The Power – and Limits – of Globalization

For all of our talk about globalization, are we really as connected as we think?

Renowned economist and global strategist Pankaj Ghemawat argues that as leaders around the world hail the rise of globalization, its reach is still limited. Through his research for theDepth Index of Globalization 2013 (DIG), Ghemawat found that globalization’s post-crisis recovery stalled in 2012, making the world less deeply interconnected than it was in 2007.

“The potential for connectivity is not the same as actual levels of connectedness,” explained Ghemawat in a New York Times interview last week. “In principle, Facebook is a technology that allows us to friend people halfway around the world, but on average, 87 percent of people’s friends on Facebook are in and around the area they are located in. So that’s a little bit of a reminder that technology is super-imposed on an existing matrix of relationships.”

The DIG analyzes more than just our overseas social media connections; it measures the depth of countries’ globalization across four pillars: trade, capital, information and people flows, capturing trends at the global, regional and country levels. The report includes 139 countries – accounting for 99 percent of the world’s GDP and 95 percent of its population – and contains detailed analysis of the “big shift” from advanced to emerging economies.

“We have seen significant growth in emerging economies,” says Ghemawat. “Yet eight of the top 10 most deeply globalized countries are advanced economies, whereas all of the bottom 10 countries are emerging economies. The silver lining is that the lower rankings of emerging economies suggest that, despite recent turmoil in emerging markets, they may be the most able to power globalization going forward.”

Professor of global strategy at IESE Business School in Barcelona, Ghemawat is a well-known speaker, consultant and writer on topics of business and competitive strategy, as well as globalization and its public policy implications. Arguing that our world is not “flat” but semi-globalized at best, Ghemawat is a strong advocate for increased market integration – a measure, he says, that will truly create a global, prosperous economy. As growth is projected to increase faster in the coming years than it has in decades, Ghemawat warns that the biggest threat to globalization comes not from macroeconomic fundamentals, but from preventable policy fumbles.

Stern Strategy Group: