Geography Reference
In-Depth Information
unchanged. Rather it should be redesigned to best avoid the worst impacts
of unregulated global financial flows in a manner which is appropriate
for twenty-first century realities of financial markets (Roubini and Mihm
2010), largely in a manner akin to what the Bretton-Woods system did for
the mid twentieth century realities. Yet, the scale and power of modern
multinationals in shaping globalization, and in particular the impacts that
MNE location and investment behaviour play in determining the differen-
tial advantages enjoyed by certain places and regions over other regions,
implies that any future changes in the global architecture of commerce
are beyond the scope of individual countries to influence. Such changes in
the architecture of the global trading system require new forms of inter-
national coordination, which may have common elements with Bretton-
Woods, but will also necessarily be very different in many dimensions.
As we saw in Chapter 6, the four centuries spanning the sixteenth to
the nineteenth century represent the period in which almost all parts of
the world came to be dominated to some degree by the emergence of
large European empire powers of France, Netherlands, Spain, Austria-
Hungary, Portugal, Russia and most notably Great Britain (Findlay and
O'Rourke 2007; Maddison 2007a). The principles governing the modern
notion of sovereignty, which as we saw in Chapter 6 are typically attributed
to the 1648 Treaty of Westphalia, were established at a time when there
was little interaction between states. The vast majority of the commercial
activities of states were dominated by the economic and trading relations
which were primarily contained within their individual colonial systems
(Findlay and O'Rourke 2007). This of course is in very marked contrast
to the modern nation state, which as we saw in Chapter 6 is a relatively
recent concept, and although the principles of statehood were established
in the seventeenth century, de facto modern states are primarily a result
of the nineteenth century structural and economic transformations. Apart
from the specific political issues which were current at the time, at least in
economic terms these larger states had a very concrete logic to them which
is still very pertinent, in that larger countries imply larger economies, and
the resulting 'home market effects' (Fujita et al. 1999) ensure that the
economies of these larger states are more productive in comparison to
smaller countries. These home market effects also foster greater interna-
tionalization advantages for MNEs deriving from the larger home market
economies, exactly as we saw in Chapters 2 and 6.
However, when discussing the relationships between countries and the
global economic system, it is important to recall here that in orthodox
trade theory and international business theory the size of the country is
treated as exogenous, being determined by history. While much interna-
tional development research focuses on the role played by institutions and
