GMS 724 Study Guide - Midterm Guide: Trade-To-Gdp Ratio
11 Nov 2018
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Chapter 1 - The Forces Driving Globalization
• Measuring globalization is problematic, especially for historical comparisons
o First, a country's independence must be measured indirectly
o Second, when national boundaries shift, such as in the breakup of the
former Soviet Union or the reunification of East and West Germany,
domestic business transactions can become international transactions and
vice versa
o Various reliable indicators assure us that globalization has been
increasing, at least since the mid-twentieth century
o Currently, over 20 percent of world production is sold outside its country of
origin, compared to about 7 percent in 1950
o Restrictions on imports have generally been decreasing, and output from
foreign-owned investments as a percentage of world production has
increased
o In almost every year since World War II, world trade has grown more
rapidly than world production
o However, in necessary periods, global trade and investment contract even
more than the global economy, such as fall in world trade of 21 percent
between April 2008 and May 2009
• At the same time, however, globalization is less pervasive than you might
suppose
o In much of the world (especially poor rural areas), people lack the
resources to establish more than the barest connection with anyone
beyond the outskirts of their isolated domains
o Only a few countries---mainly very small ones---either sell over half their
production abroad or depend on foreign output for more than half of their
consumption
o This means that most of the world's goods and services are still sold in the
countries in which they're produced
o Moreover, the principal source of capital in most countries is domestic
rather than international
• Granted, these measurements address only economic aspects of global
interdependence
o Various studies have relied on different indicators for comparison
o One of the most comprehensive is the A.T. Kearney/Foreign Policy
Globalization Index, which shows not only some countries are more
globalized than others but also that a given country may be highly
globalized on one dimension and not another
o This index ranks countries across four dimensions:
❖ Economic---international trade and investment
❖ Technological---Internet connectivity
