Monday, April 25, 2011

Is Globalization Real?

As we have seen in our recent posts on the OECD results,"exposing intuitions to hard data" can either confirms and contradicts assumptions we may have when we discuss crosscultural differences. My point is that even though hard data can also be twisted and misinterpreted, they can also be a lot of fun, if you need to add hard science to subjective conversations. 

This is partly what I find the idea behind Pankaj Ghemawat's book "World 3.0: Global Prosperity and How to Achieve It" fascinating - Ghemawat claims to challenge our views of globalization by showing that many indicators of global integration are actually quite low : 
- only 2% of students are at universities outside their home
- only 7% of rice is traded across borders. 
- only 7% of directors of S&P 500 companies are foreigners
-  less than 1% of all American companies have any foreign operations. 
-  exports are equivalent to only 20% of global GDP
-  foreign direct investment (FDI) accounts for only 9% of all fixed investment
-  less than 20% of venture capital is deployed outside the fund’s home country. 
- only 20% of shares traded on stockmarkets are owned by foreign investors. 

And this one surprises me the most : less than 20% of Internet traffic crosses national borders.

Ghemawat also concludes that globalization is actually shaped by very concrete elements such as distance and cultural ties. 
For example two similar countries will engage in :
- 42% more trade if they share a common language than if they do not, 
- 47% more if both belong to a trading block, 
- 114% more if they have a common currency 
- 188% more if they have a common colonial past.

Finally, Ghemawat disagrees that globalization means homogenisation - a point hard to prove though  - 
McDonald’s serves vegetarian burgers in India and spicy ones in Mexico, where Coca-Cola uses cane sugar rather than the corn syrup it uses in America. MTV, which went global on the assumption that “A-lop-bop-a-doo-bop-a-lop-bam-boom” meant the same in every language, now includes five calls to prayer a day in its Indonesian schedules.
(source The Economist)

This deserves more studies and hard data but I like the idea that so many figures can challenge today's assumption that "The World is Flat" - i.e. that individuals are competing in a global market where historical and geographical divisions are becoming increasingly irrelevant. - cf. Tom Friedman's highly influential book. A book to read! 

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