0:00:00.468,0:00:04.999
I'm here to talk to you about how globalized we are,

0:00:04.999,0:00:07.507
how globalized we aren't,

0:00:07.507,0:00:11.051
and why it's important to actually be accurate

0:00:11.051,0:00:13.832
in making those kinds of assessments.

0:00:13.832,0:00:17.572
And the leading point of view on this, whether measured

0:00:17.572,0:00:21.763
by number of books sold, mentions in media,

0:00:21.763,0:00:24.979
or surveys that I've run with groups ranging from

0:00:24.979,0:00:29.056
my students to delegates to the World Trade Organization,

0:00:29.056,0:00:32.170
is this view that national borders

0:00:32.170,0:00:35.723
really don't matter very much anymore,

0:00:35.723,0:00:39.779
cross-border integration is close to complete,

0:00:39.779,0:00:42.074
and we live in one world.

0:00:42.074,0:00:44.306
And what's interesting about this view

0:00:44.306,0:00:47.900
is, again, it's a view that's held by pro-globalizers

0:00:47.900,0:00:52.674
like Tom Friedman, from whose book this quote is obviously excerpted,

0:00:52.674,0:00:56.600
but it's also held by anti-globalizers, who see this giant

0:00:56.600,0:01:01.491
globalization tsunami that's about to wreck all our lives

0:01:01.491,0:01:04.375
if it hasn't already done so.

0:01:04.375,0:01:08.399
The other thing I would add is that this is not a new view.

0:01:08.399,0:01:12.110
I'm a little bit of an amateur historian, so I've spent

0:01:12.110,0:01:16.091
some time going back, trying to see the first mention

0:01:16.091,0:01:19.810
of this kind of thing. And the best, earliest quote

0:01:19.810,0:01:23.654
that I could find was one from David Livingstone,

0:01:23.654,0:01:29.699
writing in the 1850s about how the railroad, the steam ship,

0:01:29.699,0:01:34.166
and the telegraph were integrating East Africa perfectly

0:01:34.166,0:01:37.537
with the rest of the world.

0:01:37.537,0:01:39.717
Now clearly, David Livingstone

0:01:39.717,0:01:42.737
was a little bit ahead of his time,

0:01:42.737,0:01:46.280
but it does seem useful to ask ourselves,

0:01:46.280,0:01:48.376
"Just how global are we?"

0:01:48.376,0:01:51.079
before we think about where we go from here.

0:01:51.079,0:01:55.617
So the best way I've found of trying to get people

0:01:55.617,0:02:00.266
to take seriously the idea that the world may not be flat,

0:02:00.266,0:02:04.281
may not even be close to flat, is with some data.

0:02:04.281,0:02:07.660
So one of the things I've been doing over the last few years

0:02:07.660,0:02:11.627
is really compiling data on things that could either happen

0:02:11.627,0:02:15.782
within national borders or across national borders,

0:02:15.782,0:02:19.285
and I've looked at the cross-border component

0:02:19.285,0:02:21.698
as a percentage of the total.

0:02:21.698,0:02:25.663
I'm not going to present all the data that I have here today,

0:02:25.663,0:02:29.269
but let me just give you a few data points.

0:02:29.269,0:02:33.603
I'm going to talk a little bit about one kind of information flow,

0:02:33.603,0:02:38.471
one kind of flow of people, one kind of flow of capital,

0:02:38.471,0:02:41.952
and, of course, trade in products and services.

0:02:41.952,0:02:46.531
So let's start off with plain old telephone service.

0:02:46.531,0:02:51.624
Of all the voice-calling minutes in the world last year,

0:02:51.624,0:02:56.272
what percentage do you think were accounted for

0:02:56.272,0:02:58.597
by cross-border phone calls?

0:02:58.597,0:03:02.673
Pick a percentage in your own mind.

0:03:02.673,0:03:05.768
The answer turns out to be two percent.

0:03:05.768,0:03:09.906
If you include Internet telephony, you might be able

0:03:09.906,0:03:13.333
to push this number up to six or seven percent,

0:03:13.333,0:03:17.990
but it's nowhere near what people tend to estimate.

0:03:17.990,0:03:21.735
Or let's turn to people moving across borders.

