Contrary to fears that globalization could collapse under the weight of resurgent economic nationalism – reflected by the 2016 Brexit referendum and President Trump’s “America First” stance – the DHL Global Connectedness Index, which measures the flow of trade, capital, information and people, hit a record high in 2017.

Moreover, the Index – developed by New York University globalization experts Professor Pankaj Ghemawat and Steven A. Altman together with Phillip Bastian – highlights how the world is actually far less globalized than most of globalization’s antagonists believe. Despite all our advances in transportation and communications, international trade, capital, information and people travel only 60 percent as far as they would in a “flat” world, and more than half of those journeys take place between countries and their top three destinations. Meanwhile, a mere 3 percent of people live outside of the country where they were born.

Unsurprisingly, eight of the 10 most globally connected countries in 2017 – including the U.K. and Germany – are in Europe, the world’s most connected region, which tops the index for trade and people flows.

Economies with the highest proportions of flows crossing national borders are all wealthy and relatively small, such as Singapore or Belgium, while countries with the most global flow patterns are wealthy but larger, such as the U.S. and South Korea.

Nations’ connectedness scores are also influenced by their proximity to the sea, foreign markets and shared languages. The countries whose depth of international flows most exceeded expectations include Cambodia and Vietnam, although this is partly explained by regional supply chains.

The GCI’s connectedness metrics are designed to help companies navigate calmly through current and future turbulence. The report helps identify which countries are most exposed to threats to particular types of flows, and whether that exposure is global or more narrowly constrained. It can also contribute to more productive debates about globalization by clarifying distorted perceptions, such as the actual proportion of immigrants – the biggest public concern on both sides of the Atlantic, according to recent surveys.

At the moment, although emerging economies trade almost as intensively as advanced ones, the GCI shows advanced economies are more than three times as deeply integrated with international capital
flows, five times as deeply with people flows, and nine times as deeply with information flows.
Clearly though, globalization’s future is in the hands of the policymakers. Recent tit-for-tat tariff hikes have undoubtedly raised the specter of a trade war between the U.S. and China, while other countries have signaled that they are keen to curb foreign corporate takeovers, slash immigration and restrict international data transfers. While there is insufficient data to forecast overall global connectedness levels for 2018, the available figures suggest that these developments have impacted international flows.

The coming years may bring a new wave of globalization, a plateau or even a dip. However, the biggest winners under each scenario, according to the GCI, are likely to be those who embrace globalization’s complexity rather than those who see the world purely in terms of local versus global. Boyd Farrow

Published: January 2019

Images: Interfoto/Stocktrek Images