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The networked economy: Globalized trade

For several years, the Bertelsmann Stiftung has been exploring the economic aspects of globalization. In the following interview, Thieß Petersen and Jan Arpe discuss the connections and interdependencies within the global economy and take a critical look at the most important developments and risks.

 

 

Mr. Arpe, what exactly are “megatrends”?

 Jan Arpe: Megatrends are those developments that have a fundamental impact on social change worldwide. Examples include climate change and aging societies, as well as digitalization or increasing interconnectedness on a global scale. In other words: globalization.

 And what are the most significant effects of globalization on global trade, Mr. Petersen?

Thieß Petersen: For starters, global trade has increased considerably since 1990. One could say that the fall of the Iron Curtain triggered an acceleration of the process. In addition, since China joined the World Trade Organization in 2001, we’ve also seen emerging economies’ participation in global trade grow stronger. Third, we’re now seeing not only manufactured products, but increasingly more inputs in global markets. This is an indication of how the trend toward an international division of labor is growing. The global production of goods is being distributed across various locations as countries specialize according to who has the best conditions.

China’s growth sustained economic activity during the crisis

Doesn’t the mutual interdependence between national economies exacerbate the vulnerability to crises?

Jan Arpe: That’s true, we’ve become more vulnerable to crises.The risk of regional crises spilling over to the rest of the world has also increased. The global financial and economic crisis – which had its roots in the bursting of the U.S. housing bubble -- is the most recent proof of this. National economies with high export levels are particularly prone to the negative effects of events like this. Unsurprisingly, Germany and Japan were hit particularly hard in the wake of the 2009 global economic crisis.

Thieß Petersen: On the other hand, a networked economy doesn’t necessarily imply instability – it can, in fact, provide increased stability. We can also point to the positive developments observed in emerging economies. Perhaps most notable is China’s astounding growth rate, which helped buoy the global economy during the crisis and more or less drove economic activity.

Interconnectivity is particularly high in Ireland, Belgium and the Netherlands

In your studies you compare the degree to which different countries are globalized. Can we measure globalization?

Thieß Petersen. We can measure how networked a country is. To do this, we look at various aspects of a country and ask, for example:  What kind of trade relations does it pursue? How strong is its economic trade? What about information flows between countries? And who goes where for holidays? The answers to these questions are then subject to statistical analysis. From these results, we can calculate indicators for the degree of interconnectivity for economic, social and political factors as well as a composite indicator, the globalization index. Countries such as Ireland, Belgium and the Netherlands feature a particularly high level of interconnectivity whereas countries like Argentina, Brazil and China show a low level.  

In the Globalization Report 2014 you ask which countries have profited most from globalization.

Jan Arpe: Yes, in this study we look at globalization’s economic advantage. First, we simulated scenarios for 42 countries to see how their economic performance would have developed if their level of interconnectivity had remained at its 1990 level. Then we compared these fictional numbers with the real numbers. The difference gave us the added value that could be attributed to the growing force of globalization. Finland showed the largest gain with an annual GDP per capita increase of nearly €1,500 from 1990 to 2011.

Germany lands at fourth place in this ranking. The big emerging economies, however, all fall at the bottom of the ranking. This has in large part to do with the fact that their GDP per capita in 1990 was still very low.

It makes sense for industrialized countries to open up their markets to goods from emerging economies and developing countries.
Thieß Petersen, Bertelsmann Stiftung

How can we ensure that emerging economies and developing countries profit more from globalization in the future?

Thieß Petersen: For starters, it would make sense for industrialized countries to open up their markets to goods form emerging economies and developing countries, and to remove tariffs. Second, we recommend that advanced industrial countries do away with their trade-distorting agricultural subsidies, which prevent developing countries from selling their agricultural products on the global market. Third, rich countries should provide poorer countries opportunities for financing infrastructural development, educational measures and the acquisition of new technologies.

We see globalization as a process of growing exchange and interconnectivity, not as growing competition between individual states.
Jan Arpe, Bertelsmann Stiftung

Mr. Arpe, as a project manager, you helped develop the GED VIZ data visualization tool. What can it do and how can it be used?

Jan Arpe: GED VIZ

is a free online-accessible tool that helps users better understand and communicate data on global economic dynamics. It allows users to follow trade and migration flows as well as debt levels among any number of a total of 47 countries for the years 2000 to 2012. The visualization of relationships is important because we see globalization as a process of growing exchange and interconnectivity – not as growing competition between individual states, as globalization is often depicted.

 

GED VIZ is unique because users can extract slides from their user-driven visualization and embed these interactive slides into other websites such as news websites or blogs or share them via Twitter and Facebook. Journalists, scholars or teachers can integrate these visualizations into their descriptions of complex issues, thereby making them more accessible and understandable.

[Translate to English:] Publikation

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