0:03:21.735,0:03:24.952
One particular thing we might look at, in terms of

0:03:24.952,0:03:28.679
long-term flows of people, is what percentage

0:03:28.679,0:03:32.191
of the world's population is accounted for

0:03:32.191,0:03:35.199
by first-generation immigrants?

0:03:35.199,0:03:39.494
Again, please pick a percentage.

0:03:39.494,0:03:41.919
Turns out to be a little bit higher.

0:03:41.919,0:03:44.986
It's actually about three percent.

0:03:44.986,0:03:49.857
Or think of investment. Take all the real investment

0:03:49.857,0:03:53.025
that went on in the world in 2010.

0:03:53.025,0:03:55.881
What percentage of that was accounted for

0:03:55.881,0:03:59.818
by foreign direct investment?

0:03:59.818,0:04:03.185
Not quite ten percent.

0:04:03.185,0:04:05.824
And then finally, the one statistic

0:04:05.824,0:04:09.001
that I suspect many of the people in this room have seen:

0:04:09.001,0:04:11.729
the export-to-GDP ratio.

0:04:11.729,0:04:15.498
If you look at the official statistics, they typically indicate

0:04:15.498,0:04:18.057
a little bit above 30 percent.

0:04:18.057,0:04:23.146
However, there's a big problem with the official statistics,

0:04:23.146,0:04:28.077
in that if, for instance, a Japanese component supplier

0:04:28.077,0:04:31.689
ships something to China to be put into an iPod,

0:04:31.689,0:04:34.490
and then the iPod gets shipped to the U.S.,

0:04:34.490,0:04:38.327
that component ends up getting counted multiple times.

0:04:38.327,0:04:41.096
So nobody knows how bad this bias

0:04:41.096,0:04:44.883
with the official statistics actually is, so I thought I would

0:04:44.883,0:04:47.467
ask the person who's spearheading the effort

0:04:47.467,0:04:50.732
to generate data on this, Pascal Lamy,

0:04:50.732,0:04:53.244
the Director of the World Trade Organization,

0:04:53.244,0:04:55.571
what his best guess would be

0:04:55.571,0:04:58.746
of exports as a percentage of GDP,

0:04:58.746,0:05:01.169
without the double- and triple-counting,

0:05:01.169,0:05:05.703
and it's actually probably a bit under 20 percent, rather than

0:05:05.703,0:05:09.472
the 30 percent-plus numbers that we're talking about.

0:05:09.472,0:05:13.655
So it's very clear that if you look at these numbers

0:05:13.655,0:05:17.223
or all the other numbers that I talk about in my book,

0:05:17.223,0:05:21.610
"World 3.0," that we're very, very far from

0:05:21.610,0:05:25.664
the no-border effect benchmark, which would imply

0:05:25.664,0:05:32.567
internationalization levels of the order of 85, 90, 95 percent.

0:05:32.567,0:05:36.175
So clearly, apocalyptically-minded authors

0:05:36.175,0:05:39.135
have overstated the case.

0:05:39.135,0:05:43.327
But it's not just the apocalyptics, as I think of them,

0:05:43.327,0:05:46.552
who are prone to this kind of overstatement.

0:05:46.552,0:05:49.949
I've also spent some time surveying audiences

0:05:49.949,0:05:51.947
in different parts of the world

0:05:51.947,0:05:56.007
on what they actually guess these numbers to be.

0:05:56.007,0:05:59.076
Let me share with you the results of a survey

0:05:59.076,0:06:02.415
that Harvard Business Review was kind enough to run

0:06:02.415,0:06:05.935
of its readership as to what people's guesses

0:06:05.935,0:06:10.350
along these dimensions actually were.

0:06:10.350,0:06:16.285
So a couple of observations stand out for me from this slide.

0:06:16.285,0:06:21.200
First of all, there is a suggestion of some error.

0:06:21.200,0:06:24.003
Okay. (Laughter)

0:06:24.003,0:06:29.476
Second, these are pretty large errors. For four quantities

0:06:29.476,0:06:32.455
whose average value is less than 10 percent,

0:06:32.455,0:06:36.557
you have people guessing three, four times that level.

0:06:36.557,0:06:39.645
Even though I'm an economist, I find that

0:06:39.645,0:06:42.049
a pretty large error.

0:06:42.049,0:06:45.911
And third, this is not just confined to the readers

0:06:45.911,0:06:47.871
of the Harvard Business Review.

