Globalization is Not Truly Global

Identifying the Good and Bad of Globalization

Photo by Austin Distel on Unsplash

Pankaj Ghemawat in “Why the World Isn’t Flat” argues that the world is not nearly as connected as many people believe; instead, we are just beginning to realize the potential of true global integration. He argues the 10% presumption, which states that there is only about 10% cross border integration. For example, 90% of the world’s investment is still domestic, and the total amount of the world’s capital formation generated from foreign direct investment is about 10%. Similarly, geographic barriers, especially distant, are still prominent and hinder real globalization. The geographic boundaries are so persuasive that they even extend to cyberspace; the internet has increased communication within states, not between them. Thus we are more wired but not more global.

Similarly, in the “Globalization of the Economy,” Jeffrey Frankel argues distance is still a vital inhibition to trade. For example, technology companies choose to gather in Silicon Valley because face-to-face contact is essential for exchanging information and negotiating deals. Additionally, prices vary due to location, the farther away a place is, the higher the cost of the product. Linguistic barriers also exist. These affect trade because counties that speak the same language are 50% more likely to trade than countries…