Measuring Globalization: Who's Up, Who's Down?

Two years ago, we created an index that measures a country's global links, from foreign direct investment to international travel, telephone traffic, and Internet servers. For the last two years, Singapore and Ireland have topped our ranking of political, economic, and technological integration in 62 countries. Find out who was the most global of all and how September 11 affected global integration in the 2003 A.T. Kearney/FOREIGN POLICY Magazine Globalization Index.

JANUARY 1, 2003

Last year's A.T. Kearney/FOREIGN POLICY Magazine Globalization Index offered a "before" photo on a worldwide scale -- a snapshot of global integration prior to the September 11, 2001, attacks. This year's index, in turn, gives a glimpse of the developing "after" image -- an opportunity to assess the initial impact of the attacks on a process that many analysts see as the driving force of our times.

Certainly the smoke over the World Trade Center had yet to clear before the attacks by al Qaeda had become a powerful symbol in the debate over globalization. For the antiglobalization movement, September 11 was a gruesome vindication of its argument that global integration had widened the gap between the haves and have-nots, and in doing so created resentment that exploded with the destruction of one of the most famous icons of Western capitalism. For others, the message was entirely opposite, and the solution was not less globalization but more. U.S. Federal Reserve Board Chairman Alan Greenspan, in a speech shortly after the attacks, declared that "globalization is an endeavor that can spread worldwide the values of freedom and civil contact -- the antithesis of terrorism." But even as both sides of the political spectrum reached opposite conclusions, they agreed on one point: The collapse of the twin towers was a body blow to what was seen, in some quarters, as an almost unstoppable force.

This year's ranking of global integration among 62 countries (representing 85 percent of the world's population) offers a dissenting view. To be sure, 2001 saw a dramatic downturn in some of globalization's most visible drivers, from foreign direct investment (FDI) to international travel and tourism. In many cases, however, not only was a slowdown already in train before the attacks, but prompt response by policymakers to September 11 helped dissipate the negative economic effects. Moreover, globalization involves far more than the ebb and flow of economic cycles. That's why the A.T. Kearney/FOREIGN POLICY Magazine Globalization Index makes use of several indicators spanning information technology (IT), finance, trade, personal communication, politics, and travel to determine a country's ranking. And, in addition to giving each nation an overall score, we provide a multifaceted view of a country's level of global integration by combining these indicators into four subcategories: economic integration, technology, personal contact, and political engagement.

What emerges from a close look at this year's index is a much more nuanced portrayal than that captured in the stagnation or decline of FDI, trade, and passenger arrivals and departures. For instance, globalization's leading economic indicators lagged, but levels of political integration shot up, spurred in part by cooperation in the war on terrorism and the continuing integration of Russia and China into the international system. Even the much lamented global economic slowdown had an uneven effect. Western Europe saw its level of economic integration decline dramatically, but Ireland remained, for the second year running, the world's most globalized country, and Eastern Europe bucked the continental trend with expanded volumes of trade. Singapore slipped from third to fourth in this year's ranking, but Southeast Asia remains the most economically integrated region among the emerging markets. And around the world, travelers who were unable or unwilling to go abroad still kept the lines of communication open through the expanded use of telephones and the Internet.

To say that al Qaeda's attacks failed to untangle globalization's web is not to say globalization was unaffected. But overall, the picture that emerges is one of September 11 as symptom, rather than cause, of the stresses inherent in the deepening of global integration.

Half Empty or Half Full?
Last year's Globalization Index recorded new highs for global integration, as 2000 capped a decade of dramatic expansion in global economic flows and political engagement, as well as the increased mobility of people, information, and ideas.

This momentum slowed as the United States, Japan, and Europe experienced simultaneous economic slumps. World economic growth, for example, plummeted from 4 percent in 2000 to 1.3 percent in 2001. But sluggish economies had been a problem well before September 11. Moreover, despite the shock of the attacks, particularly to sectors such as aviation and tourism, the Organisation for Economic Co-operation and Development noted that half a year later, "the direct economic effects seem to have largely vanished," thanks in part to the rapid response of central banks worldwide, which aggressively lowered interest rates.

More fundamentally, the retreat of economic globalization must be put in the context of its tremendous advance over the last few years. Consider 2001's stunning drop in levels of FDI, which fell more than 50 percent worldwide from $1.49 trillion to $735 billion, due in large part to a steep decline in cross-border mergers and acquisitions. In nominal terms (not adjusted for inflation), however, the total flows were still higher than any other year before 1999. And when viewed as a share of global economic output (as calculated in the Globalization Index), FDI flows in 2001 were nearly double their level in 1995.

 

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