[

G L O B A L I Z A T I O N

A T

W O R K

Measuring Globalization:
Whos Up, Whos Down?

ast years A.T. Kearney/Foreign Policy

Magazine Globalization Index offered a
before photo on a worldwide
scalea snapshot of global integration
prior to the September 11, 2001, attacks. This years
index, in turn, gives a glimpse of the developing
after imagean opportunity to assess the initial
impact of the attacks on a process that many analysts
see as the driving force of our times.
Certainly the smoke over the World Trade Center had yet to clear before the attacks by al Qaeda
had become a powerful symbol in the debate over
globalization. For the antiglobalization movement,
September 11 was a gruesome vindication of its
argument that global integration had widened the
gap between the haves and have-nots, and in doing
so created resentment that exploded with the
destruction of one of the most famous icons of
Western capitalism. For others, the message was
entirely opposite, and the solution was not less
globalization but more. U.S. Federal Reserve Board
Chairman Alan Greenspan, in a speech shortly after

Copyright 2003, A.T. Kearney, Inc., and the Carnegie

Endowment for International Peace. All rights reserved.
A.T. Kearney is a registered service mark of A.T. Kearney, Inc.
Foreign Policy is a registered trademark owned by the
Carnegie Endowment for International Peace.
60

Foreign Policy

the attacks, declared that globalization is an

endeavor that can spread worldwide the values of
freedom and civil contactthe antithesis of terrorism. But even as both sides of the political
spectrum reached opposite conclusions, they agreed
on one point: The collapse of the twin towers was
a body blow to what was seen, in some quarters, as
an almost unstoppable force.
This years ranking of global integration among
62 countries (representing 85 percent of the worlds
population) offers a dissenting view. To be sure, 2001
saw a dramatic downturn in some of globalizations
most visible drivers, from foreign direct investment
(fdi) to international travel and tourism. In many
cases, however, not only was a slowdown already in
train before the attacks, but prompt response by policymakers to September 11 helped dissipate the negative economic effects. Moreover, globalization
involves far more than the ebb and flow of economic cycles. Thats why the A.T. Kearney/Foreign Policy Magazine Globalization Index makes use of several indicators spanning information technology (it),
finance, trade, personal communication, politics, and
travel to determine a countrys ranking. And, in addition to giving each nation an overall score, we provide a multifaceted view of a countrys level of global integration by combining these indicators into four
subcategories: economic integration, technology, per-

CHARTS BY MANUEL BEVIA PEREZ

Two years ago, we created an index that measures a countrys global links,
from foreign direct investment to international travel, telephone traffic, and
Internet servers. For the last two years, Singapore and Ireland have topped
our ranking of political, economic, and technological integration in 62 countries. Find out who was the most global of all and how September 11 affected
global integration in the 2003 A.T. Kearney/Foreign Policy
Magazine Globalization Index.

J a n ua ry

| F e b r ua ry

2003

61

Measuring Globalization

sonal contact, and political engagement.

What emerges from a close look at this years
index is a much more nuanced portrayal than that
captured in the stagnation or decline of fdi, trade,
and passenger arrivals and departures. For instance,
globalizations leading economic indicators lagged,
but levels of political integration shot up, spurred in
part by cooperation in the war on terrorism and the
continuing integration of Russia and China into the
international system. Even the much lamented global economic slowdown had an uneven effect. Western Europe saw its level of economic integration
decline dramatically, but Ireland remained, for the
second year running, the worlds most globalized
country, and Eastern Europe bucked the continental trend with expanded volumes of trade. Singapore
slipped from third to fourth in this years ranking,

but Southeast Asia remains the most economically

integrated region among the emerging markets. And
around the world, travelers who were unable or
unwilling to go abroad still kept the lines of communication open through the expanded use of telephones and the Internet.
To say that al Qaedas attacks failed to untangle
globalizations web is not to say globalization was
unaffected. But overall, the picture that emerges is one
of September 11 as symptom, rather than cause, of the
stresses inherent in the deepening of global integration.
HALF EMPTY OR HALF FULL?

