DHL Global Connectedness Index 2014

54 3. The Depth of Global Connectedness
Conclusion
The depth of global connectedness remains limited.
Borders still matter, and the large majority of activities
that could take place either within or across them are
still domestic, not international. The limited current
depth of global connectedness has two important
implications. First, it draws attention to the substantial
headroom available for countries to connect more
intensively beyond their national borders—so much
headroom that the gains from doing so could reach
into trillions of dollars. And second, it helps calm some
fears that may prevent countries from reaping the
benefits of deeper global connectedness. As mentioned
in Chapter 1, simply telling people the true depth of
immigration in their countries can cut the proportion
believing their countries have too many immigrants by
as much as one-half!
In light of the power of deeper global connectedness
to boost prosperity, it is good news that depth
resumed its upward march in 2013. The depth of
trade and capital flows—the most volatile flows over
the period studied—is, however, sensitive to global
macroeconomic conditions. The downgrade of global
growth forecasts by the IMF in October 2014 is a cause
for some worry. However, the gloom should not be
overdone. The IMF still forecasts faster growth between
2014 and 2019 than during the 1980s, 1990s, or 2000s.
The biggest threats to the depth of global
connectedness over the next few years, therefore,
may come from policy fumbles or protectionism rather
than macroeconomic fundamentals. While adversity
often leads to calls to fortify borders and hunker down
behind them, it is precisely when growth slows that
vocal reminders of the power of global connectedness
to accelerate recovery are most needed.
Looking beyond immediate macroeconomic cycles, the
“big shift” of economic activity to emerging economies
will have a large influence on the depth of global
connectedness over a longer time horizon. Figure 3.11
compares the depth of global connectedness between
advanced and emerging economies. It displays ratios
of the aggregate depth scores of advanced economies
divided by the aggregate depth scores of emerging
economies. A ratio of 1 implies equal depth, a ratio of
2 implies that advanced economies are twice as deeply
globalized as emerging economies, and so on.
Emerging economies are about as deeply connected
today as advanced economies with respect to trade,
but far less deeply connected on all of the other
pillars. Advanced economies are 9 times as connected
with respect to information flows, 5.5 times as deeply
connected on the people pillar, and just shy of 4 times
as connected on the capital pillar. That pattern is
consistent with evidence presented in Chapter 2 that
richer countries tend to be more deeply connected than
poorer countries.
If emerging economies trend toward advanced
economies’ depth of global connectedness as they
become more prosperous, their rising depth could
be a powerful contributor to deepening the world’s
global connectedness. On the other hand, if emerging
economies remain less connected than advanced
economies, as their share of world activity increases,
they would actually drag down global levels of
connectedness. Figure 3.11 does not show a clear
trend toward emerging economies converging toward
advanced economies’ depth of global connectedness.
Since 2011, emerging economies actually lost ground
relative to advanced economies on the trade and
capital pillars. Regularly monitoring these ratios may
offer clues to the longer-term evolution of the depth of
global connectedness.