Pankaj Ghemawat: Actually, the world isn't flat

Summary

In this talk, Professor Ghemawat challenges the widely held belief that the world is fully globalized, or 'flat.' He presents data showing that cross-border interactions in areas like phone services, immigration, and trade are much lower than commonly assumed. Ghemawat introduces the concept of 'globaloney' to describe the overestimation of globalization's reach. He argues that recognizing the true scale of globalization can drive meaningful progress, especially in areas like foreign aid and international cooperation. Ultimately, he stresses the importance of accurate data and realistic views on global integration for fostering future growth.

Takeaways

• 😀 Globalization is often overestimated, with people believing national borders no longer matter, but data reveals otherwise.
• 😀 Despite the common view that globalization is nearly complete, cross-border activities like phone calls, immigration, and investment are still relatively small.
• 😀 Only about 2% of global voice-calling minutes involve cross-border calls, and the percentage rises slightly when including internet telephony.
• 😀 First-generation immigrants make up just 3% of the global population, challenging the perception of a highly mobile world.
• 😀 Foreign direct investment accounted for less than 10% of global investment in 2010, revealing a lower level of cross-border financial flows.
• 😀 Official trade-to-GDP ratios often overestimate globalization due to issues like double-counting in global supply chains.
• 😀 The term 'globaloney' is used to describe the overestimation of globalization, a concept widely held by both pro- and anti-globalization groups.
• 😀 Surveys show that people tend to overestimate globalization, with large errors in their guesses about cross-border interactions.
• 😀 Factors like a lack of data, peer pressure, and the influence of technology contribute to the widespread overestimation of globalization.
• 😀 Social media, like Facebook, creates the illusion of a borderless world, but only 10-15% of Facebook users' friends are located in other countries.
• 😀 Being accurate about the current level of globalization is crucial for identifying opportunities for further integration and reducing fears about it.
• 😀 Overstating globalization can fuel misconceptions, such as the false belief that immigration is much higher than it is, or that foreign aid makes up a large portion of the federal budget.

Q & A

What is the central claim of Professor Ghemawat's lecture?

Professor Ghemawat challenges the widespread belief that the world is fully globalized, or 'flat.' He argues that globalization is not as advanced as commonly believed, and he presents data to demonstrate that national borders still play a significant role.

What does Professor Ghemawat mean by the term 'globaloney'?

'Globaloney' refers to exaggerated or inaccurate beliefs about the extent of globalization. It highlights the discrepancy between popular perceptions and actual data on cross-border flows in areas such as trade, investment, and communication.

How does Professor Ghemawat challenge the 'flat world' perspective?

He uses data to show that cross-border activities, such as international phone calls, immigration, and foreign investment, make up a much smaller portion of global activity than commonly assumed. This challenges the idea that national borders no longer matter or that globalization is complete.

What data does Professor Ghemawat present regarding global phone calls?

Professor Ghemawat points out that only about 2% of global voice-calling minutes were international in the previous year. If Internet telephony is included, this number may rise to 6-7%, but it remains far below the commonly assumed levels of globalization.

What percentage of the world’s population is made up of first-generation immigrants?

According to Professor Ghemawat's data, first-generation immigrants account for approximately 3% of the global population, which is far lower than what many people assume.

How much of global investment was accounted for by foreign direct investment in 2010?

Foreign direct investment accounted for less than 10% of the total global investment in 2010, demonstrating that international capital flows are limited.

Why does Professor Ghemawat argue that the export-to-GDP ratio is misleading?

The export-to-GDP ratio is often overestimated due to double-counting in trade statistics. For instance, components from one country that are assembled in another and then exported to a third country can lead to multiple counts of the same goods. The corrected estimate for this ratio is closer to 20%, not the 30% typically reported.

What were the results of the survey conducted by Harvard Business Review regarding globalization?

The survey revealed that people massively overestimated the extent of globalization, especially regarding trade-to-GDP ratios. In many cases, respondents guessed four or five times higher than the actual figures.

What does Professor Ghemawat identify as the reasons behind the overestimation of globalization?

Professor Ghemawat identifies several factors, including the lack of reliable data, social and peer pressure that encourages a globalized worldview, and the influence of technology, particularly social media platforms like Facebook, which create an illusion of global interconnectedness.

How can addressing the overestimation of globalization improve public discourse?

Accurately understanding the limits of globalization can help reduce unnecessary fears about issues like immigration and foreign aid. For example, in France, people overestimated the immigrant population, and in the U.S., people drastically overestimated the percentage of the federal budget allocated to foreign aid. Correcting these misconceptions can lead to more informed and balanced discussions.

What is the potential impact of increasing global integration, even incrementally?

Professor Ghemawat argues that even modest progress in reducing the disparities in global integration, such as increasing foreign aid or improving trade, could have significant positive effects. For instance, bringing the ratio of aid to domestic versus international poor people from 30,000-to-1 to 15,000-to-1 could make substantial progress toward global welfare goals.