Last years Globalization Index recorded new highs

for global integration, as 2000 capped a decade of
dramatic expansion in global economic flows and

How the Index Is Calculated

he Globalization Index
brings globalization into
sharper focus by assessing changes in its most important
components, whether
engagement in international relations and policymaking, trade and
financial flows, or the
movement of people,
ideas, and information
across borders. The index
tracks these changes
across 62 advanced
economies and key
emerging markets to
draw a picture of globalization across all the
worlds regions.
The index quantifies
economic integration by
combining data on trade, foreign direct investment (fdi) and
portfolio capital flows, and
income payments and receipts,
which includes compensation of
nonresident employees and
income earned and paid on
assets held abroad. It charts per-

62

Foreign Policy

sonal contact via levels of international travel and tourism,

international telephone traffic,
and cross-border transfers,

including remittances. The

index also gauges technological
connectedness by counting Internet users and the Internet hosts
and secure servers through
which they communicate and
conduct business transactions.
And it also assesses political
engagement by taking stock of

the number of international

organizations and U.N. Security Council missions in which
each country participates, as
well as the number of foreign embassies that each
country hosts.
For most variables,
each years inward and
outward flows are added,
and the sum is divided by
the countrys nominal economic output or, where
appropriate, its population. Political engagement
figures are treated differently, with participation
in U.N. Security Council
missions divided by the
total number of missions
active in each year and
embassies and international
organizations remaining as
absolute numbers. This process
produces panels of data that
enable comparisons between
countries of all sizes.
The resulting data panels
for a given variable are then

political engagement, as well as the increased mobility of people, information, and ideas.
This momentum slowed as the United States,
Japan, and Europe experienced simultaneous economic slumps. World economic growth, for example, plummeted from 4 percent in 2000 to 1.3 percent in 2001. But sluggish economies had been a
problem well before September 11. Moreover,
despite the shock of the attacks, particularly to sectors such as aviation and tourism, the Organisation for Economic Co-operation and Development
noted that half a year later, the direct economic
effects seem to have largely vanished, thanks in part
to the rapid response of central banks worldwide,
which aggressively lowered interest rates.
More fundamentally, the retreat of economic
globalization must be put in the context of its tremen-

compared and normalized

through a process that values
the single lowest data point at
zero and the highest at one,
while assigning relative values
between zero and one to the
remaining data points in the
panel. Suppose the variable is
trade. The maximum value of
inward and outward trade
flows is 341 percent of gross
domestic product ( g d p )
recorded for Singapore in
1995, while the minimum is
15.3 percent of gdp for Brazil
in 1996. These data points are
valued at one and zero, respectively, with all others falling
in between.
Country scores are summed
across the panels, with double
weighting on fdi and portfolio
capital flows due to their particular importance in the ebb
and flow of globalization.
Internet indicators and political
indicators are collapsed into a
single variable each. The Internet variable is then double
weighted in the final calcula-

dous advance over the last few years. Consider 2001s

stunning drop in levels of fdi, which fell more than
50 percent worldwide from $1.49 trillion to $735 billion, due in large part to a steep decline in cross-border mergers and acquisitions. In nominal terms (not
adjusted for inflation), however, the total flows were
still higher than any other year before 1999. And
when viewed as a share of global economic output
(as calculated in the Globalization Index), fdi flows
in 2001 were nearly double their level in 1995.
Or look at the 1.5 percent decline in the volume
of world trade in 2001. First of all, it came on the heels
of a dramatic 12 percent increase in 2000. Moreover,
exports as a share of world economic output were
actually higher in 2001 than in any year of the preceding decade, save 2000. In fact, the downward dip
in trade probably says more about the bursting of the

