Singap

ore

Irelan

dSw

itzerl

and

United

State

s

Netherl

ands

Canad

a

Denmark

Swed

en

Austr

iaFin

land

New Ze

aland

United

King

dom

Austr

alia

Norway

Czech R

epub

lic

Croatia

Israel

France

Malaysi

a

Sloven

ia

ECON

OMIC

PERS

ONAL

TECH

NOLO

GICA

LPO

LITI

CAL

2019181716151413121110987654321

The Global Top 20The countries that top the charts in

trade, travel, technology, and links to the rest of

the world

ECONOMIC INTEGRATION:Trade and foreign direct investment

TECHNOLOGICAL CONNECTIVITY:Internet users, Internet hosts, and secure servers

PERSONAL CONTACT:International travel and tourism, interna-tional telephone traffic, and remittancesand personal transfers (including workerremittances, compensation to employees,and other person-to-person and non-governmental transfers)

POLITICAL ENGAGEMENT:Membership in international organiza-tions, personnel and financial contribu-tions to U.N. peacekeeping missions,international treaties ratified, and govern-mental transfers

MeasuringGlobalization

CH

AR

TS F

OR

FP

BY

JAR

ED S

CH

NEI

DM

AN

52 Foreign Policy

May | June 2005 53

[ G L O B A L I Z A T I O N A T W O R K ]

The noted international economistJoseph Stiglitz called 2003 “a disasterfor globalization.” At one level, hewas right. The Iraq war and its after-

math created deep fissures between the United Statesand its allies, and the great majority of countrieswho opposed the war. The U.N. Security Council, thelead body for international peace and security issues,was dealt a blow by the willingness of the coalitionto launch a military campaign without its blessing.The war even prompted boycotts and mutteringabout possible trade embargoes. During the height ofthe Iraq controversy, some German restaurants post-ed signs reading, “Sorry, Coca-Cola is not availableany more due to the current political situation.” Thedesire to express political differences at the cash reg-ister was reciprocated in the United States. One 2003poll showed that nearly half of Americans preferrednot to buy French goods. Even White House Chiefof Staff Andrew Card was reported to have said that“Virginia wine is fine with me.”

Economically, the year did not begin much bet-ter. Foreign investment flows slowed, and tradewas stagnant for the first half of the year. In itsmeeting at Cancún, Mexico, the World Trade Orga-nization (wto) failed to agree on the reduction ofpowerful agricultural subsidies in the United Statesand Europe. What might have been a dramaticexpansion of free trade fizzled, leaving behind noobvious roadmap for progress. In the realm ofpublic health, the sars epidemic grounded global

travelers and exposed unsettling gaps in interna-tional health monitoring. Tourism to Asia droppedprecipitously as a result—by as much as 50 percentin some countries.

Yet this year’s edition of the A.T. Kearney/Foreign Policy Globalization Index shows thatthe multifaceted force called globalization is madeof sterner stuff. By the second half of 2003, the tiesthat bind were connecting us once again. Globaltrade, which grew at less than 1 percent in the firstquarter, jumped by more than 5 percent in thesecond half of the year. Global development aidimproved dramatically. The Organisation for Eco-nomic Co-operation and Development estimatedthat official development assistance reached arecord $69 billion. The largest increase came fromthe United States, which boosted foreign aid bymore than 20 percent.

The resilience of globalization indicates that itis a phenomenon that runs deeper than the politi-cal crises of the day. In an effort to measure itsmany dimensions, the index looks behind the head-lines by using several indicators spanning trade,finance, political engagement, information tech-nology, and personal contact to determine the rank-ings of 62 countries. These 62 countries togetheraccount for 96 percent of the world’s gross domes-tic product (gdp) and 85 percent of the world’spopulation. The index measures 12 variables,which are divided into four “baskets”: economicintegration, technological connectivity, personalcontact, and political engagement.

The resulting rankings offer an important high-altitude look at which countries are globalizing andwhich are not. But sifting through the data thatcome out of the index also yields some interestingstories behind the broader trends.

The fifth annual A.T. Kearney/Foreign Policy Globalization Index

shows that global integration survived the turbulence of the Iraq war, a

sharp economic downturn, and the failure of trade talks. Our ranking of

political, economic, personal, and technological globalization in 62

countries reveals that the world is still coming together. Find out who’s up,

who’s down, and how they got there.

Copyright 2005, A.T. Kearney, Inc., and the Carnegie Endow-

ment for International Peace. All rights reserved. A.T. Kear-

ney is a registered service mark of A.T. Kearney, Inc.

Foreign Policy is a registered trademark owned by the

Carnegie Endowment for International Peace.

