Actually the world isnt flat Pankaj Ghemawat

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I’m here to talk to you about how

globalized we are how globalized we

aren’t and why it’s important to

actually be accurate in making those

kinds of assessments and the leading

point of view on this whether measured

by number of books sold mentions in

media or surveys that I’ve run with

groups ranging from my students to

delegates to the World Trade

Organization is this view that national

borders really don’t matter very much

anymore cross-border integration is

close to complete and we live in one

world and what’s interesting about this

view is again it’s a view that’s held by

pro globalizers like Tom Friedman from

whose book this quote is obviously

excerpted but it’s also helped by anti

globalizes who see this giant

globalization tsunami that’s about to

wreck all our lives if it hasn’t already

done so the other thing I would add is

that this is not a new view I’m a little

bit of an amateur historian so I spent

some time going back trying to see the

first mention of this kind of thing and

the best earliest quote that I could

find was one from David Livingstone

writing in the 1850s about how the

railroad the steamship and the Telegraph

were integrating East Africa perfectly

with the rest of the world

now clearly David Livingstone was a

little bit ahead of his time but it does

seem useful to ask ourselves just how

global are we before we think about

where we go from here so the best way I

found of trying to get people to take

seriously the idea that the world may

not be flat may not even be close to

flat is with some data so one of the

things I’ve been doing over the last

few years is really compiling data on

things that could either happen within

national borders or across national

borders and I’ve looked at the

cross-border component as a percentage

of the total I’m not going to present

all the data that I have here today but

let me just give you a few data points

I’m going to talk a little bit about one

kind of information flow one kind of

flow of people one kind of flow of

capital and of course trade in products

and services so let’s start off with

plain old telephone service of all the

voice calling minutes in the world last

year what percentage do you think were

accounted for by cross-border phone

calls pick a percentage in your own mind

answer turns out to be 2 percent if you

include Internet telephony you might be

able to push this number up to six or

seven percent but it’s nowhere near what

people tend to estimate or let’s turn to

people moving across borders one

particular thing we might look at in

terms of long term flows of people is

what percentage of the world’s

population is accounted for by

first-generation immigrants again please

pick a percentage turns out to be a

little bit higher it’s actually about 3%

or think of investment take all the real

investment that went on in the world in

2010 what percentage of that was

accounted for by foreign direct

investment not quite 10 percent and then

finally the one statistic that I suspect

many of the people in this room have

seen the export to GDP ratio if you look

at the official statistics they

typically indicate a little bit above 30

percent however there’s a big pro

with the official statistics in that if

for instance a Japanese component

supplier ships something to China to be

put into an iPod and then the iPod gets

shipped to the US that component ends up

getting counted multiple times so nobody

knows how bad this bias with the

official statistics actually is so I

thought I would ask the person who’s

spearheading the effort to generate data

on this bus calamy the director of the

World Trade Organization what his best

guess would be of exports as a

percentage of GDP without the double and

triple counting and it’s actually

probably a bit under 20 percent rather

than the 30 percent plus numbers that

we’re talking about so it’s very clear

that if you look at these numbers or all

the other numbers that I talked about in

my book world 3.0 that we’re very very

far from the no border effect benchmark

which would imply internationalization

levels of the order of 85 90 95 percent

so clearly apocalyptically minded

authors have overstated the case but

it’s not just the apocalyptic s– as i

think of them who are prone to this kind

of overstatement I’ve also spent some

time serving audiences in different

parts of the world on what they actually

guessed these numbers to be let me share

with you the results of a survey that

Harvard Business Review was kind enough

to run of its readership as to what

people’s guesses along these dimensions

actually were so a couple of

observations stand out for me from this

slide first of all there is a suggestion

of some error

second these are pretty large errors for

four quantities whose average value is

less than 10% you have people guessing

three four times that level even though

I’m an economist I find that a pretty

large error and third this is not just

confined to the readers of the Harvard

Business Review I’ve run several dozen

such surveys in different parts of the

world and in all cases except one where

a group actually underestimated the

trade to GDP ratio people have this

tendency towards over estimation and so

I thought it important to give a name to

this and that’s what I refer to as

global oniy the difference between the

dark blue bars and the light gray bars

especially because I suspect some of you

may still be a little bit skeptical of

the claims I think it’s important to

just spend a little bit of time thinking

about why we might be prone to global

oniy couple of different reasons come to

mind first of all there’s a real dearth

of data in the debate let me give you an

example when I first published some of

these data a few years ago in a magazine

called foreign policy one of the people

who wrote in not entirely an agreement

was Tom Friedman and since my article

was titled why the world isn’t flat that

wasn’t too surprising what was very

surprising to me was Tom’s critique

which was game ‘ow it’s data are narrow

and this caused me to scratch my head

because as I went back through his

several hundred page book I couldn’t

find a single figure chart table

reference or footnote so my point is I

haven’t presented a lot of data here to