tion, as are the international

telephone traffic scores, reflecting their status as important
means by which ideas and
information are spread across
national borders. Globalization
Index scores for every country
and year are derived by summing the scores across panels.
Small trading nations tend
to take top places in the index,
leading some observers to
speculate that size plays an
undue role in determining levels of globalization. A closer
look, however, suggests otherwise. Statistically speaking,
there is very little direct correlation between the size of a
countrys economy and its
globalization rank. Big
economies rank from 11th
(United States) to 51st (China),
while smaller economies rank
from 1st (Ireland) to 46th
(Egypt) and 60th (Venezuela).
But size is not irrelevant,
either; it is only in combination
with the level of economic
development, as measured by

per capita income, that the

relationship becomes clear.
Simply put, small countries
tend to have an advantage over
larger countries at similar levels of per capita income.
These key indicators only
scratch the surface of globalizations complexity. Many
other aspects of global integrationincluding culturedefy
measurement.
Cultural exchange has
undoubtedly grown in tandem
with the movement of people
and ideas across borders and
with the growing use of communications technology, but little accurate data are available.
For instance, statistics on trade
flows in music or books might
show a countrys comparative
advantages in manufacturing
these products, such as cds and
technical manuals, but would
not reveal whether the goods
reflect the ideas and culture of
the exporting nation. Consequently, cultural trends are not
included in this index.
J a n ua ry

| F e b r ua ry

2003

63

Measuring Globalization

it bubble than it does about postSeptember 11

transportation bottlenecks. Airfreight charges shot
up by 15 percent at the end of 2001, but the vast
majority of goods continue to be shipped by sea.
Beyond the economy, global integration actually
deepened on several levels. The war on terrorism, for
instance, was a key factor fueling political integration.
As U.S. Deputy Secretary of State Richard Armitage
observed in the days following the attack against the
Taliban in Afghanistan, More than 180 nations are
part of the coalition to fight terrorism; 25 nations are
engaged in military operations and 132 have signed the
International Convention to Suppress Terrorism
Financing; 136 have contributed some other concrete
assistance, running the gamut from humanitarian supplies to the use of airspace and base access rights.
But other drivers were at work as well. Membership in international organizations expanded significantly in 2001, with humanitarian and commercial organizations leading the way. China joined the
World Trade Organization (wto) and became the
fourth-largest trader after the United States, Japan,
and the European Union (eu). (And, despite ongoing political tensions with China, Taiwan also joined
the wto.) The International Organization for Migration, dedicated to the idea that humane and orderly
international movement of people benefits both individuals and societies, saw its official membership
grow and now includes 59 of the 62 countries covered in the Globalization Index. And, although the
number of active U.N. peacekeeping missions
declined in 2001, the number of participating countries grew. Even the antiglobalization movement
went global in 2001, when activists gathered in Porto
Alegre, Brazil, to stage the first annual meeting of the
World Social Forum as an in-your-face challenge to
the free-market agenda of the annual World Economic Forum in Davos, Switzerland.
Funding for key multilateral institutions also
increased. Thanks to an upsurge in voluntary contributions, the World Health Organizations budget for 20002001 grew more than 9 percent, from
$1.65 billion to $1.80 billion. The International
Monetary Funds (imf) budget jumped 6 percent,
from $638 million (April 2000 to April 2001) to
$676.7 million (April 2001 to April 2002).
Although travel and tourism suffered a significant slowdown, it was less painful than many predicted following the September 11 attacks and the
closing of airports in the United States. By the end
of the year, the number of international tourist
arrivals reached 597.5 million, down 0.95 percent
64

Foreign Policy

Rankings
The A.T. Kearney/Foreign Policy Magazine Globalization Index
includes rankings of 62 countries for 13 variables grouped in
four baskets: economic integration, personal contact,
technology, and political engagement. In the table, the countries
ranking in the top 10 in each category are shaded red.

