of the ‘anti-globalisation movement’. Made up of a loose and amorphous grouping of NGOs, the movement is difficult to define, and has therefore been defined by the media and its opponents rather than its advocates. [90] The movement includes organisations specialising in economic issues, human rights, the environment and other prominent international social movement claims. [91] “In the media, the movement is portrayed as being violent, and as a collection of splinter groups with no discernible direction and no general consensus on what it wants to achieve.” [92] The common image is of the ‘Battle of Seattle in 1999, or the protests outside the various WTO, G-8 and World Economic Forum summits that necessitate heavy police presences. Yet a closer examination of these groups shows that what they are protesting against is not globalisation as such; most of these groups freely use the open borders, transport and communications networks on which globalisation depends and which make many of their operations possible. Rather they tend to focus on the economic and social justice aspects of globalisation. The general demand is for some form of global justice which better divides the increased wealth created by the economic growth of the past 60 years. James Harding uses the term ‘counter-capital’ rather than anti-globalisation, and writes that the movement “…have coalesced around the base notion that capitalism has already gone too far and could go further, to the detriment of society as a whole”. [93] If globalisation is confused with a neo-liberal agenda for free trade and an increased role for capital, then ‘anti-globalisation movement’ may be an accurate name. But if globalisation as a term is divorced from this interpretation, and simply seen as the expansion of social connections and practices from a regional to a transcontinental scale, then counter-capital is a more accurate title. In summary, it appears to me that the ‘anti-globalisation movement’ is misnamed, and is not agitating for deglobalisation as the term applies to this paper.

If deglobalisation can and has occurred previously, a key question for New Zealanders is how this might affect our country if (and when) it happens again. What might be the impact on our society, our economy and our relationship with the rest of the world? What do we need from overseas and what do we export to pay for this? The short answer is that the potential impacts depend on the circumstances; what factors are causing this particular bout of deglobalisation, where, how and by whom? New Zealand has been faced with deglobalising trends before. Depressions in the 1890s, 1920s and 1930s greatly reduced demand for New Zealand exports. Both World Wars affected our ability to export goods. [94] Trade barriers have been erected, in 1971 when Britain joined the European Economic Community (EEC) and by the US in 1999, with tariffs on lamb exports. The oil shocks of the 1970s raised the costs of exports and imports. These case studies can be useful in determining what the potential effects of any future bout of deglobalisation might be.

Like other members of the OECD, New Zealand is deeply integrated into the world economy. Governments in the 1980s and 1990s rejected any concept of self-sufficiency in favour of a reliance on our ‘comparative advantage’ in certain industries. New Zealand would develop superior products in its chosen industries, exporting these to pay for imported goods, resulting in an approximate balance in trade. The range of goods imported into New Zealand is huge; petroleum, machinery, vehicles, steel, furniture, toys, books, fertilizers, grain, salt and a host of other products. The proportion of imported goods in certain key markets is also huge; in 2001 New Zealand spent NZ$890 million on pharmaceuticals, [95] of which NZ$780 million was imported. [96] In 2003, New Zealand produced 49 petajoules of oil but imported 218 petajoules. [97] In 2005, New Zealand imported a net total of NZ$6.45 billion in machinery. [98] While New Zealand is a net food exporter, in the important category of cereals, it is a net importer; in 2003, New Zealand farmers produced 320,000 tonnes of wheat, but the nation imported an additional 330,000 tonnes. [99] Most of New Zealand’s exports are primary products; the four biggest earners are dairy, meat, tourism and timber. New Zealand is therefore reliant on overseas suppliers to provide it with most of the machinery, manufactured materiel and energy to maintain an industrialised society and economy.

New Zealand is isolated in geographic terms, with very long distances to almost all of its export markets. It takes 3-4 days for a cargo ship to reach Australia, 12 days to reach Singapore, 14 days to reach Los Angeles and 28 days to reach Europe. [100] New Zealand is heavily reliant on trans-oceanic shipping to import and export goods; almost 85% of exports by value, and over 99% by volume, are carried by sea. For imports, around 75% by value is carried by sea and over 99% by volume. [101] Airlines are also important to New Zealand, particularly for tourism. In the year to December 2005, 2.4 million tourists arrived in New Zealand (almost all by air), and spent NZ$2.96 billion dollars, nearly equalling export earnings from fisheries, horticulture and wool combined. [102] As discussed above, these transport networks are vulnerable to increases in the price of energy, though the price rises of the last three years have not yet had a great impact on tourist numbers or export volumes.

The 1970s were a difficult time for New Zealand. In 1961 Britain announced that it would seek full membership of the European Common Market. [103] At that time, New Zealand sent 91% of its butter and 94% of its cheese, lamb and mutton to Britain. [104] The loss of this market to New Zealand would have been catastrophic, as these constituted nearly 50% of its total exports. [105] Britain joined the Common Market in 1971, cutting the open access that New Zealand had enjoyed, and exports to Britain declined from 35.9% in 1970, to 14.2% in 1980. [106] At the same time, the first oil shock slowed the world economy and raised transport costs which hit New Zealand particularly hard, due to the long transport routes and the fact that 61% of its energy came from oil. [107] Though New Zealand’s economy grew strongly in 1973 and 1974 on the back of high commodity prices, from 1975 the loss of our main market and the effects of the oil shock dropped growth substantially. [108] New Zealand’s balance of payments declined from a net surplus in the early 1970s to a substantial deficit later in the decade. [109] The combination of high energy prices and trade barriers during this time is a useful case study of the effects of these factors of deglobalisation on New Zealand. The impact was hard, as the recession of the 1970s and early 1980s showed. New Zealand’s response took several forms. To combat the effects of high energy prices, the government implemented the ‘Think Big’ programme, borrowing heavily in a bid to become more self-sufficient in energy. This aimed to produce synthetic fuel, on the assumption that oil prices would remain high. When they slumped in the 1980s, the programme became an expensive failure, and a key element in the financial crisis of 1984. But that slump in the oil price proved to be a great boon to New Zealand, making exports more competitive, and improving the balance of payments. The deglobalising effects of the oil shocks proved to be minimal, as the highest price spikes were short-lived, and New Zealand was able to continue trading competitively. The response to the loss of the British market had a more profound effect, and started in the early 1960s. There were persistent efforts to diversify the economy, with the opening of new embassies and consulates, especially in Europe as part of the EEC negotiations. [110] New markets were sought, such as the USSR, China and Iran, while existing ones, such as Japan, were enlarged. [111] Australia went from 4% of exports in 1960, to 12.6% in 1980. [112] New goods were marketed, such as kiwifruit, casein products and fresh fish. [113] The loss of the British market resulted in a greater degree of globalisation, as New Zealand businesses, supported by the government, sought new markets around the world. A key factor in this success was the change in attitudes, as neo-liberals gained influence, and persuaded foreign governments of the benefits of free trade. [114] Whether New Zealand’s efforts to open new markets would have been so successful without this is uncertain.

Given New Zealand’s dependence on trade, a sustained and comprehensive increase in international trade barriers would be devastating. The imposition of tariffs on lamb by the US in 1999, ‘set off alarm bells’, as the US was the fourth biggest market for this valuable export. [115] The collapse of the Doha Round raises the possibility that small countries like New Zealand will suffer, as they will no longer be able to ‘piggyback’ on the negotiating clout of more powerful nations. [116] Market access may also be lost to ‘Buy Local’ or ‘Food Miles’ campaigns. New Zealand also stands to lose if trade wars break out between the major trading blocs, or if those blocs further tighten controls on what can be imported. New Zealand’s responses to future barriers will be the same as its response to Britain’s entry into the EEC; diversification of product and export markets, allied with strong lobbying of countries through diplomatic channels. New Zealand has already proven that this can work, but it is a never-ending task, as the changing political situation in other nations changes their markets.