0:06:47.871,0:06:51.269
I've run several dozen such surveys in different parts

0:06:51.269,0:06:54.619
of the world, and in all cases except one,

0:06:54.619,0:06:57.491
where a group actually underestimated

0:06:57.491,0:07:01.803
the trade-to-GDP ratio, people have this tendency

0:07:01.803,0:07:04.962
towards overestimation, and so I thought it important

0:07:04.962,0:07:08.267
to give a name to this, and that's what I refer to

0:07:08.267,0:07:12.844
as globaloney, the difference between the dark blue bars

0:07:12.844,0:07:15.851
and the light gray bars.

0:07:15.851,0:07:19.987
Especially because, I suspect, some of you may still be

0:07:19.987,0:07:24.179
a little bit skeptical of the claims, I think it's important

0:07:24.179,0:07:27.443
to just spend a little bit of time thinking about

0:07:27.443,0:07:31.202
why we might be prone to globaloney.

0:07:31.202,0:07:34.045
A couple of different reasons come to mind.

0:07:34.045,0:07:38.347
First of all, there's a real dearth of data in the debate.

0:07:38.347,0:07:41.528
Let me give you an example. When I first published

0:07:41.528,0:07:44.124
some of these data a few years ago

0:07:44.124,0:07:46.661
in a magazine called Foreign Policy,

0:07:46.661,0:07:50.231
one of the people who wrote in, not entirely in agreement,

0:07:50.231,0:07:54.186
was Tom Friedman. And since my article was titled

0:07:54.186,0:07:59.096
"Why the World Isn't Flat," that wasn't too surprising. (Laughter)

0:07:59.096,0:08:03.377
What was very surprising to me was Tom's critique,

0:08:03.377,0:08:08.315
which was, "Ghemawat's data are narrow."

0:08:08.315,0:08:11.334
And this caused me to scratch my head, because

0:08:11.334,0:08:14.471
as I went back through his several-hundred-page book,

0:08:14.471,0:08:19.104
I couldn't find a single figure, chart, table,

0:08:19.104,0:08:21.832
reference or footnote.

0:08:21.832,0:08:26.439
So my point is, I haven't presented a lot of data here

0:08:26.439,0:08:29.831
to convince you that I'm right, but I would urge you

0:08:29.831,0:08:32.816
to go away and look for your own data

0:08:32.816,0:08:36.304
to try and actually assess whether some of these

0:08:36.304,0:08:40.665
hand-me-down insights that we've been bombarded with

0:08:40.665,0:08:42.577
actually are correct.

0:08:42.577,0:08:46.109
So dearth of data in the debate is one reason.

0:08:46.109,0:08:50.024
A second reason has to do with peer pressure.

0:08:50.024,0:08:53.205
I remember, I decided to write my

0:08:53.205,0:08:55.830
"Why the World Isn't Flat" article, because

0:08:55.830,0:08:59.019
I was being interviewed on TV in Mumbai,

0:08:59.019,0:09:02.694
and the interviewer's first question to me was,

0:09:02.694,0:09:06.645
"Professor Ghemawat, why do you still believe

0:09:06.645,0:09:10.825
that the world is round?" And I started laughing,

0:09:10.825,0:09:14.598
because I hadn't come across that formulation before. (Laughter)

0:09:14.598,0:09:16.937
And as I was laughing, I was thinking,

0:09:16.937,0:09:19.824
I really need a more coherent response, especially

0:09:19.824,0:09:23.934
on national TV. I'd better write something about this. (Laughter)

0:09:23.934,0:09:26.903
But what I can't quite capture for you

0:09:26.903,0:09:29.503
was the pity and disbelief

0:09:29.503,0:09:32.981
with which the interviewer asked her question.

0:09:32.981,0:09:37.321
The perspective was, here is this poor professor.

0:09:37.321,0:09:42.007
He's clearly been in a cave for the last 20,000 years.

0:09:42.007,0:09:44.655
He really has no idea

0:09:44.655,0:09:47.613
as to what's actually going on in the world.

0:09:47.613,0:09:51.086
So try this out with your friends and acquaintances,

0:09:51.086,0:09:54.527
if you like. You'll find that it's very cool

0:09:54.527,0:09:57.815
to talk about the world being one, etc.

