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Launch of 2013 Depth Index of Globalization

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Study reveals: Globalization’s post-crisis recovery stalled

IESE launches today the latest edition of the Depth Index of Globalization (DIG), developed by Prof. Pankaj Ghemawat and Prof. Steve A. Altman. The study ranks how deeply countries are globalized in regards to international flows of trade, capital, information and people.
 
The 2013 DIG reveals that globalization’s post-crisis recovery stalled in 2012, leaving the world less deeply interconnected than in 2007. Macroeconomic weakness was the main culprit, but there is also evidence of increasing protectionism.

The report shows the extent of countries global connections is not only far more limited than most believe, but also varies widely among countries. The study found that the top ten overall globalized countries in terms of depths of international flows were:

1. Hong Kong (China)
2. Singapore
3. Luxembourg
4. Ireland
5. Belgium
6. the Netherlands
7. Malta
8. Malaysia
9. Bahrain
10. Estonia

The 2013 Index, which ranks 139 countries - jointly accounting for 99 percent of the world’s GDP and 95 percent of its population – highlights Europe as the most deeply globalized region despite recent economic setbacks. Sub-Saharan Africa and South & Central Asia lag the farthest behind— although South & Central Asia did experience the second biggest increase in depth of globalization in 2012, behind North America.

Companies struggle with shift to emerging economies

The study also reveals the big shift in the share of world output from advanced to emerging economies, with the latter driving most of the growth of international flows even as the largest among them, China, significantly reduced its reliance on exports and foreign investment. This is driving profound changes in the pattern of globalization. Yet while multinationals from emerging economies remain few and far between, firms from advanced economies are falling behind their new competitors. Their people, in particular, have not globalized as fast as their operations and sales targets.

Internet fragmentation

While the digital transformation of society is often seen as evidence of how globalized the world is, the DIG also shows that even as international bandwidth continues to expand, Interactions on social media, like other information flows, mostly remain domestic.

Policy fumbles bigger threat than economy

The data in the DIG report, combined with recent growth forecasts, suggest that the largest threat to globalization comes from policy fumbles rather than macroeconomic fundamentals, since the world economy is still projected to grow faster from 2012-2018 than over any of the past three decades.

Accordingly, the report also provides recommendations to policymakers – and to multinational companies that have been struggling to keep up with the shift to emerging markets. 

For more information and to download the 2013 Depth Index of Globalization.

More information on the IESE Insight website.

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