Much more difficult to contend with would be a sustained rise in energy prices. The shocks of the 1970s were bad, but the most extreme price rises were short-term, and were followed by a price collapse in the 1980s and 1990s. New Zealand’s reliance on foreign oil is high, and its ability to affect the world price is non-existent. The Ministry of Economic Development (MED), by its own admission, no longer meets the requirement to keep 90 days of imports in emergency stocks. [117] The second oil shock demonstrated the vulnerability New Zealand has in its reliance on foreign energy. Meanwhile, oil use in this country continues to rise each year, while domestic production continues to drop. In 2004, investment banker Chris Stone said the ‘current high oil prices’ would have a major impact on New Zealand. Stone predicted that sustained oil costs of $US35 a barrel would wipe about $3 billion a year off New Zealand’s annual GDP. The costs will be borne across the whole economy, as “Very few industries can do without transportation.” [118] The price has been above US$35 for more than two years now, and despite the recent drop, does not look like it will ever go back to that level. AMP Capital estimated that each US$10 increase in the price of oil “will knock 0.5% from world growth, 0.5% from New Zealand growth and add 0.8% or so to inflation within a year.” [119] In a report on the implications of the Iraq War, Treasury stated that the effects on New Zealand would include lower demand for New Zealand goods (especially in tourism), lower export prices and higher import prices. [120] There has been some validation of this prediction, with slower growth around the world, and a general weakening of the world economy. Tourist numbers continue to increase in New Zealand, partly because of the ‘safe destination’ image, but the higher airline fares may act as a disincentive to potential visitors. A sustained oil price rise, to the region of US$80-100 could be expected to lower tourist numbers substantially and lower export earnings, while raising international transport prices and the cost of imported fuel. The latter has already begun to eventuate; ‘Mineral Fuels’ were 6.31% of New Zealand’s imports in 1990, 9.02% in 2002 and 13.71% in 2006. [121] New Zealand’s responses to this are fairly limited, and potentially drastic. Individuals can economise on fuel costs, by using their cars less, maintaining them better, cutting back on other spending, telecommuting and using public transport. [122] Many businesses will be forced to cut back, or may be driven under as market conditions change; tourist operators, trucking companies and airlines are particularly vulnerable. Government responses are given by the MED, and include education programmes, more flexible work hours, reduction in speed limits, carless days and potentially, rationing. [123] These are short to medium term responses. A longer term price rise, consistent with Peak Oil theory, would need solutions such as investment in rail and shipping, development of alternative fuels and a re-ordering of New Zealand society; less car-bound, more local and slower. The long-term effects on New Zealand’s trading situation are also uncertain. It may not be economic to supply markets in Europe, so a greater emphasis would be placed on the Asia-Pacific region. Vital manufactured goods, like pharmaceuticals, would need to be produced locally, or sourced from within the region, especially from Australia. What couldn’t be locally produced or imported would have to be substituted, or simply done without. A global energy crisis would re-impose the tyranny of distance on New Zealand, and have a truly deglobalising impact on it.

Increasing nationalism and unilateral action could be expected to have a minimal impact on New Zealand, except where it raises barriers to New Zealand exports or leads to conflicts that directly affect New Zealand’s interests. As a small nation, New Zealand is a strong supporter of multilateral institutions such as the UN, and sees any weakening of these organisations as a weakening of its international position. It is therefore seeking to join multilateral organisations where this is advantageous, particularly in the Asia-Pacific region. Helen Clark stated this year that “The case for engagement with Asia is obvious…. Asia provides half of our top twenty export markets, and is a major source of our tourists … According to most future projections, Asia’s economic dynamism will continue.” [124] Efforts to establish stronger links with Asia can be difficult though, as many Asians do not perceive New Zealand to be a part of Asia: Mahathir Mohammed said last year that “I have always opposed the idea of Australia and New Zealand being in the [East Asian free trade] group, simply because Australia and New Zealand are not really East nor are they Asian.” [125] Perceptions like this may block or slow entry to Asian markets, markets that New Zealand is likely to need. With Europe and North America forming trading blocs, Helen Clark noted, “…the burgeoning East Asia group is one that New Zealand cannot afford to be excluded from. If there's going to be three big regions, we've got to be linked somewhere.” [126] If the world moves toward regionalism in trade, the potential for this to cut New Zealand’s trade links rises.

The main way in which nationalism could affect New Zealand would be through conflict. The Iraq war has already raised oil prices. Conflicts in the Asia-Pacific region, especially in the South China Sea, would result in severed trade routes, interdicted or closed markets and broken communications links. A US attack on Iran would result in an oil shock and the loss of a useful market. The chances of New Zealand being directly involved in a conflict are minimal, given our geographic position, lack of military strength and general neutrality. Instead the effects of conflict would be felt through a drop in tourism and exports, a rise in the cost of imports (due to oil price and insurance increases) and potentially the loss of vital imports, particularly oil, which may not be available in the quantity needed. Migration might rise, as people seek a safer place, and see New Zealand as a potential ‘bolt-hole’, while export earnings might possibly increase, as food becomes more valuable at a time when other nations may struggle with agricultural production. The conflicts that would affect New Zealand the most are a war in the Persian Gulf (most likely over Iran, though a revolution in Saudi Arabia is also a possibility), in the South China Sea or a global conflict (very unlikely). Conflict does not always involve force, and may be ‘fought’ with diplomacy and trade. Even a ‘bloodless’ conflict such as this could have an adverse effect on New Zealand, as the raising of trade barriers and the flaunting or ignoring of international law ‘gets innocent bystanders’. As with energy, there is little that New Zealand can do. Contributions to peacekeeping forces, an insistence on international law and multilateral institutions and maintaining a neutral status may be all that is possible. A flexible and clear foreign policy, backed by the development and maintenance of a skilled and useful defence force, would be of great value in letting New Zealand play a role in conflict prevention and in post-conflict peacekeeping; peace-making is likely to be beyond New Zealand’s capabilities in all but the most low-level of conflicts. [127]

