Measuring Globalization

DHL Global Connectedness Index

Two economists, Pankaj Ghemawat (New York University’s Stern School) and Steven Altman (IESE Business

School) compiled DHL Global Connectedness Index using data from 140 countries, which account for 99% of the

world’s GDP and 95% of its population. It shows that, after a big post-crisis drop, the trend of growing global

interconnection resumed last year. Globalisation is back.

There are many definitions of globalisation, and the index uses one that is fairly all-embracing. It encompasses four

main types of cross-border flow: trade (in both goods and services), information, people (including tourists,

students and migrants) and capital. It tracks not just the depth of international connections (how much activity

crosses borders), but also their breadth (how many different borders are being crossed) and their direction

(how do outward and inward flows compare).

Source: Economist

DHL Global Connectedness Index

The authors found that the depth of global integration, probably the most straightforward definition of globalisation, fell

sharply after 2008, by nearly one-tenth. Yet since then it has recovered strongly. By 2013 it was well above its pre-crash

peak.

By contrast, the breadth measure continued to slide in 2013, and is now nearly 5% below its peak - there are more cross-

border connections being made, but with fewer places. This may reflect the growing popularity of bilateral trade deals in

the absence of big multilateral liberalisations. Another factor may be Western firms’ slow response to the growing

weight of emerging economies.

In 2013 emerging economies generated only 17% of the profits of 100 of the biggest

firms based in rich countries, even though they accounted for 36% of the world’s GDP.

The ten countries that globalised most in 2013 are all emerging markets, most of them

in Latin America and the Caribbean.

Source: Economist

DHL Global Connectedness Index

As the chart shows, the globalisation of information, measured by such things as the number of cross-border phone calls and Skype

usage, slowed after the crash but did not fall, and accelerated again in 2013.

Capital flows remain below pre-crisis levels, however. Trade in goods and services plunged in the aftermath of the crash, rebounded a

bit, and then started sliding again, when measured by value (volumes are rising, albeit sluggishly).

Source: Economist

How worrying is the decline in trade?

The economists calculate that the lower share of traded goods and services in total output is largely a function of

sluggish global demand, and predict that as the world economy strengthens trade will too.

There is evidence that protectionism is growing. Global Trade Alert says that since 2008, over 70% of the changes

to trade rules around the world have curbed trade, rather than spurring it. The WTO, which is supposed to resist and

reverse such measures, has struggled to do so.

Encouragingly on November 13th India and America resolved a dispute over Indian

agricultural subsidies, paving the way for a long-stalled WTO plan to dismantle barriers to

trade. The WTO projects that the deal, its first global pact in 20 years, will boost the world

economy by as much as $1 trillion.

DHL Global Connectedness Index

Source: Economist

DHL Global Connectedness Index

How worrying is the decline in trade?

Meanwhile trade negotiators are becoming more open to building “coalitions of the willing” rather than waiting for a

global consensus. This would be a new approach for the WTO, but it has the backing of its boss, Roberto Azevêdo.

Smaller deals do make progress:

China and America agreed to reduce tariffs on IT products in concert with other like-minded countries.

Trade is also one of the few areas in which co-operation seems possible between Barack Obama and

the Republicans who will soon control both houses of Congress. The announcement by China (also on

November 11th) of plans for a new free-trade zone in Asia and the Pacific may help to concentrate

minds in Washington. Negotiations over a rival American scheme, the Trans-Pacific Partnership, are

two years behind schedule.

Source: Economist

DHL Global Connectedness Index

There is certainly plenty of scope for further globalisation.

DHL’s index shows that whilst advanced economies tend to be more interconnected than emerging economies, only a

handful of small, wealthy places are deeply interconnected, including Singapore, Hong Kong and Luxembourg.

Past episodes of deglobalisation suggest that political pressure to retreat from the world builds slowly but is also slow

to dissipate. That seems to be the case this time too, in many European countries at least, where populist parties are

still growing in strength, even though the local economy has stabilised and, in most instances, started growing again.

The fact that globalisation is advancing again after such a calamitous crisis is encouraging, but further reversals are

perfectly possible.

Source: Economist

★ Introduction ★ DHL GCI Index- Key countries/cities- Methodology- Trends★ A. T. Kearney Index- Definition and key facts- Global cities index and Global cities outlook (+

example of our home countries)- Global elites and Smart cities★ Conclusion

Introduction

Why is it important to measure globalization?