convince you that I’m right but I would

urge you to go away and look for your

own data to try and actually assess

whether some of this

these hand-me-down insights that we’ve

been bombarded with actually are correct

so dearth of data in the debate is one

reason a second reason has to do with

peer pressure I remember I decided to

write my why the world isn’t flat

article because I was being interviewed

on TV and Mumbai and the interviewers

first question to me was Professor

Ghemawat why do you still believe that

the world is round and I started

laughing

because I hadn’t come across that

formulation before and as I was laughing

I was thinking I really need a more

coherent response especially a national

TV I’d better write something about this

but what I can’t quite capture for you

was the pity and disbelief with which

the interviewer asked her question the

perspective was here is this poor

professor he’s clearly been in a cave

for the last 20,000 years he really has

no idea as to what’s actually going on

in the world so try this out with your

friends and acquaintances if you like

you’ll find that it’s very cool to talk

about the world being one etc if you

raise questions about that formulation

you really are considered a bit of an

antique and then the final reason which

I mentioned especially to a TED audience

with some trepidation has to do with

what I call techno trances if you listen

to techno music for long periods of time

it does things to your brainwave

activity something similar seems to

happen with exaggerated conceptions of

how technology is going to overpower in

the very immediate run all cultural

barriers all political barriers all

Geographic barriers because at this

point I know you aren’t allowed to ask

me questions but when I get to this

point in my lecture with my students

hands go up and people ask

yeah but what about Facebook and I got

this question often enough that I

thought I’d better do some research on

Facebook because in some sense it’s the

ideal kind of technology to think about

theoretically makes it as easy to form

friendships halfway around the world as

opposed to right next door

what percentage of people’s friends on

Facebook are actually located in

countries other than where people we’re

analyzing our based the answer is

probably somewhere between 10 to 15% not

negligible so we don’t live in an

entirely local or national world but

very very far from the 95% level that

you would expect and the reason is very

simple we don’t or I hope we don’t form

friendships at random on Facebook there

the technology is overlaid on a

pre-existing matrix of relationships

that we have and those relationships are

what the technology doesn’t quite

displace those relationships are why we

get far fewer than 95% of our friends

being located in countries other than

where we are so does all this matter or

is global Oni just a harmless way of

getting people to pay more attention to

globalization related issues I want to

suggest that actually global Oni

can be very harmful to your health

first of all recognizing that the glass

is only 10 to 20 percent full it’s

critical to seeing that there might be

potential for additional gains from

additional integration whereas if we

thought we were all dirty there there

would be no particular point to pushing

harder it’s a little bit like we

wouldn’t be having a conference on

radical openness if we already thought

we were totally open to all the kinds of

influences that are being talked about

at this conference

so being accurate about how limited

globalization levels are is critical to

even being able to notice that there

might be room for something more

something that would contribute further

to global welfare which brings me to my

second point avoiding overstatement is

also very helpful because it reduces and

in some cases even reverses some of the

fears that people have about

globalization so I actually spend most

of my world 3.0 book working through a

litany of market failures and fears that

people have that they worry

globalization is going to exacerbate I’m

obviously not going to be able to do

that for you today so let me just

present to you two headlines as an

illustration of what I have in mind

think of France and the current debate

about immigration when you ask people in

France what percentage of the French

population is immigrants the answer is

about 24% that’s their guess maybe

realizing that the number is just 8%

might help cool some of the superheated

rhetoric that we see around the

immigration issue or to take an even

more striking example when the Chicago

Council on Foreign Relations did a

survey of Americans asking them to guess

what percentage of the federal budget

went to foreign aid the guess was 30%

which is slightly in excess of the

actual level of u.s. governmental

commitments to federal aid the

reassuring thing about this particular

survey was when it was pointed out to

people how far their estimates were from

the actual data some of them not all of

them seem to become more willing to

consider increases in foreign aid so the

foreign aid is actually a great way of

sort of wrapping up here because if you

think about it what I’ve been talking

about

today is this notion very

uncontroversial amongst economists that

most things are very home biased foreign

aid is the most aid to poor people is

about the most home biased thing you can

find if you look at the OECD countries

and how much they spend per domestic

poor person and compare it with how much

they spend per person per poor person in

poor countries the ratio

Branko Milanovic at the World Bank that

the calculations turns out to be about

thirty thousand to one now of course

some of us if we truly are cosmopolitan

would like to see that ratio being

brought down to one is to one I’d like

to make the suggestion that we don’t

need to aim for that to make substantial

progress from where we are if we simply

brought that ratio down to fifteen

thousand to one we would be meeting

those aid targets that were agreed at

the Rio summit 20 years ago that the

summit that ended last week made no

further progress on so in summary while

radical openness is great given how

closed we are even incremental openness

could make things dramatically better

thank you very much

[Applause]

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