This paper has assessed the factors causing deglobalisation, and the likelihood that it might happen in the near-to-medium term. After the collapse of the Berlin Wall, globalisation seemed a certainty. 17 years later, the old orthodoxy about the benefits of free trade are foundering, and countries are beginning to form local trade blocs and bilateral trade agreements, excluding outsiders. Potential energy shortages are becoming more likely, as oil exploration fails to find new sources, existing wells deplete and demand continues to rise. Nationalism and unilateralism are undermining the reputation and efficacy of international treaties [128] and multilateral institutions. And there has been a steady rise in the number of conflicts around the globe, including international terrorism. Some of these conflicts have the potential to affect the entire world, something not seen since the bipolar world of the 1980s.

However, despite these factors, it is clear that the world is not currently deglobalising. New trade treaties are being negotiated and signed. Goods, people, information and capital continue to move freely around the world. Trade is still open, and many countries have fairly liberal trade policies. [129] While energy prices are rising, they do not appear to have had an appreciable impact on the trend to globalise. Yet while this is correct, it seems that the rate of globalisation is slowing; the world is still making transcontinental connections faster than they’re being broken, but the rate is less than it was five or ten years ago. The failure of the Doha talks is one indicator of this, as is the increasing unilateralisation of international affairs. The US still appears to be considering a strike on Iran’s nuclear facilities, regardless of international support. While some facets of globalisation continue unabated, such as the increase in international air passengers, this rests on a fragile foundation, as rising oil prices put pressure on carriers who will eventually have no choice but to pass these costs on to customers. The same is true of the freight and shipping businesses. This may change, as the factors encouraging globalisation continue to hold sway, and as transcontinental links are created faster than they’re broken. But the potential for deglobalisation is greater than it has been since the end of the Second World War. For New Zealand the effects of deglobalisation are likely to be mostly negative. Isolated from vital markets and suppliers, New Zealand benefits from an integrated world and cheap transport. If these are degraded, it is likely that New Zealand’s economy and social structure will also be negatively affected.

Whether globalisation is a net benefit or a cost is uncertain, and depends largely on the viewpoint of the observer. What is certain is that it is not certain. Globalisation has reversed course before, and will likely do so again. The best that can be done is to acknowledge this simple truth, to keep a close eye on international developments, and to make contingency plans for this eventuality.









  1. Quoted in John Ralston Saul, “The Collapse of Globalism and the Reinvention of the World”, Penguin, London, 2005, p19

  2. Kofi Annan at the 53rd Department of Public Information/Non-governmental Organisation Conference, UN Website, available at http://www.un.org/dpi/ngosection/annualconfs/53/sg-address.html

  3. Tony Blair, Newsweek: Issues 2006

  4. Toulmin is discussing the history of modernity here, but the point about received wisdom is still valid. Stephen Toulmin, “Cosmopolis: The Hidden Agenda of Modernity”, University of Chicago Press, Chicago, 1992, p13.

  5. Charles Tilly, “Social Movements 1768-2004”, Boulder, London, 2004, p98

  6. Ibid, p99

  7. Sometimes involuntarily, like the 6.3 million African slaves forcibly transported to the Americas.

  8. Tilly notes that three million Indians, nine million Japanese, ten million Russians, twenty million Chinese and thirty-three million Europeans emigrated from 1850-1914. Charles Tilly, op cit, p99

  9. An example of this is the boast by a British economist in 1865 that “The plains of North America and Russia are our corn fields; Chicago and Odessa our granaries; Canada and the Baltic our timber forests; Australasia contains our sheep farms, and in Argentina and on the western prairies of North America are our herds of oxen; Peru sends her silver, and the gold of South Africa and Australia flows to London; the Hindus and the Chinese grow tea for us, and our coffee, sugar and spice plantations are all in the Indies. Spain and France are our vineyards and the Mediterranean our fruit garden; and our cotton grounds, which for long have occupied the Southern United States, are now being extended everywhere in the warm regions of the earth.” Quoted in Paul Kennedy, “The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000”, Fontana Press, London, 1988, p194

