Globaloney

The Economist article

GEOFFREY CROWTHER, editor of The Economist from 1938 to 1956, used to advise young journalists to “simplify, then exaggerate”. He might have changed his advice if he had lived to witness the current debate on globalisation. There is a lively discussion about whether it is good or bad. But everybody seems to agree that globalisation is a fait accompli: that the world is flat, if you are a (Tom) Friedmanite, or that the world is run by a handful of global corporations, if you are a (Naomi) Kleinian.

Pankaj Ghemawat of IESE Business School in Spain is one of the few who has kept his head on the subject. For more than a decade he has subjected the simplifiers and exaggerators to a barrage of statistics. He has now set out his case—that we live in an era of semi-globalisation at most—in a single volume, “World 3.0”, that should be read by anyone who wants to understand the most important economic development of our time.

Mr Ghemawat points out that many indicators of global integration are surprisingly low. Only 2% of students are at universities outside their home countries; and only 3% of people live outside their country of birth. Only 7% of rice is traded across borders. Only 7% of directors of S&P 500 companies are foreigners—and, according to a study a few years ago, less than 1% of all American companies have any foreign operations. Exports are equivalent to only 20% of global GDP. Some of the most vital arteries of globalisation are badly clogged: air travel is restricted by bilateral treaties and ocean shipping is dominated by cartels.

Far from “ripping through people’s lives”, as Arundhati Roy, an Indian writer, claims, globalisation is shaped by familiar things, such as distance and cultural ties. Mr Ghemawat argues that two otherwise identical countries will engage in 42% more trade if they share a common language than if they do not, 47% more if both belong to a trading block, 114% more if they have a common currency and 188% more if they have a common colonial past [..].

That FDI fell from nearly 2 trillion dollar in 2007 to 1 trillion dollar in 2009 can be put down to the global financial crisis. But other trends suggest that globalisation is reversible. Nearly a quarter of North American and European companies shortened their supply chains in 2008 (the effect of Japan’s disaster on its partsmakers will surely prompt further shortening). It takes three times as long to process a lorry-load of goods crossing the Canadian-American border as it did before September 11th 2001. Even the internet is succumbing to this pattern of regionalisation [..]

Mr Ghemawat also explodes the myth that the world is being taken over by a handful of giant companies [..] He also refutes the idea that globalisation means homogenisation. The increasing uniformity of cities’ skylines worldwide masks growing choice within them, to which even the most global of companies must adjust. McDonald’s serves vegetarian burgers in India and spicy ones in Mexico, where Coca-Cola uses cane sugar rather than the corn syrup it uses in America.

Mr Ghemawat notes that company bosses lead the pack when it comes to overestimating the extent of globalisation. Nokia, for example, spent years trying to break into Japan’s big but idiosyncratic mobile-handset market with its rest-of-the-world-beating products before finally conceding defeat [..]

This sober view of globalisation deserves a wide audience. But whether it will get it is another matter. This is partly because “World 3.0” is a much less exciting title than “The World is Flat” or “Jihad vs. McWorld”. And it is partly because people seem to have a natural tendency to overestimate the distance-destroying quality of technology. Go back to the era of dictators and world wars and you can find exactly the same addiction to globaloney. Henry Ford said cars and planes were “binding the world together”. Martin Heidegger said that “everything is equally far and equally near”. George Orwell got so annoyed by all this that he wrote a blistering attack on all the fashionable talk about the abolition of distance and the disappearance of frontiers—and that was in 1944, when Adolf Hitler was advancing his own unique approach to the flattening of the world.