I am an expatriate, with experience of living and working in six different countries. I am currently residing in Spain, working for a globally oriented institution, and frequently travelling abroad for business. When at work, I interact a lot with international students, foreign colleagues, and expatriate managers. On my way home from work I feel part of an internationally vibrant city, which offers global brands, hosts many temporary and permanent migrants, and welcomes a multitude of international tourists. Last but not least, at home I am a father of a TCK, and I can pay visits to my extended family on four continents.
Yes, my world is pretty global. But is it just MY world? As I communicate and move constantly across borders, at times there is a clear perception that ‘the whole world is globalized’. Yet, is the perception accurate?
How globalized is the world?
Aiming to answer the question of ‘how globalized the world is’, my colleagues Pankaj Ghemawat and Steven Altman at IESE business School, in cooperation with DHL, introduced the Global Connectedness Index (GCI). The index is calculated based on a worldwide analysis of globalization, manifested in international flows of products and services, capital, information, and people. The GCI measures both depth and breadth of globalization, thus looking, respectively, at the proportion of international activities, and how broadly these activities are distributed.
Contrary to the widely accepted perception of how wide-spread globalization is, the latest GCI data (2014 report) suggests that global connectedness is much more limited than many of us think. Specifically, when looking at the globalization depth ratios, Ghemawat and Altman conclude that the share of international activity mostly does not exceed 10-20% of total activity. Other stats are also quite modest. For example, it may come as a surprise that migrants make up only 3% of the world’s population, international students make up only 2% of the whole student population, and tourists make up only about 16% of total arrivals. Another example comes from the seemingly global company BMW, whose workforce is, in spite of selling ‘everywhere’, 74% German.
As for the breadth of globalization, its extent also seems to be quite limited. The report indicates that more than 40% of the major international interactions studied take place within roughly continent-sized regions. To put it differently, we truly do travel, trade and communicate across borders, but we do not make it much further than to our close neighbors.
Finally, the GCI implies that current globalization trends are also highly imbalanced, meaning that international interactions are rarely equal in directionality of imports and exports.
As such, how globalized is the world? The abovementioned stats seem to imply an unexpected answer: not that much.
‘The world is NOT flat’, states Pankaj Ghemawat notoriously. In fact, he refers to the widespread overestimation of globalization as ‘globaloney’.
Why is ‘globaloney’ bad?
Giving a talk at a TED global event in 2012 Ghemawat related the negative sides of globaloney to the ongoing debate about the good and bad of globalization.
If we were to focus on the positives of globalization, then overestimating the extent of globalization is actually limiting our actions towards furthering it. In a way, if we are already living in a highly globalized world, why should we try to globalize it even further?
On the other hand, there are many heated discussions on the downsides of globalization. To name a few, one of the recent Forbes articles speaks about increased pressures towards the local working class and growing inequalities within national populations. Naturally, overestimating the extent of globalization may lead to an exaggeration of several problems. It is much more difficult to solve global rather than local problems, right? As such, it probably makes sense to check the global nature of a problem before working on any complicated global solutions. For example, the negative perception of immigration in the US and many other countries should not overshadow the actual need for highly skilled migrants.