Friday, July 28, 2006

Air Travel and Globalization

Much has been written about the critical role that free movement of capital has played in the development of globalization, some of it positive (Thomas L. Friedman. 2000. The Lexus and the Olive Tree. New York, Anchor Books), some of it loving but critical (Joseph Stiglitz. 2002. Globalization and Its Discontents. London, Penguin Books), and some of it critical (Leslie Sklair. 2001. The Transnational Capitalist Class. Oxford, Blackwell Publishers). All of these works tend to focus on capital and its movement. Fewer popularizing works on globalization focus on the importance of people in "activating" this capital in global economic markets. Michael Mussa , for example, emphasized the importance of migration, the movement of peoples, in fostering globalization of trade (Michael Mussa,. 2000. "Factors Driving Global Economic Integration"). Mussa also emphasized the importance of cost and reliability in driving economic trade. The cheaper and more reliable the avenues of trade, the easier the facilitation of movement of goods and people, the more densely integrated trade and economic activity might become. People make globalization happen, as consumers and traders. The greater the impediments to the facilitation of the movement of people in trade, the greater the threat to global economic integration.

It was with that in mind that I sat in one of the busiest airports in the world as it shut down in the early afternoon in the middle of a work week as a result of weather related trouble occurring some hundreds of miles away. As tens of thousands of people scrambled to find alternative means of travel, or to postpone business meetings, or reschedule work that was scheduled to be done, or to find shelter for the night (or two), a number of thoughts came to mind:

1. Economic integration, for all its robustness is fragile. Something as simple as thunderstorms over the American Oho Valley can have substantial effects on trade at the micro level. The aggregate of constant disturbances to the flows of trade can have a tremendous effect on aggregate trade either by affecting its flow (or more likely perhaps) by affecting its cost.

2. One person’s cost is another’s profit. Disruptions in trade provides benefits and opportunities. The inefficiency of air travel in the face of weather disruptions revealed a tremendous efficiency between air carriers and local retail establishments (restaurants, clothing stores, and hotels). Local business profits a great deal whenever an airport shuts down. And at this airport in particular, the systems designed to funnel passengers from airport to nearby waiting stations were efficient and likely highly profitable. They were also designed to ameliorate the loss from travel disruptions, providing methods of communications designed to facilitate the continuation of transactions even if not in person. The only losses that could not be minimized were those requiring the actual delivery of goods or the presence of persons.

3. Trade disruptions facilitates commercial transactions. And not just local ones. The businesses making money were as likely to be the local operations of multinational enterprises, or enterprises owned by people with transnational connections, as they might be purely local affairs. Indeed, as some scholars have already suggested, multinational enterprises prefer dealing with other like sized entities in making business arrangements (John A. Matthews. 2002. Dragon Multinational: A New Model For Global Growth). In this case, multinational food and hotel chains were as likely to profit from local disruption as local firms.

4. It is not always the weather. Weather can affect travel. But sometimes the effects of weather can be multiplied by bad planning, or perhaps better put, by planning that is indifferent to the possibility of disruption caused by weather. In this case, there was a sense that a conscious overreliance on certain types of travel scheduling, combined with the implementation of operations grounded in a necessary assumption of constant ideal weather conditions, fully utilizable personnel and equipment eternally in the best working order, contributed ion no small measure to the ease with which the system collapsed on the development of thunderstorms near an important spoke in the transportation network. While such potentially sub optimal planning might require change in this context, the existence of exogenous ready amelioration devices relieves the air carriers (and the airports) of this necessity. Why plan around bad weather (or personnel and equipment failure) when there is an efficient system of housing and feeding delayed passengers, the costs of delay can be reduced by technology (for example facilitating communication via cell phones, faxes, conferencing and the like), and passengers in any case would be unlikely to pay the increased costs of transportation systems better well planned for storm related disruptions.

5. Trade systems built around reliance on exogenous mitigation networks are vulnerable to failure. So, people gamble. They are said to prefer lower travel fares based on systems positing perfect transportation conditions, gambling that they will not be on the airplane when the assumptions (one or more of them) fail. And they further gamble that the systems of mitigation in place (through transnational hotel, food and telecommunications networks) will reduce their transaction costs in the event they are caught in a transportation failure of the sort I suggested. This system is elegant in theory and quite messy in practice. Just watch tens of thousands of people scramble for hotel rooms near midnight on a week day in a large city that plays an important role in transnational trade. Just listen to the frustration of missed transaction opportunities as mobile phne networks freeze, or are disrupted by the same forces contributing to the disruption of the transportation networks. Just work through the longer term effects as it takes more than a day to get people to where they are going, disrupting the flow of commerce over a much longer term. These sorts of failures can be tolerated only to a certain point. When they become routine, when they must be planned for, then their effect on economic systems may become too large to ignore.

6. Correction is difficult. When an airport, to continue with my example, shuts down with too much frequency, and thereby causes great disruption to trade, an inefficiency has been created requiring correction. That correction may come from several sources. The market may correct the inefficiency, people may choose to travel through airports less likely to fail, they may be willing to pay more for a greater assurance of non failure, they may seek protection through insurance schemes, they may seek alternative means of travel. Innovation may make the site of inefficiency obsolete. People do not travel by ship anymore for the most part. Technology may solve the problem of airport failure. Teleconferencing, global systems of spot production or assemblage, combined with alternative transport, may reduce the value of airports to trade. States may intervene. This may produce short term amelioration at great cost (regulation is costly to produce, inherently clumsy and slow to react to changes in patterns of market conditions). Or the market may fail. Transportation systems are a soft underbelly of global integration. They might be seen by some as the perfect place to strike at the power of the states benefiting most from this economic integration. That these forces have not struck yet is a mystery but might be due in part to the difficulty of affecting the entire global system of transportation in any meaningful way (destroying an airport or two, while spectacular, is not likely to significantly affect the way goods and people move in the aggregate). But credible threats to transportation centers can under extreme condition, paralyze the system as a whole.

I would add more but the air carrier’s personnel have just started calling names on a standby list, I have been at the airport for two days, cannot get a confirmed flight until tomorrow and would really like to get to where I am going because I have a meeting I must attend . . . . . . . .


Cheap flights to Rome said...

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iffatali said...

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