54 Foreign Policy

[ Measuring Globalization ]

The world’s superpower became a bit moreglobal in 2003, climbing three spots in the index.But a quick glance at the U.S. report card revealsa hit-or-miss performance. The United Statesput up stratospheric numbers in the technologybasket, ranking first in the number of Internethosts and the number of secure servers. But theUnited States lagged far behind in categoriesincluding trade, foreign direct investment (fdi),and treaty commitments. In part,the United States’ lackluster per-formance in economic areas is dueto its vibrant domestic market.Because many U.S. producers canfocus exclusively on satisfyingU.S. consumers, the United Statesis a less trade-dependent nationthan small exporting countriessuch as Singapore and Ireland. Insome ways, the U.S. economy is aworld unto itself. The Bushadministration has often actedsimilarly aloof in political anddiplomatic terms. Consider theUnited States’ skepticism of inter-national treaty regimes. In 2003,the Bush administration contin-ued to turn up its nose at a variety

of international agreements. The White House’sopposition to the Kyoto Protocol and the Inter-national Criminal Court is well known. But theBush administration didn’t even want to sign onto the Basel Convention on the Control ofTransboundary Movements of HazardousWastes. The United States looks suspiciously atmany of the new legal and institutional arrange-ments that are binding the world together, atleast on paper. As a result, the United Statesranks 57th of the 62 ranked countries—belowChina and Pakistan—when it comes to signingon the dotted line.

36

44

5055

Internet users as a percentageof U.S. population

1999 2000 2001 2002

59

2003

T H E W I N N E R S ’ C I R C L E

The luck of the Irish finally ran out, as last year’s run-ner-up, Singapore, took the top spot in this year’sranking, ending Ireland’s three-year streak. One keyto Singapore’s rise was its increased political engage-ment. The island nation built bridges in 2003—increasing its financial contribution to U.N. peace-keeping missions by 41 percent. (Indeed, a Singaporeangeneral commanded the peacekeeping force in EastTimor for much of 2003.) Singapore solidified itsfirst-place ranking in foreign trade by signing a bilat-eral free trade agreement with the United States in May2003, the first such agreement the United States hadsigned with an Asian nation. Meanwhile, Ireland’sstrong economy slumped, with gdp growth slidingfrom a robust 6.9 percent in 2002 to a tepid 1.8 per-

cent in 2003. There was other movement in the topfive. Finland fell from fifth to 10th place. The UnitedStates jumped from seventh to fourth and became thefirst large country to crack the top five. Nations withlarge populations (and large domestic markets) gen-erally fare worse in the index because they are typicallyless dependent on foreign trade and investment. Thestrong U.S. showing is primarily a result of its remark-able technological prowess.

RankingsIn the table, the countries ranking in the top 10

in each category are shaded orange, and thoseranking in the bottom 10 are shaded blue.

The SchizophrenicUnited States

Sources: International Telecommunication Union; International Monetary Fund

123456789

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2005

GI R

anki

ngs

Chan

ge fr

om 2

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Econ

omic

Pers

onal

Tech

nolo

gica

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Polit

ical

FDI

Trav

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ittan

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anki

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Dimension Item

EconomicIntegration

Personal Contact TechnologicalConnectivity

Political Engagement

56 Foreign Policy

[ Measuring Globalization ]

Globalization Score

Less globalized

More globalized

Number of Significant Terrorist Attacks

Fewer attacks

More attacks

0

60

10

6

8

4

2

0

900

750

600

450

300

150

SingaporeIreland

SwitzerlandUnited States

NetherlandsAustria

United KingdomCzech Republic

Israel

FranceMalaysia

Slovakia

Spain

Japan

PhilippinesChileUkraineNigeria

Saudi Arabia

Pakistan

Colombia

China

Turkey

Egypt

Indonesia

India

IranIs opening your

country to the forcesof globalization an invita-tion to terror? Many analystshave theorized that the more global acountry is, the more susceptible it is to ter-rorist attacks. Countries with relatively openphysical borders and close contact with the outsideworld may allow terrorists to enter and move aroundeasily. Frustrated about the unequal distribution ofglobalization’s benefits or the perceived corruption oftraditional values, terrorist outfits may actually wantto make an example of these open societies and sin-gle them out for attack. And the more technologicallyopen a country, the easier it is for terrorists to coor-dinate and execute their plans without being noticed.No one forgets that the September 11 hijackers reliedon e-mail, cell phones, and wire transfers in themonths leading up to their attacks.