from the previous yearthe first year-on-year

decrease since World War II. Hit particularly hard
were Southeast Asia, the Americas, and the Middle
East, where arrivals declined by 10 percent or more.
But even as family members and business people
traveled less across borders, they helped push international telephone traffic to record levels. The International Telecommunication Union (itu) estimates
that international telephone traffic grew more than
9 percent in 2001, reaching 120 billion minutes. In
this years Globalization Index, levels of personal
contact (as measured by international travel and
tourism, international telephone traffic, and crossborder transfers) had a profound impact on the
rankings of some countries. Pakistan and India, for
example, are almost evenly matched in their levels
of economic integration (scoring 60 and 61 respectively). But Pakistans overall ranking (50) is higher than Indias (56), due in large part to its significantly higher level of personal contacts with the
wider world (scoring 37, compared with Indias 49).
Moreover, even as the dot coms were going bust,
the number of Internet users worldwide grew 22.5
percent, from 451 million in 2000 to 552.5 million
in 2001 (and may now total as many as 580 million).
Although this number suggests only 9.1 percent of the
worlds population had access to the Internet in
2001, it marks a significant rise from 7.1 percent in
2000. China added 11 million new users in 2001,
while emerging markets added some 32.5 million new
users altogether, more than in any previous year.
WINNERS AND LOSERS

As in previous iterations of the Globalization Index,

small trading nations tended to rank ahead of larger
economies in 2001. In some cases, the same integration
that once brought capital pouring into a country suddenly, in 2001, helped facilitate its exit. Countries such

J a n ua ry

| F e b r ua ry

2003

65

Measuring Globalization

Is globalization bad for the environment? Not according to

this comparison of Globalization Index scores against
those of the Environmental Performance Index (EPI),
developed by the Yale Center for Environmental Law and
Policy and the Center for International Earth Science
Information Network at Columbia University. In fact, the
most global countries tend to rank higher in environmental
performance, and less global countries environmental
performance is not as good. Seven of the top 10 most
global countries are also among the EPIs top 10.

The EPI measures environmental results at the national

level, gauging air and water quality, greenhouse gas
emissions, and land protection. It was designed to permit
cross-national comparisons of the effect of government
policies on the environment and includes both measures
of current environmental performance and rates of
improvement.
One might conclude it is natural for the richest countries
to be both more global and more able to afford good
environmental policies. But in fact, per capita income
differences explain only a portion of the variation in EPI
scores. Its not how wealthy a country is, but how well its
government and the private sector harness available
resources that determines whether a country manages its
ecosystems well.

66

Foreign Policy

as New Zealand, Romania, South Africa, and Turkey

saw the previous years portfolio investments liquidated in large numbers (a phenomenon that other
countries, such as Argentina, Indonesia, and Russia,
have experienced for several years running).
The slowing pace of international economic
activity affected different regions in markedly different ways. Initially, U.S. integration with world
markets was not affected as deeply as that of many
other countriesin large part because global capital markets saw the brightest prospects in the United States and continued to supply fdi and portfolio capital to U.S. companies, albeit at somewhat
reduced levels. Recent estimates, however, suggest a
further downward trend, with fdi estimated at $44
billion in 2002, down from $124 billion in 2001.
Meanwhile, Western Europe suffered a significant
downturn in levels of economic integration, even as
political, social, and technological integration continued to climb. fdi to and from the United Kingdom,
for instance, dropped by more than 75 percent and
to and from Germany by 70 percent. Portfolio investments to Italy were off by more than 50 percent, and
even Londons financial center saw portfolio inflows
dive from $258 billion to $64 billiona 75 percent
reduction. As a result, Western Europe was the only
major world region to see its Globalization Index
scores decline from last years levels (with nine of the
15 countries in the region posting lower overall
scores). Finland, France, and Spain all dropped out
of the top 10 this year for economic integration.
One country that survived the storm was Ireland,
which for the second consecutive year ranked as
the worlds most global country. Despite difficult
times for the Irish economy, the strength of Irelands
portfolio capital flows and its continued investment
in high-tech industries actually deepened the countrys integration with the rest of the world. In 2000,
Ireland ranked as the worlds fourth-largest recipient (and third-largest contributor) of portfolio capital. By 2001, Ireland had overhauled its financial
services regulatory framework, introducing a single
regulatory authority responsible for issues across
the full range of the industry. At the same time, barriers to entry in financial services fell, due both to the
effects of the single currency and to new legislation
allowing any institution licensed by an eu member
state to set up shop in Ireland. The impact on portfolio capital flows has been dramatican increase
from $80 billion to $91 billion in 2001, even as
France and the United Kingdom saw inflows tumble by as much as 75 percent.