  10. John Ralston Saul, op cit, p21 and pp77-79

  11. “Since 1950 world trade has multiplied — depending on whose numbers you use — between twelve and twenty-two fold.” John Ralston Saul, ibid, p21

  12. E.J. Hobsbawm, “Nations and Nationalism Since 1780: Programme, Myth, Reality”, Canto, Cambridge, 1990, p174

  13. Anthony Giddens, quoted in Ajay Singh, ‘Blair adviser: the truth about globalization’, UCLA Today, 22nd November 2005

  14. A look at the Wellington Port along Aotea Quay will show that unprocessed logs are big business, while bulk carriers also call into New Zealand to carry iron sand away for smelting in Japan and China.

  15. David C. Korten, “When Corporations Rule The World”, Kumarian Press and Berrett-Koehler Publishers, USA, 1995, p18

  16. John Ralston Saul, op cit, p 21

  17. V. Spike Peterson, ‘A Critical Rewriting of Global Political Economy’, Routledge, London, 2003, p107

  18. This is the retail value. United Nations Office of Drugs and Crime Report, ‘2005 World Drug Report’,

  19. Trafficking is very hard to measure, and figures are at best an estimate. There are 127 source countries, and 137 destination countries. United Nations Office of Drugs and Crime Report, ‘Trafficking in Persons: Global Patterns, April 2006’, p17 and pp44-45

  20. Opium was a major trade good for the West, seeking high-quality Chinese goods such as tea, silk and porcelain. The Chinese understandably tried to close their borders to it, resulting in the two Opium Wars of 1840-2 and 1856-1860. The Chinese lost, and were forced to accept opium for decades to come. John Ralston Saul, op cit, p44

  21. Taken from the front page of the WTO website at http://www.wto.org/.

  22. The Latin American trade pact

  23. Charles Tilly, op cit, p98

  24. Such as Chinese controls on Google and other internet search engines.

  25. Though conflicts can also increase the movement of people, as refugees, sometimes to other continents.

  26. John Maynard Keynes, “The Economic Consequences of the Peace”, MacMillan & Co, London, 1920, pp14-15

  27. “The inhabitant of London could order by telephone, sipping his tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend.” Ibid, p9

  28. John Ralston Saul, op cit, p9.

  29. “The rising popularity of rail travel in the mid-19th century led to an explosion of tourism throughout Europe and caused a complete breakdown in the European passport and visa system. In answer to the crisis, France abolished passports and visas in 1861. Other European countries followed suit, and by 1914, passport requirements had been eliminated practically everywhere in Europe.” Taken from the Canadian Government webpage “History of Passports’, at http://www.ppt.gc.ca/about/history.aspx.

  30. And as Saul points out, a few transborder incidents and the passport checks of previous years could all be back. Op cit, p 10

  31. Stanley Weintraub, “Silent Night: The Remarkable Christmas Truce of 1914”, Great Britain, 2001, pp113-6

  32. John Ralston Saul, op cit, p20

  33. “… by 1914, passport requirements had been eliminated practically everywhere in Europe. However, World War I brought renewed concerns for international security, and passports and visas were again required, as a “temporary” measure.” Taken from the Canadian Government webpage “History of Passports’, at http://www.ppt.gc.ca/about/history.aspx.

  34. Examples of this are the uniform dyes used by the French Army and optical lenses for British gun sights, which in 1914 had come from Germany, while the Germans were forced to develop a new way of obtaining nitrates as these had previously come from Chile (largely in British ships) and were now blockaded. The Germans developed the Haber-Bosch process, which has now become the source of 99% of the world’s nitrogen fertilizer, initially as a means of producing high explosives for the First World War.

  35. John Ralston Saul, op cit, p15

  36. Taken from the WTO website at http://www.wto.org/english/thewto_e/whatis_e/inbrief_e/inbr00_e.htm

  37. An example of this is Ford and General Motors, who previously dominated the US automobile market, and are now facing stiff competition from Japanese and European car companies operating in the United States.

  38. Information taken from the Fonterra website ‘About Fonterra’ information page, at http://www.fonterra.com/default.jsp.

