-Caveat Lector- @ http://www.foreignpolicy.com/issue_janfeb_2001/atkearney.html >>>At the site, there are some nifty little full colour bar (pencil) charts that evaluate a number of nations in different categories. Go there (via the URL above) and enjoy yourselfs. You'll find in the one at the bottom of the web page *why* the subject line. T'AER <<< }}>Begin Foreign Policy 1779 Massachusetts Ave., NW, Washington, DC 20036-2103 Phone: 202-939-2230 Fax: 202-483-4430 Measuring Globalization Is Globalization Slowing Down? Everyone talks about globalization, but no one has tried to measure its extent. . . at least not until now. The A.T. Kearney/FOREIGN POLICY Magazine Globalization Index TM dissects the complex forces driving the integration of ideas, people, and economies worldwide. Which countries have become the most global? Are they more unequal? Or more corrupt? When you can measure what you are speaking about, and express it in numbers, you know something about it," the British physicist Lord Kelvin once observed. "But when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind." "Unsatisfactory" is the word that best describes the contemporary debate over globalization. There seems to be a consensus that globalization—whether economic, political, cultural, or environmental—is defined by increasing levels of interdependence over vast distances. But few people have undertaken the task of actually trying to measure those levels of interdependence. For instance, how do we determine the extent to which a country has become embedded within the global economy? How do we demonstrate that globalization is racing ahead, rather than just limping along? And how do we know just how worldwide the World Wide Web has become? Like the physical universe that Lord Kelvin sought to understand, globalization may be too vast a concept to be fully captured by today's still limited set of statistical measurements. But that same challenge has not deterred physicists from their relentless pursuit to measure with ever greater accuracy the forces that hold the universe together. Nor should it deter those who seek a deeper understanding of globalization and its impact on the contemporary world. Without some means to quantify the extent of globalization, any meaningful evaluation of its effects will remain elusive. With this challenge in mind, we present the A.T. Kearney/FOREIGN POLICY Magazine Globalization Index TM, which offers a comprehensive guide to globalization in 50 developed countries and key emerging markets worldwide. The Globalization Index "reverse-engineers" globalization and breaks it down into its most important component parts. On a country-by-country basis, it quantifies the level of personal contact across national borders by combining data on international travel, international phone calls, and cross-border remittances and other transfers. It charts the World Wide Web by assessing not only its growing number of users, but also the number of Internet hosts and secure servers through which they communicate, find information, and conduct business transactions. The Globalization Index also measures economic integration. It tracks the movements of goods and services by examining the changing share of international trade in each country's economy, and it measures the permeability of national borders through the convergence of domestic and international prices. The index also tracks the movements of money by tabulating inward- and outward-directed foreign investment and portfolio capital flows, as well as income payments and receipts. Given the unprecedented range of factors that the Globalization Index encompasses, we believe that it is a unique and powerful tool for understanding the forces shaping today's world. And the results of this year's index prove startling. Much of the conventional wisdom cherished by both champions and critics of globalization collapses under the weight of hard data, ranging from the pace and scale of global integration and the characteristics of the "digital divide" to the impact of globalization on income inequality, democratization, and corruption. The A.T. Kearney/FOREIGN POLICY Magazine Globalization Index TM may not settle the question of whether globalization does more good than harm. But the index provides an objective starting point for a debate that has typically relied more on anecdotal evidence than empirical facts. The Global Top 20 Leaders of the Pack In recent years, indicators of global integration have shown remarkable growth. The number of international travelers and tourists has risen, now averaging almost three million people daily—up from only one million per day in 1980. The latest data from the United Nations Conference on Trade and Development show that foreign direct investment jumped 27 percent in 1999 to reach an all-time high of U.S. $865 billion, while total cross-border flows of short- and long-term investments have more than doubled between 1995 and 1999. Due to the falling cost of international telephone calls and the rising levels of cross- border activity, the traffic on international switchboards topped 100 billion minutes for the first time in 2000. And with an online population estimated at more than 250 million and growing, more people in more distant places have the opportunity for direct communication than ever before. The expansion of information technologies adds to