Ireland has other strong links to the global economy, based largely on its heavy investment in high-tech
and information technologies. The country increased
trade levels in 2001, one of only a handful of countries to thwart the global trade slowdown. On the
strength of robust exports of computer components,
electronics, and medical and pharmaceutical products,
Ireland ranked third behind Singapore and Malaysia
in total trade as a share of gross domestic product
(gdp). Its Internet infrastructure continued to grow,
and countrywide the number of secure servers
increased from 337 to 500. Ireland was also the
worlds most talkative nation, owing to the heavy traffic into its call centers as well as the strong growth in
outgoing international calls.
For the second year in a row, Switzerland ranked
as the second most global nation. The countrys
strong reputation as a financial services center has
prompted high levels of capital inflows and outflows. In addition, Switzerland is distinguished by the
sheer volume of income receipts from its investments
overseas, which averaged $7,670 for each citizen in
2001. The country is a popular center for travel and
tourism, not only because some 11 million visitors
entered the country in 2001 but also because Swiss
citizens made an average of 1.85 international trips
that year, second only to the Czech Republic.
Sweden moved up one notch to claim third place
in this years Globalization Index. In addition to strong
Internet infrastructure, the differentiating factor was
a huge jump in fdi, as German, French, and Finnish
companies acquired shares of Swedish utilities. Inflows
jumped from $22.1 billion in 2000 to $46.8 billion in
2001or $5,269 per Swedish resident.
Among emerging markets, Southeast Asia could
again claim the title of worlds most economically integrated region, although its exposed export-oriented
economies took a beating from the downturn in global trade, with exports (as a share of gdp) falling by
more than 4 percent. Nevertheless, as a share of gdp,
Southeast Asias exports grew by more than 22 percentage points since 1995, a record no other region
can match. Singapore and Malaysia ranked among the
top 10 most economically integrated nations in this
years index (at fourth and eighth place, respectively).
Malaysia also scored fairly high in its overall ranking
(18), with the number of Internet users jumping 35
percent to reach 5.7 million, making it Southeast
Asias largest Internet center. Singapore dropped from
third to fourth place in this years index, as both net
fdi inflows and total portfolio capital flows declined.
In 2001, Singapore concluded a free-trade agreement
J a n ua ry

| F e b r ua ry

2003

67

Measuring Globalization

with New Zealand and was in the process of negotiating with countries such as the United States, Japan,
and Australia. However, the global economic recession and the bursting of the it bubble, which led to
reduced demand for computer components, hit Singapores exports severelyits trade surplus plummeted from $22 billion in 2000 to $12.7 billion in
2001. Despite these setbacks, Singapore remains the
most globalized Asian nation in our survey.
Meanwhile, East European countries stood
resilient against the tide of bad economic news in
2001. Bucking the international trend, both the
regions exports and imports grew. In fact, all of Russias former satellite countries covered by this years
Globalization Index scored higher than Russia itself.
The Czech Republic (in 15th place) was the most
globalized nation in Eastern Europe and ranked higher than Western neighbors Italy (24) and Greece (26).
The Czech Republic has proved attractive to foreign
investors (including automobile manufacturers Toyota and psa), thanks to its geographic location at the
center of Europe and competitive advantage in terms
of lower cost yet highly skilled workers.
High levels of economic integration made Panama (ranked 30th) the most globalized nation in Latin
America for the second year in a row. Panama scores
consistently well in part due to its Colon Free Zone
at the gateway of the Panama Canal, which imports
goods from the United States, Europe, and Asia and
then reexports them to the rest of Latin America. (In
2001, exports from the Colon Free Zone declined due
to weaker demand throughout the region. Nonetheless, the countrys overall exports saw a modest
increase of $34 million.) Panama also ranks high in
the Globalization Index because it holds the worlds
largest shipping registry and Latin Americas largest
international banking center (as measured by the
number of banks). And in 2001, Panama witnessed
a significant increase in portfolio flowsfrom 1.9 to
8.1 percent of its gdpas banking authorities conducted major international refinancing operations,
issuing U.S. dollar-denominated bonds to restructure its international debt.
By contrast, Venezuela ranked last in Latin
America, dropping from 57th to 60th place. The
countrys decline in 2001 was due to the temporary
drop in oil prices (the petroleum sector accounts for
80 percent of all exports) and because fdi plummeted by 23 percent to $3.5 billion. Local business
leaders blame President Hugo Chvez for the accelerated pace of capital flight from Venezuelaciting,
for example, a new law on hydrocarbons that raised
68

