What does the performance of small cities such as Tallinn, Dublin and Skopje in the Hotspots Index tell us about global connectedness, and how have they managed to outperform much bigger cities?
This is an interesting question, and one that we cannot yet answer based on statistical analysis. However, the general lesson I take away from this pattern at this point is that cities across a wide size spectrum can enjoy the benefits of global connectedness. And smaller cities with strong specializations, in particular, can play important roles beyond the borders of the countries where they are located.
What was the probable cause of the slowdown in the growth of global connectedness in 2015?
The largest contributor was declining depth on the trade pillar of the index, and even more specifically the merchandise trade component. While merchandise exports as a percentage of world GDP has been on a declining trend since 2012, its fall accelerated in 2015. The causes are multifaceted. First of all, trade value is affected by commodity prices and exchange rates – the trade picture looks somewhat brighter if analyzed in terms of volume instead of value (merchandise trade value in U.S. dollar terms fell 13 percent in 2015 but merchandise trade volume grew a modest 2.7 percent over the same year). But even in volume terms, trade flows remain weak. The causes involve a combination of cyclical (macroeconomic) factors, structural factors (e.g. China’s rebalancing from an export-driven growth model to one that relies more on domestic demand), as well as policy measures. With regard to the latter, there is mounting evidence that protectionist policies are dampening trade growth.
Why are emerging economies less connected than advanced economies – other than obvious factors such as poorer infrastructure?
Whereas global connectedness can contribute to faster growth, low levels of economic development can also constrain connectedness. As you mentioned, infrastructure is an obvious barrier. However, physical infrastructure constraints are of maximum importance for merchandise trade, and that is the only type of flow on which emerging economies match advanced economies’ levels of integration.
The largest discrepancy is on international information flows, on which advanced economies are nine times as connected as emerging economies. This presumably reflects both bandwidth limitations as well as lower levels of digitization overall in less developed countries. On the people and capital pillars, policy constraints also come into play to a greater extent. Citizens of emerging economies face more stringent visa requirements when traveling abroad, and emerging economies also tend to place more restrictions on their international capital flows.
What is the most encouraging takeaway from the 2016 survey for you personally – and the most discouraging?
In my view, the most encouraging finding is that people tend to greatly overestimate levels of globalization, and that correcting those misperceptions can soften or even reverse many common concerns about it.
To cite a very concrete example, immigration was a big issue in the Brexit debate, and surveys indicate that Britons think there are more than twice as many immigrants in the U.K. as there actually are. Moreover, simply telling them the actual level of immigration into their country cuts the proportion thinking there are too many immigrants by 40 percent. To me, that illustrates the value of a study like the DHL Global Connectedness Index. Globalization will remain controversial, but it is essential to strengthen the debate by grounding it more effectively in hard data.
The most discouraging finding, in my view, is that growth on the depth dimension of global connectedness slowed in 2015. This is a serious concern because the depth dimension of global connectedness has been associated with faster economic growth.
Are you an optimist or a pessimist on the future of globalization? Is the continued growth of global connectedness inevitable in the longer term, regardless of short-term hiccups, given the information and technology revolution?
Globalization can go into reverse over very long periods – decades or more – as we saw in the mid-20th century. But over even longer time horizons, I still tend toward optimism. Human progress over centuries and even millennia has been marked by expanding circles of cooperation. We have advanced from small bands of several dozen people up to larger tribes and eventually to nation states and beyond. Pushing these boundaries has always involved taking real risks, and there have often been setbacks. But the gains have been enormous and are worth continuing to pursue.
For globalization to prevail, do political adjustments need to be made to allay public concerns?
Absolutely. There is still much to be gained from strengthening the links between countries, and many of the problems blamed on globalization result more from domestic than international causes. But just because the problems of globalization tend to be exaggerated does not mean they are not real at all. International flows can sometimes have negative consequences. The solution, however, is not to draw back from international engagement across the board. National governments actually have far more power to manage it than is commonly presumed – more can and should be done to assist people who are harmed by the side effects of globalization.