globalization in ways other than facilitating communication. Some nations fear that the Internet is an engine driving U.S. cultural hegemony. Others see the Internet as a catalyst for creating global cultural communities, from Moroccan sports enthusiasts rooting for their favorite Canadian ice hockey team to antiglobalization protestors mobilizing against the World Trade Organization and the International Monetary Fund. The Internet is also an unprecedented means for disseminating ideology to a global audience, whether it is pro-democracy activists in Serbia rerouting dissident radio broadcasts to the World Wide Web or Chechen rebels maintaining their own online news service. The full impact of information technologies on political and social life is not easily measured. But it is possible to gauge their effects on the economic sector. Information technologies make it possible for nations to sustain deeper levels of economic integration with one another. Nowhere is this integration more evident than in financial markets, which use advanced information technologies to move U.S. $1.5 trillion around the world every day. For the United States, cross-border flows of bonds and equities alone are 54 times higher now than they were in 1970. Such flows have multiplied by 55 times for Japan and 60 times for Germany. At first glance, these trends lend credence to the popular notion that globalization is fast creating a world that, as former Citicorp Chairman Walter Wriston put it, is "tied together in a single electronic market moving at the speed of light." But a closer look reveals that global integration appears to be growing no more rapidly now than it has been for years, and its pace may even be slowing. Why does globalization remain sluggish even as indicators of technological integration—the number of Internet hosts, online users, and secure servers—continue to grow exponentially? The data from our broad spectrum of developed and developing markets suggest that global economic integration has wound down to something of a crawl. The drop in total trade to and from the 50 countries surveyed weighs particularly heavy in this slowdown. The chief culprit was the series of financial crises that rippled through Southeast Asia, Latin America, and Russia in the late 1990s. Strong growth in portfolio investments and foreign direct investment helped to moderate these declines, and the value of world trade has rebounded since 1999. As a result, we see a situation in which economic globalizatio n slowed even as technological globalization continued at a rapid clip [see chart]. Some nations have pursued integration with the rest of the world more aggressively than others. The most globalized countries are small nations for which openness allows access to goods, services, a nd capital that cannot be produced at home. In some cases, geography has played an important role in sustaining in tegrated markets. The Netherlands, for instance, benefits from (among many other factors) i ts position at the he ad of the Rhine, which knits together countries that account for almost three quarters of total Dutch trade. In other cases, such as Sweden and Switzerland, relatively small domestic markets and highly educated workers have given rise to truly global companies capable of competing any where in the world. And a host of other factors has contributed to the globalization of oth er small sta tes. Austria, for example, benefits from heavy travel and tourism, while remittances from l arge populations living abroad contribute to Ireland's integration with the outside world. Tiny Singapore stands out clearly as the world's most global country [see chart]. The count ry far outdistances its nearest rivals in terms of cross-border contact between people, wit h per capita internat ional outgoing telephone traffic totaling nearly 390 minutes per year. Singapore also boasts a stea dy stream of international travelers, equal to three times its total population. In contras t, the United States h osts only one sixth that level of international tourists and travelers and can claim less than one fourth the per capita outgoing international telephone traffic. Yet in recent years, Singapore has struggled to maintain high levels of trade, foreign inve stment, and portfolio investment, which help support its globalization lead. The Asian flu is partly to blame, s ince the financial crisis undermined the entire region's economic performance. But Singapor e's slow progress in privatizing state industries, its failure to win endorsement for a regional fr ee-trade agreement, an d its tight controls over Internet development have also slowed its integration with other countrie s. Another country that ranks high on the Globalization Index is the Netherlands. But here, th e story is largely economic. Within only a few short years, the Dutch have both invested he avily in other countr ies and seen foreign participation in their own economy rise to levels that few other natio ns have been willing or able to sustain. In the wake of aggressive reforms that hav e stripped regulatio ns and enhanced labor flexibility, foreign investment increased from 8 percent of gross dom estic product (GDP) in 1995 to more than 19 percent of GDP in 1998. Likewise, portf olio investments gre w from only 5 percent to more than 30 percent over the same period, the highest levels in t he world—more than double