Foreign Policy

royalty taxes from 16.6 to 30 percent and the presidents threat to withdraw public deposits from
banks to defeat financial speculators intent on
buying dollars and taking them abroad.
Venezuelas problems represent an extreme case of
Latin Americas overall malaise in 2001. Total fdi in
the region fell by more than 10 percent (due, in part,
to simultaneous economic crises in Argentina and
Venezuela), and trade declined by 2.3 percent (due to
reduced demand in the United States and Europe and
the decline in commodity prices for oil and coffee). But
one notable development augurs higher levels of personal and technological integration for Latin American countries in the years ahead: The number of wireless telecommunications subscribers grew 33 percent
(more than 86 million people) in 2001, or double the
world growth rate. David Kerr, of the research firm
Strategy Analytics, suggests that since many Latin
Americans cannot afford personal computers, the
regions trajectory is more like that of Scandinavian
markets and indeed some Southern European markets
where wireless is the default access to the Internet.
Similar growth occurred in telecommunications
in Africa. The African Telecommunication Indicators 2001 report, published by the itu, notes
the penetration of telephone subscribers in SubSaharan Africa surpassed the psychological milestone of one for every 100 inhabitants during the
year. The oft-quoted statistic that Tokyo has more
telephones than all of Africa is no longer true; the
continent now has twice as many phones as Japans
capital city. Yet the digital divide with the rest of the
world remains wide. In 2001, Africa had only 0.31
Internet hosts per 1,000 people (compared with
163 per 1,000 in the United States). Africa also
remains the region least integrated into the global
economy. The continents share of global trade has
actually declined in the last decade. G. E. Gondwe,
director of the imfs African department, notes
that if the regions countries had merely maintained their export market shares of 1980, their
2000 exports would have amounted to $161 billionmore than double the actual outcome.
Botswana saw its exports decline by nearly 9
percent in 2001, as the sluggish global economy
depressed the demand for diamonds, which account
for 80 percent of the countrys export revenue. But
Botswana still came out on top as Africas most globalized nation, thanks to being ranked No. 1 in the
index category of transfer payments. (A significant
number of Botswanans work abroad, largely in South
African mines, and send their remittances back home

In the most global countries, trade among multinational

corporations and their affiliatessay, between Ford Motor
Co. and Ford Motor Co. of Canadaaccounts for a much
larger share of exports than other sorts of trade. In the
United States, for instance, intrafirm trade amounted to
$526 billion in imports, or 47 percent of the U.S. total value
of imports in 2001, and $223 billion in exports, or 32
percent of the total annual value of exports.

