Despite modest gains since 2009, global connectedness has yet to recapture its pre-crisis peak, the slowdown in globalization a detriment to economic growth, according to the newly released DHL Global Connectedness Index 2012 (GCI).
The report, drawing on data gathered from 2005 to 2011, concludes that the world today is less globally connected than it was in 2007. It documents how global connectedness—measured by international flows of trade, capital, information, and people—grew robustly from the report’s baseline year of 2005 to 2007, and then dropped sharply at the onset of the financial crisis.
“The GCI 2012 indicates that today’s volatile and uncertain business environment bears the lasting impact of the financial crisis,” said Frank Appel, CEO of Deutsche Post DHL. “Especially in this period of slow growth, it’s important to remember the tremendous gains that globalization has brought to the world’s citizens and to recognize it as an engine of economic progress. Above all, governments must resist protectionist measures that hinder cross-border interactions.”
The index also showed that at present, the world is less than 20 percent globalized—often even less than 10 percent—with 50 percent to 60 percent of international flows occurring within regions.
The Netherlands retained its 2010 position as the world’s most connected country. Of the top 10 most connected countries in 2011, nine of them are located in Europe. “Europe’s high level of global connectivity points to one of the greatest achievements of European integration,” said Appel.
The countries with the largest increases in their global connectedness scores from 2010 to 2011 are Mozambique, Togo, Ghana, Guinea and Zambia—all of which are located in Sub-Saharan Africa. While this region remains the world’s least connected, it averaged the largest connectedness increases from 2010 to 2011.
Professor Pankaj Ghemawat, author of the index, said they arrived at two critical observations during their data analysis. “First, cross-border flows are significantly lower than commonly perceived, and second, every country—even the Netherlands—has untapped possibilities to benefit from more connectedness. At a time of economic weakness, this represents one of the most powerful levers available for boosting growth.”
He added: “The benefits of expanding merchandise trade are much larger than traditional models indicate. Adding to that the gains from services trade and other kinds of cross-border flows, the estimated economic benefits double to at least 8% of global GDP.”
On industry-level connectedness, the report concludes that it is being shaped by the continued shifting of the economic center of gravity to the east. The migration of production and consumption to emerging markets has specific implications for the three industries highlighted in the report: pharmaceuticals, passenger cars, and mobile phones.
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