Globalization continues to feature prominently in political debates, business strategy deliberations, and in everyday life. The dialogue, however, is seldom backed up with hard data, the authors of a new report on global connectivity assert.
The new report from logistics giant DHL finds that the world is less globally connected today than it was in 2007, and global connectedness also falls far short of the levels commonly assumed by business executives and the general public.
Increasing global connectedness can be a powerful lever for improving prosperity, the report suggests and that limited and faltering global connectedness imply that strengthening countries’ connectedness offers large untapped potential to help accelerate economic recovery.
Global Connectedness is defined in the report as the depth and breadth of a country’s integration with the rest of the world as manifest by its participation in international flows of products and services, capital, information, and people.
Depth measures how much of a country’s activities or flows are international versus domestic by comparing the size of its international flows with relevant measures of its domestic economy. For example, to assess the depth of Hong Kong SAR (China)’s merchandise exports, its exports are compared to its GDP: Hong Kong’s merchandise exports-to-GDP ratio is 187%, the highest in the world and 37 times higher than Nepal’s (the lowest – only 5%).
Breadth complements depth by looking at how broadly the international component of a given type of activity is distributed across countries. To illustrate the importance of incorporating breadth into assessments of global connectedness, consider inbound tourism in the Bahamas. While the Bahamas ranks first in terms of the number of inbound tourists per capita (a depth metric), more than 80% of those tourists come from the United States. Thus, while depth of inbound tourism in the Bahamas is high, its breadth is limited, especially when one notes that less than 15% of outbound international tourists worldwide come from the United States.
The 2012 DHL Global Connectedness Index measures and analyzes the global connectedness of 140 countries, covering 99% of the world’s GDP and 95% of its population.