A recent study by the U.N. Committee on Trade and

Development shows that the significant role of intrafirm
trade in world trade is pervasive, particularly in countries
with substantial gains in export growth. Multinationals
affect export patterns in everything from manufacturing to
natural resources to agriculture. However, the role of
foreign affiliates in exports varies substantially among
countries ranked in the Globalization Indexfrom one
tenth of 1 percent in Egypt to 14 percent in Japan to 64
percent in landlocked Switzerland, which must host a
disproportionate number of affiliates and parent
companies relative to its economic size to extend its reach
beyond its borders.
Source: U.S. Commerce Departments Bureau of Economic
Analysis

J a n ua ry

| F e b r ua ry

2003

69

Measuring Globalization

to their families.) Kenya was the least globalized

African nation in this years index. The countrys
reputation for corruption and bureaucratic inefficiency continue to drive away foreign investment.
The Middle East displayed the most dramatic
upward and downward movement in this years
rankings. Morocco jumped from 46th to 29th
place, making it the most globalized country in
the Arab world. Much of this movement was driven by high-profile foreign investment deals associated with the liberalization of the countrys telecom
sector. Saudi Arabia (in 61st place, down from
37th last year) is simultaneously the largest economy and least globalized country in the Arab
world. Its fdi flows fell by roughly 98 percent in
2001, due to falling oil prices and increasingly
negative perceptions of the kingdom among the
international business community.
In many ways, Saudi Arabia is a poster child
for why the Middle East as a whole remains marginalized by globalization. Economic growth
throughout Arab countries has stagnated. The
Middle East accounted for 10.7 percent of world
exports in 1981 and only 3.5 percent in 2001. A
recent report by the World Economic Forum
blames Arab governments for pursuing a onedimensional growth strategy based upon the accumulation of capital: The export structure of the
region as a whole is still primarily based either on
its absolute advantage in petroleum products, as
in the case of the major oil-producing countries
like Kuwait and Qatar, or on its comparative
advantage in labor-intensive manufactures, as in
the case of Morocco and Tunisia. The United
Nations Development Programme offers an equally grim assessment of the region, noting that Arab
countries have one of the lowest levels of it access
in the world: Only 1.2 percent of Arabs can access
computers, and half that number use the Internet.
Large-scale illiteracy and deficiencies in the educational system have contributed to a capability
gap throughout the Arab world.
CAUSE AND DEFECT

Princeton historian Harold James suggests that most

people tend to confuse the cause of globalization
with its effects. International openness, he says, did
not lead to the spread of technology. Rather, it was
technical changes and efficiencies of scale that have
made purely national markets relatively inefficient,
thereby compelling business to spread across borders.
70

Foreign Policy

That argument offers insight into why globalization did not grind to a halt after September 11.
Some assumed that as nations took measures to
tighten control of their borders to protect themselves from international terrorist networks, they
would also staunch the flow of people, goods, and
services. But open borders are not the cause of globalization as much as they are the result. The most
destructive act of terrorism in history could not
destroy the underlying drivers of global integration.
Even as deepening global integration makes
nations more vulnerable to exogenous shocks, it
only strengthens their resolve to cope with crises.
Witness how the Bush administration, which had
long cast a skeptical eye on financial bailouts, recently threw its support behind a $30 billion imf loan
package for Brazil to prevent that countrys economic crisis from spreading throughout Latin America and ultimately affecting U.S. trade. And, in the
aftermath of the terrorist bombing in Indonesia that
killed nearly 200 people, leaders at the November
2002 summit of the Association of Southeast Asian
Nations pledged to strengthen regional efforts to
combat terrorism.
Globalization might be resilient to external shocks,
but it tends to create its own internal stresses. Professor James offers another history lesson that warns
against complacency. Many believe the Great Depressionwhich effectively ended the 20th centurys first
era of globalizationwas the direct result of World
War I. By contrast, James cites three factors inherent
in globalization that he claims caused it to autodestruct: the instability of capitalism, the backlash
among those who did not reap the benefits of global
integration, and the failure to create institutions that
can adequately handle the psychological and institutional consequences of the interconnected world.
There are signs that some parts of the world
believe the costs of globalization now outweigh the
benefits. Argentina implemented a series of stringent
reforms to more effectively open itself up to the global economy; for its troubles, the country got the
largest debt default in historyprompting President
Eduardo Duhalde to declare the system broken. The
antiglobalization movement has gained political traction as populists have made electoral gains in Europe
and Latin America. And the global war against terrorism has provoked fears of a human rights race to
the bottom, as nations eager to calm jittery foreign
investors by clamping down on terrorist activity might
also excessively clamp down on political freedoms.
But the jury is still out on whether history is

