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World Less Globalized Today than in 2007: DHL Global Connectedness Index 2012

by Pankaj Ghemawat 30. January 2013 20:49

We recently released the DHL Global Connectedness Index 2012, which tracks the depth and breadth of trade, capital, information, and people flows across 140 countries that account for 99% of the world's GDP and 95% of its population. Based on data covering the period from 2005 to 2011, it charts how globalization has evolved since the onset of the financial crisis at the global, regional, and national levels. The full report is available as a free download and, to whet your appetite, here are some of its most striking findings:

Global connectedness declined sharply at the onset of the financial crisis from 2007-2009, and despite modest gains has yet to recapture its 2007 peak. Capital markets are fragmenting and while merchandise trade recovered strongly since 2009, the intensity of services trade has remained stagnant. We compare trends across 10 distinct types of flows within its 4 pillars: trade (merchandise and services), capital (FDI and portfolio equity), information (internet bandwidth, telephone calls, trade in printed publications), and people (tourism, international education, migration).

The world's most globally connected country (the Netherlands) is hundreds of times more connected than the least connected country (Burundi). Our report provides full country rankings and explains how the depth and breadth of countries' connectedness varies with factors such as countries' levels of economic development, population sizes, and geographic locations. It also summarizes patterns of connectedness at the regional level. Europe is the world´s most globally connected region and sub-Saharan Africa the least, but it is encouraging to note that sub-Saharan African countries averaged the largest increases in global connectedness from 2010 to 2011.

Countries' levels of global connectedness are impacted both by their domestic and their foreign policies. Improving a country's domestic business environment can go a long way toward strengthening its international connections. We found a set of structural and policy factors that explain nearly 80% of the variation among countries' global connectedness depth scores.

Industries vary widely in their levels and patterns of globalization, contrary to the still popular notion that every kind of business is rapidly integrating across national borders. We compare the depth and breadth of 20 industries' global connectedness before delving into three case studies: pharmaceuticals, passenger cars and mobile phones. We also plot the evolution of production and consumption in developed versus developing countries for the three focal industries, showing how the world's shifting economic center of gravity is reshaping industry level connectedness.

Why does all of this matter? Because deepening global connectedness has the potential to contribute to trillions of dollars in economic gains as well as various non-economic benefits. Despite the evidence, Global Trade Alert reports that three times more discriminatory, than liberalizing or transparency-enhancing, trade policy measures have been implemented since November 2008. We cannot simply take for granted that future generations will enjoy the benefits of a more connected planet.

Perhaps the greatest value of report such as the DHL Global Connectedness Index lies in its detailed country-by-country profiles providing hard data and analysis on virtually every country's level of globalization. Why? Because those profiles reveal the limited extent of globalization where it matters to people — at home — which can go a long way toward putting fears about globalization into perspective.

The United States, for example, has a serious problem with its trade deficit which needs to be solved. However, when one recognizes that the U.S. ranks only 134th out of 140 countries on the depth of its merchandise imports in relation to its GDP (15%), one gets a useful reminder that our economic problems are primarily home grown and require domestic solutions.

To cite one more example — focusing on people flows instead of trade — respondents to a recent public survey in France estimated that immigrants make up 24 percent of the country's population. The correct figure is only 10 percent. Would anti-immigrant rhetoric have been so prominent in the 2012 French elections if the public had a more accurate read on the present extent of globalization?

The DHL Global Connectedness Index aims to provide the most comprehensive and timely source of hard data and analysis depicting the actual extent and direction of globalization around the world. Please take a look and let us know what you think.

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Globalization

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