  39. Such as the Smoot-Hawley Act of 1929, a raising of tariffs by the US in response to the Great Depression. Often blamed as a key factor, though this is disputed. John Ralston Saul, op cit, pp46-47

  40. Editorial, The Economist, 29 July 2006, p11

  41. WTO Press Release, 24 July 2006, available at http://www.wto.org/english/news_e/news06_e/mod06_summary_24july_e.htm.

  42. Editorial, The Economist, 29 July 2006, p11

  43. Reuters, ‘European retaliation against US steel tariff may start next week’, New Zealand Herald, 25 November 2003, and Hon. Jim Sutton, Press Release: New Zealand welcomes United States lifting of steel tariffs, 5th December 2003

  44. ‘China Car Parts Row Taken To WTO’, BBC News, 15th September 2006

  45. There are too many sources to cite here, but a simple Google search on the words ‘buy local’ will reveal dozens of websites, especially American ones.

  46. Saunders, Barber, Taylor, Research Report 285: Food Miles — Comparative Energy/Emissions Performance of New Zealand’s Agriculture Industry, Lincoln University, July 2006

  47. Such as the efforts of Australian growers to keep New Zealand apples out of their markets. New Zealand Press Association, ‘Fireblight Report To Be Released This Afternoon’, New Zealand Herald, 1st December 2005

  48. Robert L. Hirsch, “Peaking of World Oil Production: Impacts, Mitigation, & Risk Management, March 2005, aka ‘The Hirsch Report’, p4

  49. Ministry of Economic Development, “New Zealand Energy Data File: January 2005”, Chart D.1f, p42

  50. Thought the price on 12th September had dropped to US$1.81. Figures taken from the US Energy Information Agency, ‘US Jet Fuel Data webpage’, at http://www.eia.doe.gov/oil_gas/petroleum/info_glance/jetfuel.html.

  51. Roeland van den Bergh, ‘Fuel Bill Weighs Heavy For Air NZ’, The Dominion Post, 15 September 2006

  52. Chris Isidore, ‘Northwest files for bankruptcy’, CNN Money.com, 14th September 2005

  53. Janet Ginsburg, ‘The Pain of Fuel Surcharge Shock’, Business Week Online, 28 April 2005.

  54. Following the Iranian Revolution, in 1980 the average price was US$35.69. In 2004 dollars, that equates to US$82.15. BP Statistical Review, “Oil - crude prices since 1861” page

  55. Japan went to war in 1941 following the imposition of an oil embargo; one of her major objectives was the oilfields of the Dutch East Indies. Germany aimed for the Caucasian oilfields; in 1942 this led to a campaign that culminated in the disaster of Stalingrad. Richard Heinberg, “The Party’s Over: Oil, War and the Fate of Industrial Societies”, New Society Publishers, Gabriola Island (British Columbia), 2003, p69

  56. Michael Klare, ‘Blood and Oil: How America’s Thirst For Petrol Is Killing Us’, Penguin, London, 2004, p4

  57. A primary factor in the increasing levels of anti-Americanism in Saudi Arabia, which Al Quada has tapped quite successfully. Ibid, p27

  58. Richard Heinberg, op cit, p 72

  59. The average price of oil in 1973 was US$3.29; following the oil embargo in 1973 it rose to US$11.58, a rise of 351%. In 1978 the average price was US$13.60, but after the Iranian Revolution of 1979, the oil price rose to US$35.69 in 1980, a 262% increase. BP Statistical Review of World Energy June 2005, “Oil - crude prices since 1861” page

  60. Stefano Ambrogi, ‘Navy pledges to safeguard Hormuz Strait, Reuters, Mon Jul 3, 2006

  61. ‘Iran War 'could triple oil price', BBC News, 21st June 2006.

  62. There is a set process to extract and refine oil into usable products; this process can’t be sidestepped. Facilities to do this may be dispered over considerable distances, even continents.

