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See Inside August 2011

Globaloney: Why the World Is Not Flat...Yet




Illustration by Kagan McLeod

Fast-forward to the year 2100. Computers, writes physicist and futurist Michio Kaku in Physics of the Future (Doubleday, 2011), will have humanlike intelligence, the Internet will be accessible via contact lenses, nanobots will eliminate cancers, space tourism will be cheap and popular, and we’ll be colonizing Mars. We will be a planetary civilization capable of consuming the 1017 watts of solar energy falling on Earth to meet our energy needs, with the Internet as a worldwide telephone system; English and Chinese as the contenders for a planetary language; a unified culture of common foods, fashions and films; and a truly global economy with many more international trading blocs such as we see today in the European Union and NAFTA.

Kaku’s vision of how the exchange of science, technology and ideas among all peoples will create a global civilization with greatly weakened nation-states and almost no war is epic in its scope and heroic in its inspiration. Many have felt similar hope for a united, peaceful future through globalization. Indeed, I evoked a similar image in my book The Mind of the Market (Holt, 2009), and I was inspired in part by Thomas Friedman’s wildly popular The World Is Flat (Farrar, Straus and Giroux, 2005), in which he argues for “a global, Web-­enabled playing field that allows for multiple forms of collaboration on research and work in real time, without regard to geography, distance or, in the near future, even language.”

The problem for Kaku, Friedman, me and other globalization proponents (and even opponents) is that such a future may be unattainable because of our evolved tribal natures. In fact, this is all a bunch of “globaloney,” says Pankaj Ghemawat, professor of strategic management and Anselmo Rubiralta Chair of Global Strategy at IESE Business School at the University of Navarra in Barcelona, in his new book World 3.0: Global Prosperity and How to Achieve It (Harvard Business Review Press, 2011). According to Ghemawat, only 10 to 25 percent of economic activity is international (and most of that is regional rather than global). Consider the following percentages (of the total in each category): international mail: 1; international telephone calling minutes: less than 2; international Internet traffic: 17 to 18; foreign-owned patents: 15; exports as a percentage of GDP: 26; stock-market equity owned by foreign investors: 20; first-generation immigrants: 3. As Ghemawat starkly notes, 90 percent of the world’s people will never leave their birth country. Some flattened globe.

The problem, Ghemawat says, is that globalization theories fail to account for the very real distance factors (geographic and cultural). He crunches these factors into a distance coefficient akin to Newton’s law of gravitation. For example, he computes, “a 1 percent increase in the geographic distance between two locations leads to about a 1 percent decrease in trade between them,” a distance sensitivity of –1. Or, he calculates, “U.S. trade with Chile is only 6 percent of what it would be if Chile were as close to the United States as Canada.” Likewise, “two countries with a common language trade 42 percent more on average than a similar pair of countries that lack that link. Countries sharing membership in a trade bloc (e.g., NAFTA) trade 47 percent more than otherwise similar countries that lack such shared membership. A common currency (like the euro) increases trade by 114 percent.”

That analysis actually sounds encouraging to me if we use Kaku’s projected time frame of 2100. But Ghemawat reminds us of our deeply ingrained tendencies to want to interact with our kin and kind and to retain our local customs and culture, which may forever balkanize any globalized scheme. Even as the E.U. expands, for instance, an average of “Eurobarometer” surveys of residents of 16 E.U. countries between 1970 and 1995 made in 2004 by researchers at the Center for Economic and Policy Research found that 48 percent trust their fellow nationals “a lot,” 22 percent trust citizens of other E.U.-16 countries a lot and only 12 percent trust people in certain other countries a lot.

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