DHL Global Connectedness Index 2014

14 1. How Globalized is the World
Figure 1.2
Global Intra-regional Share of International Interactions, 2013 or most recent year available 15
Trade
Capital
Information
Merchandise Trade
Foreign Direct Investment Stocks
Portfolio Equity Stocks
Telephone Calls
Printed Publications Trade
Migrants
People
Students
Tourists
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
More than 40% of all of the international interactions studied except portfolio equity investment take place within roughly continent-sized regions.
Over half of merchandise trade and telephone calls are intra-regional, as are over 70% of international tourist arrivals.
We refer to the widespread overestimation of the extent of
16 15
globalization as “globaloney.”
A common counterargument—especially before the
crisis—was that even if the extent of globalization is small
today, a borderless world may be just around the corner.
Looking back in history, however, reveals that the changes
that have occurred are rather mixed, as examined in the
next section of this chapter. The percentage of the world’s
population composed of immigrants, for example, is about
the same now as it was in 1910! 17
Believers in a flat world also often point to the internet and,
more broadly, to the fact that in the last few decades, the
cost of communication has plummeted and the richness
of what can be transmitted has exploded, in support of
their views. But the portion of internet traffic that crosses
international borders is actually about 17%—five times as
high as telephone calls, but far below the level one would
expect in a flat world. Similarly, an estimated 16% of
people’s friends on Facebook are foreign, 18 as are 25% of the
people that individuals follow on Twitter. 19 Just because we
are able to befriend anyone living anywhere on Facebook
doesn’t mean that we will—there is an important distinction
between potential connectivity and actual connectedness.
Turning from depth to the geographic distribution of
international interactions, Figure 1.2 displays the intraregional
shares of a set of international interactions. It
shows that even the small fraction of activities that do take
place across borders (as indicated by depth ratios) tend
to be more regional than global. More than 40% of all of
the international interactions shown on the chart except
portfolio equity investment take place within the roughly
continent-sized regions listed in Appendix B. More than
half of international trade and telephone calls are intraregional
as are over 70% of international tourist arrivals.
Figure 1.3 measures the average distance traversed by the
same international interactions whose regionalization was
displayed on Figure 1.2. The weighted average distance
traversed by these interactions was 4,904 kilometers (3,047
miles). That may seem like a long distance, but when compared
to the average distance between any two randomly
selected countries around the globe of roughly 8,500 kilometers,
it provides another indicator of the limited extent
of globalization.
Global Connectedness Trends
Contrary to the popular pre-crisis view that globalization
involves the “inexorable integration of markets, nationstates
and technologies,” 20 globalization can indeed both
rise and fall. Global connectedness was hit hard by the
financial crisis in 2008 and 2009. It has since recovered
most of its losses but has yet to surpass its 2007 peak, as
shown on Figure 1.4. Over the past year, depth resumed its
upward march, while breadth continued to trend downward.
That depth began growing again during 2013, after its
recovery stalled during 2012, is good news. Higher depth
scores on the DHL Global Connectedness index are correlated
with faster economic growth rates and higher human
development levels as measured on the United Nations’
Human Development Index. 21 Globalization’s limited