Monday, July 11, 2011

Did you know?





That many indicators of global integration are surprisingly low. 
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Only 2% of students are at universities outside their home countries
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Only 3% of people live outside their country of birth. 
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Only 7% of rice is traded across borders. 
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Only 7% of directors of S&P 500 companies are foreigners
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— and, according to a study a few years ago, less than 1% of all American companies have any foreign operations. 
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Exports are equivalent to only 20% of global GDP. 
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Some of the most vital arteries of globalisation are badly clogged: 
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Air travel is restricted by bilateral treaties 
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Ocean shipping is dominated by cartels
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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. 
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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, 
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47% more if both belong to a trading block, 
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114% more if they have a common currency  
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188% more if they have a common colonial past.
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What about the “new economy” of free-flowing capital and borderless information? 
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Here Mr Ghemawat’s figures are even more striking. 
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Foreign direct investment (FDI) accounts for only 9% of all fixed investment. 
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Less than 20% of venture capital is deployed outside the fund’s home country. 
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Only 20% of shares traded on stockmarkets are owned by foreign investors. 
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Less than 20% of internet traffic crosses national borders.
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And what about the direction rather than the extent of globalisation? 
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Surely Mr Friedman (author of “The World is Flat”) and company are right about where we are headed even if they exaggerate how far we have got? 
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In fact, today’s levels of emigration pale beside those of a century ago, when 14% of Irish-born people and 10% of native Norwegians had emigrated. 
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Back then you did not need visas. 
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Today the world spends $88 billion a year on processing travel documents and in a tenth of the world’s countries a passport costs more than a tenth of the average annual income.
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That FDI fell from nearly $2 trillion in 2007 to $1 trillion in 2009 can be put down to the global financial crisis. 
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But other trends suggest that globalisation is reversible. 
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Nearly a quarter of North American and European companies shortened their supply chains in 2008 (the effect of Japan’s disaster on its parts makers will surely prompt further shortening). 
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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. 
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Even the internet is succumbing to this pattern of regionalisation, as governments impose a patchwork of local restrictions on content.
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Mr Ghemawat also explodes the myth that the world is being taken over by a handful of giant companies. 
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The level of concentration in many vital industries has fallen dramatically since 1950 and remained roughly constant since 1980: 
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60 years ago two car companies accounted for half of the world’s car production, compared with six companies today
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He also refutes the idea that globalisation means homogenisation.
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The increasing uniformity of cities’ skylines worldwide masks growing choice within them, to which even the most global of companies must adjust. 
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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. 
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MTV, which went global on the assumption that “A-lop-bop-a-doo-bop-a-lop-bam-boom” meant the same in every language, now includes five calls to prayer a day in its Indonesian schedules.
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Spot the difference
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Mr Ghemawat notes that company bosses lead the pack when it comes to overestimating the extent of globalisation. 
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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.
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In general companies frequently have more to gain through exploiting national differences—perhaps through arbitrage—than by muscling them aside.
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This sober view of globalisation deserves a wide audience. 
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But whether it will get it is another matter. 
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This is partly because “World 3.0” is a much less exciting title than “The World is Flat” or “Jihad vs. McWorld”. 
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And it is partly because people seem to have a natural tendency to overestimate the distance-destroying quality of technology. 
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Go back to the era of dictators and world wars and you can find exactly the same addiction to globaloney. 
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Henry Ford said cars and planes were “binding the world together”. 
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Martin Heidegger said that “everything is equally far and equally near”. 
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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—
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And that was in 1944, when Adolf Hitler was advancing his own unique approach to the flattening of the world.


Economist - Ghemawat

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