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I'm here to talk to you about how globalized we are,

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how globalized we aren't,

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and why it's important to actually be accurate

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in making those kinds of assessments.

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And the leading point of view on this, whether measured

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by number of books sold, mentions in media,

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or surveys that I've run with groups ranging from

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my students to delegates to the World Trade Organization,

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is this view that national borders

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really don't matter very much anymore,

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cross-border integration is close to complete,

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and we live in one world.

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And what's interesting about this view

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is, again, it's a view that's held by pro-globalizers

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like Tom Friedman, from whose book this quote is obviously excerpted,

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but it's also held by anti-globalizers, who see this giant

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globalization tsunami that's about to wreck all our lives

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if it hasn't already done so.

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The other thing I would add is that this is not a new view.

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I'm a little bit of an amateur historian, so I've spent

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some time going back, trying to see the first mention

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of this kind of thing. And the best, earliest quote

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that I could find was one from David Livingstone,

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writing in the 1850s about how the railroad, the steam ship,

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and the telegraph were integrating East Africa perfectly

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with the rest of the world.

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Now clearly, David Livingstone

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was a little bit ahead of his time,

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but it does seem useful to ask ourselves,

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"Just how global are we?"

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before we think about where we go from here.

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So the best way I've found of trying to get people

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to take seriously the idea that the world may not be flat,

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may not even be close to flat, is with some data.

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So one of the things I've been doing over the last few years

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is really compiling data on things that could either happen

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within national borders or across national borders,

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and I've looked at the cross-border component

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as a percentage of the total.

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I'm not going to present all the data that I have here today,

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but let me just give you a few data points.

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I'm going to talk a little bit about one kind of information flow,

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one kind of flow of people, one kind of flow of capital,

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and, of course, trade in products and services.

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So let's start off with plain old telephone service.

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Of all the voice-calling minutes in the world last year,

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what percentage do you think were accounted for

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by cross-border phone calls?

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Pick a percentage in your own mind.

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The answer turns out to be two percent.

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If you include Internet telephony, you might be able

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to push this number up to six or seven percent,

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but it's nowhere near what people tend to estimate.

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Or let's turn to people moving across borders.

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One particular thing we might look at, in terms of

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long-term flows of people, is what percentage

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of the world's population is accounted for

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by first-generation immigrants?

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Again, please pick a percentage.

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Turns out to be a little bit higher.

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It's actually about three percent.

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Or think of investment. Take all the real investment

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that went on in the world in 2010.

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What percentage of that was accounted for

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by foreign direct investment?

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Not quite ten percent.

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And then finally, the one statistic

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that I suspect many of the people in this room have seen:

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the export-to-GDP ratio.

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If you look at the official statistics, they typically indicate

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a little bit above 30 percent.

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However, there's a big problem with the official statistics,

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in that if, for instance, a Japanese component supplier

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ships something to China to be put into an iPod,

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and then the iPod gets shipped to the U.S.,

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that component ends up getting counted multiple times.

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So nobody knows how bad this bias

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with the official statistics actually is, so I thought I would

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ask the person who's spearheading the effort

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to generate data on this, Pascal Lamy,

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the Director of the World Trade Organization,

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what his best guess would be

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of exports as a percentage of GDP,

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without the double- and triple-counting,

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and it's actually probably a bit under 20 percent, rather than

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the 30 percent-plus numbers that we're talking about.

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So it's very clear that if you look at these numbers

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or all the other numbers that I talk about in my book,

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"World 3.0," that we're very, very far from

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the no-border effect benchmark, which would imply

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internationalization levels of the order of 85, 90, 95 percent.

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So clearly, apocalyptically-minded authors

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have overstated the case.

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But it's not just the apocalyptics, as I think of them,

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who are prone to this kind of overstatement.

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I've also spent some time surveying audiences

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in different parts of the world

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on what they actually guess these numbers to be.

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Let me share with you the results of a survey

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that Harvard Business Review was kind enough to run

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of its readership as to what people's guesses

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along these dimensions actually were.

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So a couple of observations stand out for me from this slide.

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First of all, there is a suggestion of some error.

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Okay. (Laughter)

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Second, these are pretty large errors. For four quantities

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whose average value is less than 10 percent,

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you have people guessing three, four times that level.

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Even though I'm an economist, I find that

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a pretty large error.

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And third, this is not just confined to the readers

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of the Harvard Business Review.

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I've run several dozen such surveys in different parts

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of the world, and in all cases except one,

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where a group actually underestimated

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the trade-to-GDP ratio, people have this tendency

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towards overestimation, and so I thought it important

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to give a name to this, and that's what I refer to

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as globaloney, the difference between the dark blue bars

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and the light gray bars.

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Especially because, I suspect, some of you may still be

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a little bit skeptical of the claims, I think it's important

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to just spend a little bit of time thinking about

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why we might be prone to globaloney.

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A couple of different reasons come to mind.

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First of all, there's a real dearth of data in the debate.

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Let me give you an example. When I first published

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some of these data a few years ago

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in a magazine called Foreign Policy,

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one of the people who wrote in, not entirely in agreement,

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was Tom Friedman. And since my article was titled

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"Why the World Isn't Flat," that wasn't too surprising. (Laughter)

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What was very surprising to me was Tom's critique,

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which was, "Ghemawat's data are narrow."

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And this caused me to scratch my head, because

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as I went back through his several-hundred-page book,

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I couldn't find a single figure, chart, table,

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reference or footnote.

