4.1.1 Measuring Globalization Notes

Global Interactions are Dynamic Processes Connecting Places

1. Global interactions include flows of goods and services, capital, technology, knowledge and information, cultural traits, and people.
2. These processes are dynamic and are neither inevitable nor universal.
3. Global interactions make places more interconnected and interdependent, but not always similar, they may increase or reduce the inequalities between places.

Assessing the Extent of Global Interactions

Global interactions make up globalization.

1. Formally, globalization can be defined as “the growing interdependence of countries worldwide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and through the more rapid and widespread diffusion of technology” (International Monetary Fund - IMF).
2. To measure and compare globalization across countries and cities, indices are used.
3. These indices provide insights into the patterns and trends of global connectivity, but are limited as the complexity of globalization is impossible to grasp in a single index.

Key Globalization Indices

1. KOF Globalization Index

1. The KOF Globalization Index is one of the most comprehensive tools for measuring globalization.
2. It evaluates countries based on three dimensions:
   1. Economic Globalization (33.3%) including
      1. Trade Flows: Value of imports and exports expressed as share of GDP.
      2. Foreign Direct Investment (FDI): Investment by foreign entities.
      3. Trade Restrictions: Tariffs and non-tariff barriers.
   2. Social Globalization (33.3%) including
      1. Information Exchange: Internet usage, freedom of press.
      2. Cultural Proximity: Presence of global brands like McDonald's and IKEA.
      3. Personal Contacts: International tourism and migration.
   3. Political Globalization (33.3%)
      1. Diplomatic Engagement: Number of embassies and consulates.
      2. International Organizations: Membership in bodies like the UN or WTO.
      3. Treaties: Participation in international agreements.

2. AT Kearney Global Cities Index

1. While the KOF Index focuses on countries, the AT Kearney Global Cities Index (GCI) evaluates cities as hubs of globalization.
2. GCI assesses the extent to which cities are able to attract, retain, and generate global flows of capital, people, and ideas.
3. It ranks cities based on:
   1. Business Activity: Presence of multinational corporations, financial markets, and trade.
   2. Human Capital: Education levels, international student population, and skilled workforce.
   3. Information Exchange: Media presence, internet connectivity, and technology infrastructure.
   4. Cultural Experience: Museums, sports events, and international cultural influence.
   5. Political Engagement: Influence in global governance and international diplomacy.

Patterns and Trends in Globalization

1. High Levels of Globalization in Europe and North America

1. Europe and North America (oftenly referred to as “The West”) traditionally and consistently rank as the most globalized regions.
2. Key factors include:
   1. Economic Performance: These places traditionally have been highly industrialized, being centers of innovations and investments.
   2. Economic Integration: The European Union (EU) facilitates free trade, labor mobility, and political cooperation.
   3. Cultural Exchange: High levels of tourism, migration, cultural exports, and information exchange.
   4. Political Engagement: Active participation in international organizations and treaties.

2. Rising Levels of Globalisation in East Asia, South-East Asia, and West Asia

1. After the Second World War Japan became the first country outside of “The West” to become industrialized and engage in global trade, as well as socio-cultural exchange and international politics.
2. Since the 1960s Newly Industrialized Countries (NICs) - Hong Kong, Republic of Korea (South Korea), Singapore, Taiwan - emerged as new centers of industrial growth, international trade, and financial flows.
3. After the 1990s other countries from East Asia (China) and South-East Asia followed the footsteps of the NICs.
4. Sometimes these countries are referred to as RICs - Recently Industrialized Countries.
5. In West Asia selected oil-rich countries of the Persian Gulf, e.g. The United Arab Emirates or Qatar also score relatively high in the KOF Index due to their role in international trade and financial flows.

3. Stagnating and Varying Levels of Globalization in Latin America

1. Latin American countries have been undergoing the process of industrialization for over a century.
2. However, their success and participation in globalization is influenced by political turmoil in the 20th Century and inconsistent economic policies.
3. Consequently, Latin American countries experience varying degrees of globalization.

4. Lower Connectivity and Lower Level of Globalization in Sub-Saharan Africa and South Asia

1. Sub-Saharan Africa and parts of South Asia tend to have lower globalization scores.
2. Contributing factors include:
   1. Economic Barriers: Prevailing poverty, limited trade infrastructure and lower levels of foreign direct investments (FDI).
   2. Political Instability: Conflicts and weak governance reduce international engagement.
   3. Social Challenges: Lower internet penetration and fewer cultural exchanges.

Trends in Globalization

1. Since the 1990s globalization worldwide has been on a rise.
2. Unprecedented connectivity due to changes in transport and communication, democratization, as well as adopting identical or very similar economic policies by multiple countries followed by promoting free trade and intensified cooperation led to an idea of “The Flat World”.
3. However, in recent years starting from the 2007-2009 global financial crisis, through US-China trade war, COVID-19 pandemic, Russian invasion on Ukraine, and the rise of extreme and populist right-wing policies in many Western countries there have been debates, if globalisation is at its end.
4. This issue is open for discussion and the outcome of economic, political, and environmental interdependence shaping the first half of the 21st is unknown and highly unpredictable.

Evaluating the Indices

1. Strengths

1. Comprehensive Analysis: Indices like KOF and AT Kearney GCI provide a detailed view of globalization across multiple dimensions.
2. Comparative Insights: They enable comparisons between countries and cities, highlighting regional disparities.
3. Data-Driven: These indices rely on quantitative data, ensuring objectivity and reliability.

2. Limitations

1. Weighting Bias: The choice of weights for different dimensions can influence rankings.
2. Data Availability: Incomplete or outdated data can affect accuracy, especially in developing regions.
3. Narrow Focus: Indices may overlook qualitative aspects of globalization, such as cultural diversity or environmental impacts.

Reflection and Broader Implications

1. Globalization indices are valuable tools for understanding the interconnectedness of our world.
2. However, they also raise important questions:
   1. Equity: How can less globalized regions benefit more from global integration?
   2. Sustainability: What are the environmental and social costs of globalization?
   3. Ambiguity: What is the relationship between positive and negative consequences of globalization?
   4. Cultural Identity: How can countries balance global influences with preserving local traditions?
   5. Longevity: Is globalization going to be continued in its current form?