Most people agree with the definition of globalization, but few of them have undertaken the task of trying to measure the levels of globalization

http://www.youtube.com/watch?v=9eZsfW01pS4

DHL- Key Countries and Cities

DHL Global Connectedness Index -Methodology

❖ 140 countries, 95% of world population, 99% of world GDP.

❖ “GLOBAL CONNECTEDNESS REFERS TO THE DEPTH AND BREADTH OF A COUNTRY’S INTEGRATION WITH THE REST OF THE WORLD, AS MANIFESTED BY ITS PARTICIPATION IN INTERNATIONAL FLOWS OF PRODUCTS AND SERVICES, CAPITAL, INFORMATION, AND PEOPLE.”

❖ Four Pillars: Trade Flows (Products and Services), Investment Flows (Capital), Information Flows, and People Flows

❖ Measured based on depth and breadth

DHL- Depth and Breadth

Depth

It measures how much of a given type of activity that could take place either within or across national borders is international rather than domestic.

Breadth

It is the extent to which a country's international flows are spread out globally versus confined to a particular set of partner nations.

Even more methodology...

After all data has been collected, the individual components are added together to get the four pillars (step 1). This is done for both breadth and depth, as shown. Then scores for these two dimensions are computed (step 2). Lastly, to obtain a score between 0 and 100, the two dimensions are rescaled to be between 0 and 50, and in the last step they are added together (step 3).

Methodology - Continued

DHL-Global connectedness trends

Statistics from our home countriesDHL INDEX

Main points from the 2016 report

1. The level of globalization surpassed its pre-crisis peak in 20142. Most international trade happens within regions, not between them3. Europe is the most connected region in the world. Brexit?4. For the rest, go to dhl.com

Why ? More than 50%

of world population

live in cities and

countries urbanize

rapidly.

What’s a global city ? Ability to attract

and to retain global capital, people, ideas

and a sustainable performance.

2050 : ⅔ of population

A.T Kearney Globalization Index

“A unique and powerful tool for understanding the forces shaping today’s world”

A.T Kearney Globalization Index

GLOBAL CITIES INDEX

2 Parts

GLOBAL CITIES OUTLOOK

Collects datas since 2008

to track progress. It takes a look at the world’s most influential cities as well as those that are likely to become more important on the global stage

125 cities

62 countries (including developed and developing countries)

96% of the

world’s

GDP

84% of the

world’s

population

Global Cities Index : “Perfect Cities”

Current performance of cities based on 27 metrics

5 dimensions :

- Business activity- Human capital- Information exchange - Cultural experience- Political engagement

Insight into the current global reach, performance and level of development of the world’s largest cities

Global Cities Outlook : “Fastest cities”

Evaluates city’s future potential based on the rate of change for 13 metrics

4 dimensions :

- Personal well-being- Economics- Innovation- Governance

Evaluates long-term investment and success

Forward-looking perspective that shape future competitiveness

Difference between City Index and City Outlook : example of our home countries

Different dimensions, different ranks

City Global cities index

Rank

Global cities outlook

Rank

Paris 3 13

Madrid 13 48

Copenhagen 21 42

TOP 15 : “The Global Elites”

8,8 millionsof inhabitants

7,4 trillionsdollars of global GDP

The only two cities in both top 10 (City index and city

outlook)

15 cities rank in

the top 25 of

City index and

City Outlook

New focus : “Smart cities”

Crucial point of differentiation between developed and emerging economy performances.

Supported by India, the USA, China and the EU ( but not a standard yet)

What is it ? City with

technology as core

of its development

strategy

5

dimensions

2 dimensions

of Outlook

Index

3 dimensions

of City index

Conclusion : Comparison of the two

DHL GCI Index

➔ Measures connectedness of both cities AND countries, A.T. Kearney is only focused on cities.

➔ Wider reach than A.T. Kearney -140 countries (99% of world GDP) as opposed to 62 countries (96% of world GDP)

A.T. Kearney Index

➔ Looks to the future (in ‘outlook’ section), whereas DHL GCI only takes a snapshot of globalization today.

➔ Measures more factors than DHL GCI - for example political activity and citizens’ personal well-being.

Sources

● http://www.dhl.com/en/about_us/logistics_insights/studies_research/global_connectedness_index/global_connectedness_index.html#.VFff5MkpXuM

● http://creative-commons-images.com/handwriting/a/agenda.html● http://www.dhl.com/content/dam/downloads/g0/about_us/logistics_in

sights/gci_2016/DHL_GCI_2016_Methodology.pdf● https://pxhere.com/en/photo/1092759● https://www.atkearney.com/global-cities/full-report