0:09:57.815,0:10:01.118
If you raise questions about that formulation,

0:10:01.118,0:10:05.015
you really are considered a bit of an antique.

0:10:05.015,0:10:08.469
And then the final reason, which I mention,

0:10:08.469,0:10:12.182
especially to a TED audience, with some trepidation,

0:10:12.182,0:10:15.527
has to do with what I call "techno-trances."

0:10:15.527,0:10:19.054
If you listen to techno music for long periods of time,

0:10:19.054,0:10:22.406
it does things to your brainwave activity. (Laughter)

0:10:22.406,0:10:25.864
Something similar seems to happen

0:10:25.864,0:10:31.174
with exaggerated conceptions of how technology

0:10:31.174,0:10:35.343
is going to overpower in the very immediate run

0:10:35.343,0:10:38.676
all cultural barriers, all political barriers,

0:10:38.676,0:10:42.269
all geographic barriers, because at this point

0:10:42.269,0:10:44.853
I know you aren't allowed to ask me questions,

0:10:44.853,0:10:47.826
but when I get to this point in my lecture with my students,

0:10:47.826,0:10:50.590
hands go up, and people ask me,

0:10:50.590,0:10:54.069
"Yeah, but what about Facebook?"

0:10:54.069,0:10:56.682
And I got this question often enough that I thought

0:10:56.682,0:10:59.430
I'd better do some research on Facebook.

0:10:59.430,0:11:03.150
Because, in some sense, it's the ideal kind of technology

0:11:03.150,0:11:06.819
to think about. Theoretically, it makes it

0:11:06.819,0:11:10.197
as easy to form friendships halfway around the world

0:11:10.197,0:11:13.199
as opposed to right next door.

0:11:13.199,0:11:19.285
What percentage of people's friends on Facebook

0:11:19.285,0:11:22.405
are actually located in countries other than where

0:11:22.405,0:11:25.678
people we're analyzing are based?

0:11:25.678,0:11:29.028
The answer is probably somewhere between

0:11:29.028,0:11:31.901
10 to 15 percent.

0:11:31.901,0:11:35.712
Non-negligible, so we don't live in an entirely local

0:11:35.712,0:11:40.719
or national world, but very, very far from the 95 percent level

0:11:40.719,0:11:44.125
that you would expect, and the reason's very simple.

0:11:44.125,0:11:48.117
We don't, or I hope we don't, form friendships at random

0:11:48.117,0:11:52.939
on Facebook. The technology is overlaid

0:11:52.939,0:11:57.674
on a pre-existing matrix of relationships that we have,

0:11:57.674,0:12:00.742
and those relationships are what the technology

0:12:00.742,0:12:03.973
doesn't quite displace. Those relationships are why

0:12:03.973,0:12:08.017
we get far fewer than 95 percent of our friends

0:12:08.017,0:12:11.825
being located in countries other than where we are.

0:12:11.825,0:12:17.306
So does all this matter? Or is globaloney

0:12:17.306,0:12:22.718
just a harmless way of getting people to pay more attention

0:12:22.718,0:12:25.430
to globalization-related issues?

0:12:25.430,0:12:27.637
I want to suggest that actually,

0:12:27.637,0:12:32.207
globaloney can be very harmful to your health.

0:12:32.207,0:12:35.359
First of all, recognizing that the glass

0:12:35.359,0:12:39.815
is only 10 to 20 percent full is critical to seeing

0:12:39.815,0:12:43.199
that there might be potential for additional gains

0:12:43.199,0:12:45.230
from additional integration,

0:12:45.230,0:12:48.074
whereas if we thought we were already there,

0:12:48.074,0:12:51.498
there would be no particular point to pushing harder.

0:12:51.498,0:12:54.710
It's a little bit like, we wouldn't be having a conference

0:12:54.710,0:12:58.891
on radical openness if we already thought we were totally open

0:12:58.891,0:13:02.223
to all the kinds of influences that are being talked about

0:13:02.223,0:13:03.638
at this conference.

0:13:03.638,0:13:08.428
So being accurate about how limited globalization levels are

0:13:08.428,0:13:11.487
is critical to even being able to notice

0:13:11.487,0:13:15.166
that there might be room for something more,

0:13:15.166,0:13:19.134
something that would contribute further to global welfare.

0:13:19.134,0:13:21.966
Which brings me to my second point.