  63. See Michael Klare, ‘Resource Wars: The New Landscape Of Global Conflict’, Henry Holt & Co, New York, 2001, and Michael Klare, ‘Blood and Oil’

  64. ‘Nigerian oil fuels Delta conflict’, BBC News, 25th January 2006, and ‘More oil kidnappings in Nigeria’, BBC News, 14th August 2006

  65. BP Statistical Review, “Oil Production — barrels” page

  66. US State Department ‘Iraq Weekly Status Report: 13 September 2006’, p21, and ‘Iraq Oil Production Hits A New High’, BBC News, 26th June 2006

  67. Steven Hargreaves, ‘Pumping the Fear Factor Out Of Oil’, CNN Money.com, 21st August 2006

  68. Though not until 2037.

  69. US production peaked in 1970; peak is only clear after the fact. Kenneth S. Deffeyes, “Hubbert’s Peak, The Impending World Oil Shortage”, Princeton University Press, Princeton, 2001, p1

  70. Colin Campbell (ex Texaco and Amoco) and Jean Laherrere (ex Total) are both retired oil exploration geologists. They put peak production in the first decade of this century; prior to 2010. Colin J. Campbell and Jean H. Laherrer, “The End of Cheap Oil”, Scientific American, Volume 278(3), March 1998, p81

  71. Some commentators argue that we are less reliant on oil, as oil per unit of GDP has declined since 1970. This is correct, but this actually makes us more vulnerable, not less. If we are getting more GDP out of each barrel, then more GDP will be lost per barrel that is no longer available. A taxi in 1970 might use as much petrol as two hybrid cabs in 2006; all else being equal, in 2006 twice as much GDP is being generated. If that quantity of petrol is unavailable in 2006, now two cabs will be idle, not one, two drivers will be unemployed, not one.

  72. See Chapter 4 of Richard Heinberg, ‘The Party’s Over’, for a comprehensive dismantling of the case for alternative energy sources as replacements for oil.

  73. The oil shocks of the 1970s, and the First Gulf War all showed that when there is even a 2-5% shortfall in supply, the price of oil skyrockets in a very short time, days and weeks, rather than the decades needed.

  74. This ‘supranational restructuring of the globe’ is of course a reference to globalisation. E.J. Hobsbawm, op cit, p182

  75. Kenichi Ohmae, ‘End Of The Nation State : The Rise of Regional Economies’, Free Press, 1995, and Jean-Marie Guehenno, ‘The End of the Nation-State’, University of Minnesota Press, 2000

  76. John Ralston Saul, op cit, p234

  77. Poland, Hungary, Slovakia etc, all have a history of domination by Russia and Germany. This is what they wanted to avoid in future. The other great advantage of joining the EU is economic. Ibid, p237

  78. As of August 23, 2006, nations contributing armed forces to the Coalition in Iraq included: Albania, Armenia, Azerbaijan, Bosnia-Herzegovina, Bulgaria, Czech Republic, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Macedonia, Moldova, Poland, Romania, Slovakia and the Ukraine. US State Department ‘Iraq Weekly Status Report: 13 September 2006’, p28. See also John Ralston Saul, op cit, p235, for why these nations are in Iraq.

  79. “On occasion, our experiences, our interests, will lead us to see things in a different way. For our part, we will not join a consensus if we believe it compromises our core principles. Nor would we expect any other nation to join in a consensus that would compromise its core principles. When we feel strongly about something, we will lead. We will act even if others are not prepared to join us.” (my emphasis) Colin Powell, Speech to the World Economic Forum, 26th January 2003

  80. The Malaysians saw this as a political crisis, and acted accordingly, using the full range of political and economic controls in their own national interests. John Ralston Saul, op cit, p161, p164 and p223

  81. Ibid, p163

  82. Support to Israel is more complex than a simple need to protect energy sources, but is linked with Western strategy in the Middle East.

  83. William Kay, ‘US Asks: Where Have All The Tourists Gone?”, The Dominion Post, 20th September 2006, pB5

  84. ‘Bush defends phone-tapping policy’, BBC News, 19th December 2005. Other nations, such as the United Kingdom and Australia have similar laws.

  85. ‘Travel chaos as flights cancelled’, CNN.com, 10th August 2006

  86. Michael Klare, ‘Resource Wars, p 119

  87. Ibid, p111 and p117

  88. In 1988 China sank three Vietnamese ships, killing 72 sailors. Since then, China has also seized several islands and fired on Filipino ships, Taiwanese troops have fired at Vietnamese ships, and Malaysian vessels have attacked a Chinese ship. Ibid, p124

  89. ‘Declaration on the Conduct of Parties in the South China Sea’, 4th November 2002

  90. David O’Connell, ‘What To Make Of The Anti-Globalisation Movement’, Red and Green, Vol 3, 2004, p37

  91. Charles Tilly, op cit, p 118

  92. David O’Connell, op cit, p 39

  93. David O’Connell, ibid, p39

  94. Though this was mitigated by Allied naval power

  95. Researched Medicines Industry Association of New Zealand, ‘Health Facts 2001/2002’ p28

  96. Statistics New Zealand, New Zealand External Trade Statistics June 2006, page ‘Tab 3.02’

  97. Ministry of Economic Development, “New Zealand Energy Data File: January 2005”, Table D.3, p49

  98. ‘Machinery’ and ‘Electrical Machinery’, Statistics New Zealand, New Zealand External Trade Statistics June 2006, page ‘Tab 3.02’

  99. Figures taken from the Ministry of Agriculture and Forestry, but not published; I gained these while working at MAF in 2004. New Zealand is self-sufficient in barley and oats, but imports some maize from North America.