those in France and Germany and five times higher than those in the United Ki ngdom. With Sweden and Finland riding the wave of Internet development to similar gains in integra tion with the rest of the world, the current globalization rankings may well be in flux. Si ngapore could slip fr om the lead in the coming years, as countries that are better positioned to benefit from global communications technologies or that are more aggressive about reforms to attra ct foreign trade and investment develop stronger ties with their neighbors. Yet despite signs of greater openness among these few leading countries, many others remain stalled at much lower levels of integration, with little indication of imminent change. Thus, there is rea son to believe that the countries at the top of the rankings are only running further and further away from the pack. Digital Divides : The Digital Abyss Not all countries around the world have participated equally in the transition to the new g lobal economy. As the chart below indicates, the digital divide between developed and emerg ing-market countries is now more like a digital abyss. On many relevant measures—from the diffusion of Internet users to the number of Internet hosts—the vast majority of economic activity related to information and communications te chnologies is concentrated in the industrialized world. But among industrialized countries, another digital divide exists. The Internet has penetrated deep ly in the United States, with neighboring Canada not far behind. In both countries, over 25 percent of the population enjo yed Internet access by 1998 (the last year for which data are available for all countries in the su rvey). More recent estimates put that number above 40 percent in both countries. Perhaps more impor tant, the United States and Canada lead the world in secure servers suitable for electronic commerce, signifying that thei r well-developed Internet networks can be used effectively to enhance commercial activities as well as personal communicat ion. In addition to the United States and Canada, Scandinavian countries also rank among the wor ld's most wired nations. Thirty-nine percent of Sweden's population was online in 1998, growing to 44 percent in more rec ent surveys. Finland and Norway led in Internet hosts, each with more than 70 servers per 1,000 inh abitants connected directly to the World Wide Web. Indeed, if any region of the world exemplifies the changing face of global integration, that region is Scandinavia, where Sweden, Finland, and Norway have turned their traditional engineerin g and manufacturing pr owess to work in the information technology boom while further opening their countries to trade and investment flows. Scandinavia's technological takeoff should come as little surprise. In the last century, Sw eden was among the first countries to realize the full potential of the telephone. It offer ed a means of mitigat ing distance in often sparsely populated lands. Thirty years ago, Sweden's leading technolo gy company, Ericsson, was among the pioneers in mobile telephony, and this decade the count ry has embraced Inter net technologies far ahead of the curve. Stockholm, with nearly 60 percent of its populatio n online, is perhaps the most wired city in the world. In similar ways, neighboring Finland suggests the possibilities of this Internet-led revolution. In 1995, Finland topped all others in terms of Internet access. Information technology made it possib le for Finnish companie s to respond to competitive pressures by diversifying both their export markets and their workforce. Recent studies show that over one quarter of Finnish exports now go to co untries beyond Europ e, up from less than one fifth in 1990. And nearly half the staff of Finland's 30 largest c ompanies now operate overseas, as compared to only 15 percent in 1983. Although oth er countries have si nce pulled ahead in levels of Internet penetration, Finland has witnessed rising levels of trade and investment that have pushed it into the fifth position overall in the Globalizati on Index, mu ch higher than it would have placed only a few years ago. One other symbol of success: The market capitalization of Nokia, Finland's global telecommunications giant, is now higher th an the country's gros s domestic product. The fact that Sweden, Finland, and the rest of Scandinavia have been able to nurture fast-moving te chnological developments with their traditionally lumbering regulatory and tax regimes offe rs an unexpected contr adiction, confusing traditional assumptions about how high levels of regulation imp ede globalization. But what about areas of relatively high regulation where no technologica l takeoff has yet be en achieved? Look no further than continental Europe to see the negative effects of an unfa vorable business climate on integration. Indeed, most of the countries in the euro zone, weighed down b y their relatively low scores in Internet development, rank at the bottom of the top 20 glo balized countries. Concerns about the disparities between industrialized and developing countries, especially with res pect to Internet access and use, have touched off a worldwide debate about the global digit al divide. Rather than a division between developed and developing countries, however, the divide at this moment reflects the vast technological advances in North America and the