The Reflection Cafe: FP / The Globalization Index 2007

Foreign Policy, Nov-Dec 2007
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The world may not be flat for everyone, everywhere, but there’s no turning back the clock on globalization. For the seventh year, FOREIGN POLICY partners with A.T. Kearney to measure countries on their economic, personal, technological, and political integration. Find out who’s climbing the ranks, and who’s sliding down.
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Never before have the forces of globalization been so evident in our daily lives. An estimated 2 billion people witness Live Earth, a series of concerts held in 11 locations around the world to raise environmental awareness. Chinese manufacturers decorate toys with paint containing lead, and children around the world have to give up their Batmans and Barbie dolls. Mortgage lenders in the United States face a liquidity crunch, and global stock markets go berserk. Good, bad, and ugly—the effects of our supposedly “flattened” world are undeniable. But just how strong are these ties that bind? As former U.N. Secretary-General Kofi Annan once remarked, “Globalization is a fact of life. But I believe we have underestimated its fragility.”

That fragility is particularly apparent in this edition of the Globalization Index, the seventh annual collaboration between FOREIGN POLICY and A.T. Kearney. This year’s index draws on data from 2005, a year that, on the surface, exemplified the limitations of globalization’s reach. It began with the fallout from the devastating Indian Ocean tsunami, which left at least 300,000 dead, in part because there was no transnational network for emergency alerts in the region. Eight months later, similar scenes unfolded when Hurricane Katrina hit New Orleans, where the benefits of globalization failed to reach the poorest citizens of the world’s wealthiest country. Not long afterward, an earthquake devastated Pakistan-administered Kashmir, where officials put the death toll at 75,000, with more than 2.5 million left homeless.

The limits of globalization weren’t evident only against the backdrop of natural disasters; there were political fault lines, too. Sectarian violence continued to escalate in Iraq. Iran traded the conciliatory Mohammed Khatami for a more isolationist president, Mahmoud Ahmadinejad, who called for Israel to be “wiped off the map.” North Korea announced it had nukes. Voters in France and the Netherlands rejected a new European Constitution. And four suicide bombers terrorized London on July 7 with coordinated attacks on public transportation.

Despite the turmoil in many parts of the world, nations did prove they could play nice with each other. The Middle East was home to some unexpected moments of cooperation, with Israel’s withdrawal from settlements in Gaza and the West Bank, and Syria’s pulling its forces from Lebanon after a 29-year occupation. On the economic front, cooperation in regional trading blocs grew, even as the Doha round of global trade talks continued to stumble. The United States approved a free trade agreement with the Dominican Republic and Central American nations, and Southeast Asian economies implemented several bilateral agreements of their own.

The inevitable push and pull of globalization plays out in the index’s rankings, which incorporate indicators such as trade, foreign direct investment, participation in international organizations, travel, and Internet usage to determine rankings of countries around the world. This year, we added 10 states to the original list of 62 in an effort to expand representation from various regions. Together, the 72 countries account for 97 percent of the world’s gross domestic product and 88 percent of the world’s population. The index measures 12 variables, which are grouped into four “baskets”: economic integration, personal contact, technological connectivity, and political engagement.

The results provide an assessment of how much, or how little, countries are opening themselves up and connecting with others. For example, the International Convention for the Suppression of the Financing of Terrorism welcomed new participants including Argentina, Brazil, Egypt, and Ireland, which boosted their political engagement scores. On the other hand, many countries made fewer contributions to U.N. peacekeeping, both in terms of financial aid and personnel—showing that even the most globalized countries face challenges in maintaining openness.

Cultural factors can curb the benefits of globalization, too. For instance, France’s collective nationalism tilts the scale in favor of home-grown agriculture, and the United States’ fears of terrorism make foreign management of ports an unpalatable prospect—cultural clues that may partially explain why both countries have a relatively low economic ranking on the index. Perhaps the area of the world that bears the brunt of globalization’s economic failures is sub-Saharan Africa. Despite attempts to increase regional trade—Kenya, Tanzania, and Uganda launched an East African Community Customs Union that established common external tariffs—a large informal economy, accounting for more than half the workforce, makes it nearly impossible for governments to raise the revenue they need.

In 2005, the world’s richest nations took some steps to acknowledge that not everyone has reaped globalization’s rewards. As part of its summit in Gleneagles, Scotland, leaders of the Group of Eight industrialized nations pledged $40 billion worth of debt forgiveness and an additional $50 billion in foreign aid to Africa. They also promised more peacekeeping troops and assistance in eradicating disease. To date, Africa has seen more assistance in some areas than others. Ultimately, it may take several years to see if globalization and good intentions can make the world a little bit flatter.

The Winners’ Circle

For the fourth time in seven years, Singapore tops the list as the most globalized country in the world. But there was plenty of movement in the rest of the top 20. Many of the countries that previously ranked high fell off because of stiff competition from newcomers to the index. The top new addition was Hong Kong, which debuted in second place and distinguished itself with the highest scores in both the economic and the personal contact dimensions. The Netherlands made its way back into the top three for the first time since 2001, mostly due to the merger of the Royal Dutch Petroleum Company and Britain’s Shell Transport and Trading Company. Worth about $100 billion, the deal helped to increase foreign direct investment outflows for the Netherlands by more than 590 percent over the previous year. Meanwhile, the United States slipped four places in the overall rankings to end up at seventh. Although U.S. trade grew by 12 percent, foreign investment shrank by more than 60 percent, mostly due to the effects of the 2004 American Jobs Creation Act, which granted tax incentives for hiring domestically. Clearly, the forces of globalization can turn on a dime.
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