  100. Figures taken from the Maersk Line shipping company website, http://www.maerskline.com/link/?page=home.

  101. From the Statistics New Zealand website, New Zealand Yearbook 2000, ‘Shipping’ page, at http://www.stats.govt.nz/quick-facts/industries/shipping.htm.

  102. Tourism figures from the New Zealand Statistics ‘Tourism and Migration 2005’ webpage at http://www.stats.govt.nz/tables/tourism-migration-2005.htm. Fishery, horticulture and wool figures from Statistics New Zealand, New Zealand External Trade Statistics June 2006, page ‘Tab 3.02’

  103. Michael Robson, ‘Decision At Dawn: New Zealand and the EEC’, Wright & Carman Ltd, Trentham, 1972, p9

  104. Ibid, p11

  105. Figures are for 1960. Peter Lane, ‘Economy On The Brink: An Introduction to the New Zealand Economy’, Longman Paul, Auckland, 1983, Table 2.3, p27

  106. Ibid, Table 2.2(a), p25

  107. Richard Kennaway, ‘Need New Zealand Fear A New Oil Shock’, New Zealand International Review, Vol.27, March/April 2002, p25

  108. Len Bayliss, ‘Prosperity Mislaid: Economic Failure in New Zealand and What Should Be Done About It’, GP Publications, Wellington, 1994, Figure 6, p12

  109. Richard Kennaway, op cit, p26

  110. Of which New Zealand played a part, as Britain sought to keep New Zealand access to her markets. Michael Robson, op cit, Foreword viii, p17 and p120

  111. Peter Lane, op cit, Table 2.4, p28

  112. Ibid, Table 2.2(a), p25

  113. Ibid, Table 2.5, p29

  114. John Ralston Saul, op cit, pp58-65

  115. ‘New Zealand protests U.S. lamb tariffs’, CNN.com, 9th April, 1999

  116. Editorial, The Economist, 29 July 2006

  117. “As part of its membership of the International Energy Agency, New Zealand is required to hold, at any one time, emergency reserve oil stocks equivalent to 90 days of market demand. (The Agency deems this to be 90 days of net oil imports.) In 2004, it became apparent that New Zealand no longer complied with this obligation,” MED webpage, available at http://www.med.govt.nz/templates/MultipageDocumentPage____11494.aspx.

  118. Andrew Janes, ‘Peak Hour’, New Zealand Listener, Volume 196 No 3366, 13-19 November 2004, p2

  119. AMP Capital, ‘Surging Oil Prices: Will It Continue And What’s The Impact?’, Investment Insights, 5th September 2005, p1

  120. New Zealand Treasury, ‘Treasury Report T2003/231: Conflict in Iraq: Economic Implications for New Zealand’, 21 February 2003, p2

  121. Statistics New Zealand, New Zealand External Trade Statistics June 2006, page ‘Tab 3.02’

  122. The latter is already happening, with an 8.1% increase in passenger numbers on buses and trains in Wellington in 2006. Adam Ray, ‘Passengers Seek Action On Bus, Rail Overcrowding’, The Dominion-Post, 22nd August, 2006

  123. Ministry of Economic Development, ‘Oil Demand Restraint Options for New Zealand’, June 2005

  124. Helen Clark, Address to the Asia New Zealand Summit, ‘Preparing for a Future with Asia’, Wellington, 14th September 2006

  125. Fran O’Sullivan, ‘Clark Takes Stage At East Asia Summit’, New Zealand Herald, 13th December 2005

  126. Ibid.

  127. Such as in East Timor or the Solomons.

  128. Such as the Kyoto Protocol and the Ottawa Convention on Landmines.

  129. Though the actions of most nations seldom match the rhetoric. Protectionist measures are still used by many nations, especially those that are industrialising, while many Third World countries have liberal agendas imposed on them by institutions such as the IMF and World Bank.