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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