J a n ua ry

| F e b r ua ry

2003

71

Measuring Globalization

repeating itself today. As this years index makes clear,

technological and personal integration continues
unabated even in countries whose overall levels of economic integration were minimal. Political engagement has expanded because the benefits of multilateral cooperation still outweigh the costs of going it
alone. The forward momentum of these trends in
the face of al Qaedaa transnational terrorist network that is itself a manifestation of the darker side

of globalizationtestifies to the resilience of global

integration. But, as the war against terrorism continues, those most interested in promoting global integration must do more to heed the concerns of those
who feel marginalized by it, lest the backlash against
globalization become a self-fulfilling prophecy.
Or, put another way, al Qaeda is not the real
threat to global integration. Globalization has nothing to fear but globalization itself.

[ Want to Know More? ]

The data sources used to construct the third annual A.T. Kearney/Foreign Policy Magazine
Globalization Index are available at www.foreignpolicy.com and on the Web site of A.T. Kearneys
Global Business Policy Council at www.atkearney.com.
Several authors, policymakers, and commentators have offered perspectives on how the September
11 terrorist attacks affected globalization. In Countering Terror With Trade (Washington Post, September 20, 2001), U.S. Trade Representative Robert Zoellick argues that the United States must vigorously promote free trade to thrust forward the values that define us against our adversary. In a speech
titled Globalization, delivered at the Institute for International Economics on October 24, 2001 (available on the Web site of the Federal Reserve), Federal Reserve Board Chairman Alan Greenspan warns,
If we allow terrorism to undermine our freedom of action, we could reverse at least part of the palpable gains achieved by postwar globalization. In Globalization, Alive and Well (New York Times, September 22, 2002), Thomas Friedman argues that global integration continues to thrive because it is the
best way to lift . . . people out of abject poverty. Walden Bello sees a silver lining in the attacks (The
American Way of War, Znet, December 30, 2001) because the event encouraged the peace, human rights,
and antiglobalization movements to coordinate their efforts more closely. The Economic Consequences
of Terrorism (Paris: Organisation of Economic Co-Operation and Development, 2002) notes that the economic effects of the September 11 attacks largely vanished half a year later but warns that increased
defense spending among several countries could reduce the postCold War peace dividend.
In The End of Globalization: Lessons From the Great Depression (Cambridge: Harvard University Press, 2001), Harold James examines how global integration could collapse under its own
internal stresses. Joseph Stiglitz argues in Globalization and Its Discontents (New York: W.W. Norton & Company, 2002) that globalization can be a positive force, but only if multilateral organizations change the way they operate. Similarly, in George Soros on Globalization (New York: PublicAffairs, 2002), Soros acknowledges that the antiglobalization movement offers valid critiques and
suggests remedies to make global capitalism more stable and equitable.
Over the last year, Foreign Policy has provided extensive coverage of the trends in economic, political, and cultural globalization. In The Dependent Colossus (Foreign Policy, March/April
2002), Joseph S. Nye Jr. argues that although globalization reinforces U.S. power today, over time it
might have the opposite effect. Friedman and Robert Kaplan debate whether globalization promotes
stability or sows seeds of chaos in States of Discord (Foreign Policy, March/April 2002). Moiss
Nam suggests the terrorist attacks engendered a more sophisticated understanding of globalization
in Post-Terror Surprises (Foreign Policy, September/October 2002).
For links to relevant Web sites, access to the FP Archive, and a comprehensive index of related
Foreign
Policy articles, go to www.foreignpolicy.com.
72

Foreign Policy