Measuring globalization

I am not a fan such indices, but here is an index that is innovative in that it tries to measure not just economic globalization, but also "social" and "political" globalization. You can use the site to query the data base and generate your own custom tables and charts. Report back your favorite anomaly in the rankings...

One problem with such indices is that they lump together things that are conceptually distinct and which represent answers to different questions. For example, the economic globalization index is based both on the actual volumes of trade and investment and on measures of how restrictive policies are. Outcomes and policies are equally weighted.

Now, I can think of questions to which volumes of trade and investment are the answer (e.g. "how much of domestic consumption is sourced from abroad?") and I can think of questions to which measures of policy are the answer ("how much has the government liberalized its trade regime?"). But I cannot think of any questions to which a weighted average of the two represents the appropriate answer.  

Comments

[Per Kurowski]

It seems OK, at least as a curiosity, but questions abound.

1. Income Payments to Foreign Nationals - total weight 3.6%. Income payments refer to employee compensation paid to nonresident workers and investment income (payments on direct investment, portfolio investment, and other investments). Income derived from the use of intangible assets is excluded. Data are in percent of GDP.

Q. And I would have to ask what about the earnings of those real globalization champions, the migrant worker community? Those from El Salvador that live in the USA have gross earnings that exceed the GDP of El Salvador.

2. Foreign Population (percent of total population) / total weight 2.96%

Q. And is not your population living and working abroad even more significant? Who is more globalized the one who in the US employs a gardener from Honduras or the Honduran gardener?

3. Internet Users (per 1000 people) – total weight 2.85%

Q. Does it really have to do with the number of users or viewing the content of others? A Venezuelan checking up on the last escapades of Lindsay Lohan might be globalized but is this so for a Californian web surfer?

4. Data on Cultural Proximity = number of McDonald's Restaurants and Ikea (per capita).

Q. Hold it there…culture? What about salsa, merengue, tango, bachata, vallenato, boleros and the other real cultural icons?

5. Political Globalization = Embassies in Country, Membership in International Organizations, Participation in U.N. Security Council Missions. – Total weight 25%

Q. Is it there in order to give some consolation points? Anyone has got to be better than North Korea.

[Ken Houghton]

The Economist has never suggested The Dance Standard as a way to compare countries. There might be something more appropriate and the name is clearly incorrect (though my wife took a great picture of a McDonald's in Indonesia once; Ronald looks like Buddha), but the measure is clearly valid as a globalisation question.

[Bersi]

The index is a good attempt to measure a term which is not even properly defined. I am not fond of these indexes either. As an Assistant Professor trying to publish something using these indexes means suicide as the referees will rip you apart. Anyway, this is not the reason of my post.

My favorite anomaly is my country of origin, Albania, which ranks 98th in the ranking provided. Depending on how we define and understand globalization there is certain features of Albania which are overlooked if we apply the methodology suggested.

1) Albania essentially survives as a country through the remittances sent home from 1/3 of its population living abroad.

2) Given this share of the population spread around the world the amount of communication between Albania and the rest of the world (email, snail mail, telephone) is among the highest in the world. Albania is probably among the most globalized countries in the world by this measure.

3) We dont have Ikea or McDonalds in Albania. Peple however spend their money buying/ordering Italian furniture and brand name clothing.

[J-P THIEBLOT]

Surprised that you bring this up now, since the 2007 KOF index was published quite a while back.

The best known such index is that of A.T. Kearney, based on 72 countries representing 97% of world GNP and 88% of world production.

This index groups 12 variables in 4 categories: economic integration, personal contact, technological connectivity, and political engagement.

Compared to this, the 2007 ranking of the Swiss Institute for Business Cycle Research (KOF), that you discuss today, is based on 122 countries.

This second index measures the economic, social and political dimensions of globalization through 25 variables. On the surface, this seems more thorough.

In spite of their similarities, the two indices yield somewhat different results.

For instance, for A.T. Kearney (72 countries), China is ranked 66 and India is ranked 71.

For KOF (122 countries), China is ranked 37 and India is ranked 82.

In any event, it is quite stricking that these two countries, which in the western medias are the most often associated with globalization, are ranked so low in these indices.

This should tell us something, don't you think?

Namely, globalization as it is conducted today, at the macroeconomic level, is not a win-win game, but a zero-sum game in which the developed countries blindly adhere to the dogma of free trade and lose, whereas the new emerging powers pay lip service to free trade but in fact conduct neomercantilist policies and win.

[Per Kurowski]

"Globalization as it is conducted today, at the macroeconomic level, is not a win-win game, but a zero-sum game in which the developed countries blindly adhere to the dogma of free trade and lose, whereas the new emerging powers pay lip service to free trade but in fact conduct neomercantilist policies and win.”

Posted by: J-P THIEBLOT | January 11, 2008 at 05:45 PM

New emerging powers? Do you have an inferiority complex? Are you really aware of how far away they still find themselves?

Neomercantilist policies? And what do you call that of “You guarantee you will respect my intellectual property rights, and be able to charge you as I wish for their use, and in return I will give you some access to my markets, mostly thru my companies”.

Developed countries blindly adhere? The only thing I have seen them blindly adhere to are their credit rating agencies…and they are losing their shirt as a consequence.

[Per Kurowski]

"The Economist has never suggested The Dance Standard as a way to compare countries."

Posted by: Ken Houghton | January 11, 2008 at 11:31 AM

The Economist uses the BigMac index to establish equivalent purchase power currency parities and they would never ever use McDonald for a globalization index… that would be for an Americanization index…theirs is fish and chips…or so at least it used to be.

I mentioned dances since the index was measuring cultures. Go to the web and look up the current most searched for events…and you will usually find the latest Britney Spears beating Bush, chávez and even Danni Rodrik by a thousand to one.

[Alex]

Obviously a healthy dose of skepticism is appropriate when approaching the measurement of a concept as poorly defined and complex as 'globalization.' Nevertheless, it seems to me that the research community must develop measures of various aspects of globalization and (in some cases) aggregate these measures into some kind of index. Nobody may yet have done so in a way that all scholars find satisfactory, but surely existing indecies serve some research purposes?

To me it seems that the typical question that people are seeking to answer by means of measuring globalization is how globalized are we now as compared to other historical periods?

Surely there has to be a way of measuring globalization that allows us to track this over time? Level's of interdependence? Trade and investment as a share of gdp?

How would you go about this? Seems like it cannot be dismissed if globalization is to remain a useful concept?

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