Scandinavian coun tries compared with the rest of the world. Together, those two regions stand on one side of a gaping digital ch asm that appears to have left much of the remaining world behind. If this "digital abyss" is to be bridged, developing nations have the most ground to cover. But deciding how to use their limited resources poses a difficult dilemma. Malaysia offers but one example of t he perverse choices that can ensue. In an effort to attract investment and develop its high-technology capabilities, Malaysia has spent more than U.S. $3.6 billion on its Multimedia Super Corridor. At th e same time, over 70 percent of the nation's primary schools lack computer facilities, and almost 1 0 percent lack proper connections for water and electricity. The result is an impressive in frastructure not suffi ciently supported by human capital. For other countries, Internet development cannot proceed unless more fundamental concerns about inf rastructure are addressed. In Chile, one of the most prosperous emerging markets, 57 percen t of the fixed telepho ne lines and 58 percent of the mobile-phone subscribers are located in the capital city, leaving mo st of the country without Internet access. And Africa's underdeveloped telecommunications sector ha s left much of that con tinent without reliable connections to the World Wide Web. For instance, the Democratic Rep ublic of the Congo still has no direct link to the Internet, and a large number of African countries can count n o more than a few hundred active Internet users. Globalization and Inequality More Equal Than Others Antiglobalization critics frequently claim that globalization increases income inequality. This assertion is elegant in its simplicity, but it ignores a host of other important factors. The level of income dispar ity in an economy might have more to do with history, economic growth, price and wa ge controls, welfare programs, and education policies than it does with globalization or trade libe ralization. Moreover, the empirical evidence suggests a very different story about income disparity and globali zation [see chart]. Emerging-market countries that are highly globalized (such as Poland, Israel, t he Czech Republic, and Hungary) exhibit a much more egalitarian distribution of income than emerging-market natio ns that rank near the bottom of the Globalization Index (such as Russia, China, and Argentina). The re are some exceptions: Malaysia, for instance, is more globalized but less equal than Poland. But the general pat tern of higher globalization and greater income equality holds for most countries, both in mature e conomies and emerging markets. Globalization, Freedom, and Corruption These findings should reinvigorate the debate over whether countries are poor and unequal because of globalization, or because they are not globalized enough. Moreover, efforts to redress global inequality should be tempered with the recognition that many countries with skewed income distribution patterns, including Brazil and Nigeria, also have large populations. That only underscores the difficulty of pulling the mass of humanity out of poverty. A CAT Scan of Globalization Trade, foreign direct investment, international telephone calls, Internet servers—considered individually, statistics on each of these phenomena are accurate, albeit insufficient, measures of global interdependence. Yet, just as a cat scan creates a three-dimensional image of the human anatomy from a series of two- dimensional images, the A.T. Kearney/FOREIGN POLICYMagazine Globalization Index TM provides a comprehensive view of global integration through an analysis of its component parts. There is, of course, an irony associated with trying to measure globalization on a nation-by-nation basis. Even the least integrated countries are being drawn together by new forces beyond their ability to control, whether it is global warming, the spread of infectious diseases, or the rise of transnational crime. And some of the most significant aspects of globalization—the spread of culture and ideas—cannot be easily quantified. These and other challenges highlight the need for a closer and more refined examination of the forces driving global integration, not to mention further refinement of the tools used to measure it. Want to Know More? Copyright 2001, A.T. Kearney, Inc. and the Carnegie Endowment for International Peace. All rights reserved. A.T. Kearney is a registered service mark of A.T. Kearney, Inc. FOREIGN POLICY is a trademark owned by the Carnegie Endowment for International Peace. End<{{ T' A<>E<>R Forwarded as information only; no endorsement to be presumed + + + + + + + + + + + + + + + + + + + + + + + + + + + + In accordance with Title 17 U.S.C. section 107, this material is distributed without charge or profit to those who have expressed a prior interest in receiving this type of information for non-profit research and educational purposes only. + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Integrity has no need of rules. -Albert Camus (1913-1960) + + + + + + + + + + + + + + + + + + + + + + + + + + + + The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust ~~~~~~~~~~~~~~~~~~~~ The libertarian therefore considers one of his prime educational tasks is to spread the demystification and desanctification of the State among its hapless subjects. 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