Globalisation tops pre-GFC peak

Global logistics company DHL has released the fourth edition of its Global Connectedness Index (GCI), a tool to measure the state of globalisation around the world.

The report shows that 'global connectedness' – measured by cross-border flows of trade, capital, information and people – has finally surpassed its pre-crisis peak during 2014 and continued to increase, but more slowly, in 2015.

“Globalisation has served as the world’s engine of progress over the past half century,” said Deutsche Post DHL Group CEO, Frank Appel.

“The GCI documents that globalisation has finally recovered from the financial crisis, but faces an uncertain future. It is imperative that policymakers and business leaders support an environment in which globalisation can continue to flourish and improve the lives of citizens around the world.”

According to GCI, preliminary data suggests that the world was about eight per cent more connected in 2015 than in 2005.

Research on the GCI was led by internationally acclaimed globalisation expert Pankaj Ghemawat, who highlighted again how emerging economies still lag behind on global connectedness.

“Advanced economies are about four times as deeply integrated into international capital flows, five times as much on people flows, and nine times with respect to information flows,” Ghemawat commented.

The Netherlands retained its top rank as the world’s most connected country and Europe is once again the world’s most connected region. All but two of the top 10 most globalised countries in the world are located in Europe, with Singapore and the United Arab Emirates as the standouts.

In an accompanying article to the GCI report, Gehemawat explained that the future of globalisation is “shrouded by an unusual amount of ambiguity”. “..many saw the UK’s vote this past June to leave the European Union as a clear signal that globalisation was heading into retreat,” he said.

“While it is still too soon to measure the effects of Brexit on global connectedness, my two laws of globalisation provide some perspective. My law of semiglobalisation, which calls attention to the importance of national borders, reminds us that the UK’s international flows are small enough that even under a worst-case scenario, the result would be a blip at the global level.

“And my law of distance implies that the largest effects beyond Britain’s borders will be felt by the (rest of the) European Union. How the EU responds and, specifically, whether it continues to hold together is what is much more consequential at the global level.”

Ghemawat added for a country to be globally connected, it must have both large international flows relative to the size of its domestic economy – a measure DHL refers to as ‘depth’ – and its international flows must be distributed globally rather than narrowly focused, which DHL refers to as ‘breadth’.

“The index shows that the depth and breadth of globalisation are also much lower than most people presume, suggesting an opportunity to correct misperceptions and apprehensions that underlie at least some of the current anger about globalisation,” Ghemawat added.

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