Executive Briefings

A Globalized World? Hardly. The Figures Show We're Semi-Globalized, at Best.

Pankaj Ghemawat of IESE Business School in Spain says that we live in an era of semi-globalization at most. He points out that many indicators of global integration are surprisingly low. Only 2 percent of students are at universities outside their home countries; and only 3 percent of people live outside their country of birth. Only 7 percent of rice is traded across borders. Only 7 percent of directors of S&P 500 companies are foreigners - and, according to a study a few years ago, less than 1 percent of all American companies have any foreign operations. Exports are equivalent to only 20 percent of global GDP. Some of the most vital arteries of globalization are badly clogged: air travel is restricted by bilateral treaties and ocean shipping is dominated by cartels.

Globalization, Ghemawat says, is shaped by familiar things, such as distance and cultural ties. He argues that two otherwise identical countries will engage in 42 percent more trade if they share a common language than if they do not, 47 percent more if both belong to a trading block, 114 percent more if they have a common currency and 188 percent more if they have a common colonial past.

What about the "new economy" of free-flowing capital and borderless information? Foreign direct investment accounts for only 9 percent of all fixed investment. Less than 20 percent of venture capital is deployed outside the fund's home country. Only 20 percent of shares traded on stock markets are owned by foreign investors. Less than 20 percent of internet traffic crosses national borders.

Read Full Article

Pankaj Ghemawat of IESE Business School in Spain says that we live in an era of semi-globalization at most. He points out that many indicators of global integration are surprisingly low. Only 2 percent of students are at universities outside their home countries; and only 3 percent of people live outside their country of birth. Only 7 percent of rice is traded across borders. Only 7 percent of directors of S&P 500 companies are foreigners - and, according to a study a few years ago, less than 1 percent of all American companies have any foreign operations. Exports are equivalent to only 20 percent of global GDP. Some of the most vital arteries of globalization are badly clogged: air travel is restricted by bilateral treaties and ocean shipping is dominated by cartels.

Globalization, Ghemawat says, is shaped by familiar things, such as distance and cultural ties. He argues that two otherwise identical countries will engage in 42 percent more trade if they share a common language than if they do not, 47 percent more if both belong to a trading block, 114 percent more if they have a common currency and 188 percent more if they have a common colonial past.

What about the "new economy" of free-flowing capital and borderless information? Foreign direct investment accounts for only 9 percent of all fixed investment. Less than 20 percent of venture capital is deployed outside the fund's home country. Only 20 percent of shares traded on stock markets are owned by foreign investors. Less than 20 percent of internet traffic crosses national borders.

Read Full Article