|How globalized are we?|
|Thursday, 28 March 2013 05:00|
Interpreting measures of globalization is a tricky business. Small countries will always come out on top. They have to be global to survive. Singapore, for example, imports everything, including water. Large economies like the US score lower, in part because they trade a lot more internally. And yet they are home to the world’s most global cities, like New York and San Francisco.
All that said, KOF’s Index of Globalization is most certainly worth a look at.
The KOF team has a rather complicated definition of globalization, namely, “the process of creating networks of connections among actors at multi-continental distances, mediated through a variety of flows including people, information and ideas, capital and goods. Globalization is conceptualized as a process that erodes national boundaries, integrates national economies, cultures, technologies and governance, and produces complex relations of mutual interdependence.”
The KOF Index of Globalization incorporates the economic, social and political dimensions of globalization.
. Economic globalization is measured by the actual flows of trade, foreign direct investment and portfolio investment, as well as the restrictions applying to these flows.
. Social globalization is expressed as the spread of ideas, information, images and people. It is estimated by personal contact (international telephone traffic, transfers, tourism, foreign population, and international letters), information flows (Internet users, television ownership, trade in newspapers), and cultural proximity (number of McDonald’s restaurants, number of Ikea shops and trade in books).
. Political globalization is characterized by the degree of political cooperation. It is measured by the number of embassies, membership of international organizations, participation in UN Security Council missions, and number of international treaties signed.
So what are the main trends?
Since 1980, there has been a progressive upward trend in the KOF Index of Globalization, with a strong boost after the end of the Cold War in 1989. Economic globalization has been consistently well above the overall Index of Globalization, climbing fairly steadily, except for a stalling after the year 2000, around the time of the bursting of the dot.com bubble and the tragic 9/11 terrorist attacks. Political globalization has been basically the same as the overall Index, while social globalization has been consistently below the overall Index, and has been stagnating since the year 2001.
In general, OECD countries rank well above the world average for the Globalization Index, while high income non-OECD countries are a little above, and low income countries, well below the world average. This is of course reassuring for those who believe that globalization is a powerful driver of economic prosperity. However, despite Asia’s economic dynamism, East Asia and more so South Asia are quite a way below the world average. East Europe and Central Asia are now a little above the world average, Latin America and curiously the Middle East and North Africa are hovering around the world average, while Sub-Saharan Africa is also way below.
For the overall Index of Globalization, smaller European countries top the list – Belgium 1st, Austria 2nd, Netherlands 3rd, Switzerland 4th, Sweden 5th, Denmark 6th, Canada 7th, Portugal 8th, Finland 9th, Hungary 10th, Ireland 11th and Czech Republic 12th. Overall, the larger countries are further down the list: France 13th, Germany 18th, United Kingdom 24th, United States 27th, Russia 42nd, Japan 45th, China 63rd, Brazil 75th, and India 111th.
When it comes to economic globalization, Singapore jumps to the top of the list, followed by a slightly different list of small European countries – Ireland 2nd, Luxembourg 3rd, Netherlands 4th, Malta 5th, Belgium 6th, Estonia 7th, Hungary 8th, Sweden 9th, Austria 10th, Bahrain 11th and Denmark 12th. The larger countries are further down the economic globalization list: UK 32nd, France 34th, Germany 41st, US 57th, Brazil 91st, Russia 92nd, China 97th, Japan 102nd, and India 122nd.
Turning now to social globalization, a fairly familiar list pops up top: Switzerland 1st, Austria 2nd, Canada 3rd, Belgium 4th, Netherlands 5th, Denmark 6th, UK 7th, Germany 8th, Sweden 9th, France 10th, Portugal 11th and Norway 12th. The US is 25th and Japan 46th. But the large emerging economies are way down the list: Russis 39th, China 82nd, Brazil 124th and India 147th.
Lastly moving on to political globalization, we find France, which has still not given up ambitions of ruling the world, scoring top of the pops, a position that it has held without interruption since 1998. The country’s wealth of foreign embassies in Paris, its memberships in international organizations, the extent of its participation in UN peace missions and the number of international treaties to which it is party, is unparalleled.
The other leaders in political globalization are: Italy 2nd, Belgium 3rd, Austria 4th, Sweden 5th, Spain 6th, Netherlands 7th, Switzerland 8th, Poland 9th, Canada 10th, Portugal 11th, and Germany 12th. Most of the large countries rank much higher on political globalization: US 14th, Brazil 19th, India 20th, Japan 29th, China 38th, and Russia 42nd, while UK brings up the rear at 85th.
What to make of all of this?
As I said at the outset, interpreting such globalization indexes is a tricky business. Small countries always score high and large countries generally rank low. The very high ranking of many small European countries is more a reflection of their close linkages with other European countries, rather than with the outside world. In other words, it is more a reflection of regionalization than globalization.
The BRICs of Brazil, Russia, India and China remain overall, under-globalized compared with the large OECD countries. To maintain their rapid economic development, they will clearly need to open up more to the global economy. And as they do, they global presence will be felt even more by everyone.
The main outlier seems to be Japan. Although its economic size is about one-third of the American economy, it scores much lower on all dimensions of globalization. If you are wondering why Japan is having so many economic, social and political difficulties at the moment, this KOF Index of Globalization tells you quite a bit!
Last of all, I bet you were wondering which countries are at the bottom of Globalization Index! Here they are, the last five countries from the bottom up: Myanmar, Kiribati, Solomon Islands, Equatorial Guinea and Laos. Quite a number of rogue states like Somalia were not evaluated for lack of data.
KOF Index of Globalization