0:13:21.966,0:13:26.189
Avoiding overstatement is also very helpful

0:13:26.189,0:13:30.984
because it reduces and in some cases even reverses

0:13:30.984,0:13:35.789
some of the fears that people have about globalization.

0:13:35.789,0:13:39.174
So I actually spend most of my "World 3.0" book

0:13:39.174,0:13:43.718
working through a litany of market failures and fears

0:13:43.718,0:13:48.858
that people have that they worry globalization is going to exacerbate.

0:13:48.858,0:13:52.526
I'm obviously not going to be able to do that for you today,

0:13:52.526,0:13:55.794
so let me just present to you two headlines

0:13:55.794,0:13:59.075
as an illustration of what I have in mind.

0:13:59.075,0:14:03.391
Think of France and the current debate about immigration.

0:14:03.391,0:14:06.623
When you ask people in France what percentage

0:14:06.623,0:14:08.836
of the French population is immigrants,

0:14:08.836,0:14:13.336
the answer is about 24 percent. That's their guess.

0:14:13.336,0:14:17.966
Maybe realizing that the number is just eight percent

0:14:17.966,0:14:22.380
might help cool some of the superheated rhetoric

0:14:22.380,0:14:25.718
that we see around the immigration issue.

0:14:25.718,0:14:29.862
Or to take an even more striking example,

0:14:29.862,0:14:32.039
when the Chicago Council on Foreign Relations

0:14:32.039,0:14:35.386
did a survey of Americans, asking them to guess

0:14:35.386,0:14:39.613
what percentage of the federal budget went to foreign aid,

0:14:39.613,0:14:43.294
the guess was 30 percent, which is

0:14:43.294,0:14:48.654
slightly in excess of the actual level — ("actually about ... 1%") (Laughter) —

0:14:48.654,0:14:52.028
of U.S. governmental commitments to federal aid.

0:14:52.028,0:14:55.435
The reassuring thing about this particular survey was,

0:14:55.435,0:14:58.116
when it was pointed out to people how far

0:14:58.116,0:15:01.325
their estimates were from the actual data,

0:15:01.325,0:15:04.420
some of them — not all of them — seemed to become

0:15:04.420,0:15:08.407
more willing to consider increases in foreign aid.

0:15:08.407,0:15:11.531
So foreign aid is actually a great way

0:15:11.531,0:15:14.725
of sort of wrapping up here, because

0:15:14.725,0:15:17.813
if you think about it, what I've been talking about today

0:15:17.813,0:15:21.902
is this notion -- very uncontroversial amongst economists --

0:15:21.902,0:15:24.884
that most things are very home-biased.

0:15:24.884,0:15:28.109
"Foreign aid is the most aid to poor people,"

0:15:28.109,0:15:31.832
is about the most home-biased thing you can find.

0:15:31.832,0:15:34.870
If you look at the OECD countries and how much

0:15:34.870,0:15:38.012
they spend per domestic poor person,

0:15:38.012,0:15:40.264
and compare it with how much they spend

0:15:40.264,0:15:44.436
per poor person in poor countries,

0:15:44.436,0:15:48.708
the ratio — Branko Milanovic at the World Bank did the calculations —

0:15:48.708,0:15:53.384
turns out to be about 30,000 to one.

0:15:53.384,0:15:59.580
Now of course, some of us, if we truly are cosmopolitan,

0:15:59.580,0:16:02.749
would like to see that ratio being brought down

0:16:02.749,0:16:04.981
to one-is-to-one.

0:16:04.981,0:16:08.372
I'd like to make the suggestion that we don't need to aim

0:16:08.372,0:16:12.533
for that to make substantial progress from where we are.

0:16:12.533,0:16:17.600
If we simply brought that ratio down to 15,000 to one,

0:16:17.600,0:16:20.970
we would be meeting those aid targets that were agreed

0:16:20.970,0:16:24.487
at the Rio Summit 20 years ago that the summit

0:16:24.487,0:16:28.349
that ended last week made no further progress on.

0:16:28.349,0:16:32.154
So in summary, while radical openness is great,

0:16:32.154,0:16:34.167
given how closed we are,

0:16:34.167,0:16:37.141
even incremental openness could make things

0:16:37.141,0:16:40.772
dramatically better. Thank you very much. (Applause)

0:16:40.772,0:16:43.543
(Applause)