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So my point is, I haven't presented a lot of data here

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to convince you that I'm right, but I would urge you

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to go away and look for your own data

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to try and actually assess whether some of these

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hand-me-down insights that we've been bombarded with

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actually are correct.

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So dearth of data in the debate is one reason.

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A second reason has to do with peer pressure.

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I remember, I decided to write my

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"Why the World Isn't Flat" article, because

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I was being interviewed on TV in Mumbai,

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and the interviewer's first question to me was,

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"Professor Ghemawat, why do you still believe

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that the world is round?" And I started laughing,

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because I hadn't come across that formulation before. (Laughter)

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And as I was laughing, I was thinking,

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I really need a more coherent response, especially

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on national TV. I'd better write something about this. (Laughter)

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But what I can't quite capture for you

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was the pity and disbelief

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with which the interviewer asked her question.

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The perspective was, here is this poor professor.

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He's clearly been in a cave for the last 20,000 years.

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He really has no idea

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as to what's actually going on in the world.

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So try this out with your friends and acquaintances,

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if you like. You'll find that it's very cool

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to talk about the world being one, etc.

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If you raise questions about that formulation,

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you really are considered a bit of an antique.

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And then the final reason, which I mention,

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especially to a TED audience, with some trepidation,

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has to do with what I call "techno-trances."

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If you listen to techno music for long periods of time,

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it does things to your brainwave activity. (Laughter)

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Something similar seems to happen

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with exaggerated conceptions of how technology

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is going to overpower in the very immediate run

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all cultural barriers, all political barriers,

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all geographic barriers, because at this point

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I know you aren't allowed to ask me questions,

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but when I get to this point in my lecture with my students,

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hands go up, and people ask me,

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"Yeah, but what about Facebook?"

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And I got this question often enough that I thought

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I'd better do some research on Facebook.

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Because, in some sense, it's the ideal kind of technology

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to think about. Theoretically, it makes it

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as easy to form friendships halfway around the world

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as opposed to right next door.

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What percentage of people's friends on Facebook

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are actually located in countries other than where

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people we're analyzing are based?

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The answer is probably somewhere between

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10 to 15 percent.

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Non-negligible, so we don't live in an entirely local

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or national world, but very, very far from the 95 percent level

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that you would expect, and the reason's very simple.

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We don't, or I hope we don't, form friendships at random

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on Facebook. The technology is overlaid

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on a pre-existing matrix of relationships that we have,

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and those relationships are what the technology

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doesn't quite displace. Those relationships are why

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we get far fewer than 95 percent of our friends

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being located in countries other than where we are.

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So does all this matter? Or is globaloney

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just a harmless way of getting people to pay more attention

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to globalization-related issues?

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I want to suggest that actually,

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globaloney can be very harmful to your health.

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First of all, recognizing that the glass

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is only 10 to 20 percent full is critical to seeing

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that there might be potential for additional gains

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from additional integration,

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whereas if we thought we were already there,

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there would be no particular point to pushing harder.

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It's a little bit like, we wouldn't be having a conference

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on radical openness if we already thought we were totally open

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to all the kinds of influences that are being talked about

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at this conference.

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So being accurate about how limited globalization levels are

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is critical to even being able to notice

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that there might be room for something more,

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something that would contribute further to global welfare.

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Which brings me to my second point.

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Avoiding overstatement is also very helpful

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because it reduces and in some cases even reverses

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some of the fears that people have about globalization.

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So I actually spend most of my "World 3.0" book

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working through a litany of market failures and fears

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that people have that they worry globalization is going to exacerbate.

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I'm obviously not going to be able to do that for you today,

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so let me just present to you two headlines

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as an illustration of what I have in mind.

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Think of France and the current debate about immigration.

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When you ask people in France what percentage

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of the French population is immigrants,

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the answer is about 24 percent. That's their guess.

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Maybe realizing that the number is just eight percent

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might help cool some of the superheated rhetoric

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that we see around the immigration issue.

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Or to take an even more striking example,

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when the Chicago Council on Foreign Relations

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did a survey of Americans, asking them to guess

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what percentage of the federal budget went to foreign aid,

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the guess was 30 percent, which is

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slightly in excess of the actual level — ("actually about ... 1%") (Laughter) —

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of U.S. governmental commitments to federal aid.

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The reassuring thing about this particular survey was,

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when it was pointed out to people how far

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their estimates were from the actual data,

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some of them — not all of them — seemed to become

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more willing to consider increases in foreign aid.

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So foreign aid is actually a great way

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of sort of wrapping up here, because

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if you think about it, what I've been talking about today

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is this notion -- very uncontroversial amongst economists --

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that most things are very home-biased.

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"Foreign aid is the most aid to poor people,"

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is about the most home-biased thing you can find.

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If you look at the OECD countries and how much

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they spend per domestic poor person,

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and compare it with how much they spend

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per poor person in poor countries,

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the ratio — Branko Milanovic at the World Bank did the calculations —

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turns out to be about 30,000 to one.

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Now of course, some of us, if we truly are cosmopolitan,

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would like to see that ratio being brought down

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to one-is-to-one.

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I'd like to make the suggestion that we don't need to aim

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for that to make substantial progress from where we are.

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If we simply brought that ratio down to 15,000 to one,

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we would be meeting those aid targets that were agreed

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at the Rio Summit 20 years ago that the summit

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that ended last week made no further progress on.

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So in summary, while radical openness is great,

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given how closed we are,

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even incremental openness could make things

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dramatically better. Thank you very much. (Applause)

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(Applause)