Russia’s globalization score tumbled eight placesin this year’s index. The Russian economy hasbecome dependent on oil and gas investments,and the country’s partial transformation into a“petrostate” means that its economy is becomingvulnerable to the vicissitudes of those markets. Bysome accounts, the energy sector’s contributionto industrial output is about 25 percent of gdp and50 percent of the country’s export earnings. TheKremlin’s legal assault on oil giant Yukos and the

bloody terrorist attacks by Chechen forces havedeterred many foreign investors. Corruption andinefficiency are also sapping Russian economicstrength. By some estimates, the black market wasbetween 20 and 40 percent of the Russian economy.Privatization and deregulation, meanwhile, havestalled. Russia still has not made the reforms nec-essary to join the wto, and trade as a share of Rus-sia’s gdp fell sharply between 1999 and 2003. Bycontrast, Ukraine, which is also angling for wtomembership, saw trade as a share of its gdpincrease by 12 percent during the same period.

A weak connection between globalization

and terrorism

It’s an interestingtheory, but it doesn’t

check out. We compared theU.S. State Department’s Patterns

of Global Terrorism 2003 with theindex and found little correlation between a

country’s level of global integration and the num-ber of significant international terrorist attacks on itssoil. In general, integrated countries were not more vul-nerable to terrorism than countries with fewer links tothe world. In fact, globalized countries may be morecapable of combating terrorism by joining internationalnetworks. India, for example, is taking that path. A fre-quent target of militant groups operating in Jammuand Kashmir, New Delhi decided to ratify the Inter-national Convention for the Suppression of the Financ-ing of Terrorism in 2003. It’s a smart move, as dryingup the sources of terrorist financing is one of global-ization’s best tools for keeping terrorists at bay.

An Invitation to Terror?

Russia Falls Behind

May | June 2005 57

Globalization Score

Less globalized

More globalized

Public Spending on Education (% of GDP)

Less spending

More spending

1.0

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

0

800

700

600

500

400

300

200

100

IrelandUnited States

Canada

Denmark

Austria

Australia

Norway

Czech Republic

Israel

FranceMalaysia

GermanyPortugal

Hungary

Italy

JapanSouth KoreaPoland

Philippines

Tunisia

UkraineMorocco

Senegal

Thailand

Argentina

Kenya

Pakistan

Colombia

Russia

TurkeyBrazil

Bangladesh

Indonesia

IndiaIran

In 2003, when other national economies began tosputter, China kept accelerating; its gdp grew ata scorching 9.1 percent. No one questions that theChinese economy is now one of the engines ofglobal economic growth. The country’s nearlyinsatiable demand for raw materials has strength-ened trade links with neighbors and commodityproducers around the world. When Chinaannounced its intention to import a record volumeof soybeans, for example, prices jumped as muchas 28 percent in places as distant as central Illinois.China’s share of world exports, at 1.9 percent in1990, reached 6 percent in 2003, the first fullyear that China was the largest export market forboth South Korea and Taiwan. Globalizationappears to have broad public support in China. A2003 research study by the Pew Center for the

People & the Press found that 90 percent of peo-ple surveyed in China felt that growing trade andbusiness ties were “very good” or “somewhatgood” for the country. (By contrast, only 78 per-cent of Americans felt the same way.) But China’semergence as an economic powerhouse has nottranslated into a high score in the index. Many ofthe indicators in the index are measured on a percapita basis. With its massive population, Chinahas struggled to improve its place in the ranking.

7.1 8.0

9.1

2001 2002 2003

China’s economic growth(annual percentage growth rate of GDP)

Is more worldly morewise? Apparently, the

answer is yes. We compared theGlobalization Index to World Bank dataon public education spending and found apositive relation, especially in developing countries.Shifting to a globalized economy means that an edu-cated population is not just desirable but essential. Asa recent bank report states, “The emergence of theglobal knowledge economy has put a premium onlearning throughout the world.” Of course, more

DistanceLearning

resources alone do notguarantee a more educated

population. Iran, the least global-ized country in the index, devotes a

greater percentage of its spending to educa-tion than Ireland, the second-ranking country. Butthere is no question that assigning more resources toeducation generally creates possibilities for moreschools, more teachers, and higher wages for edu-cators. Without this investment, there is virtually noway for a country to move to the head of the class.

The Chinese Engine

A link between publiceducation spending and

globalization

Source: World Bank

58 Foreign Policy

[ Measuring Globalization ]

The largest European economies may still besluggish, but the European Union (eu)—ormore accurately, the prospect of membership init—has a powerful economic impact on theregion. Investors keep a close eye on whichCentral and Eastern European countries mayjoin the political and economic club. Countriespreparing for accession in 2004—such as theCzech Republic, Hungary, and Poland—saw awave of privatization and merger deals in 2002.In 2003, the wave of investment moved on tolower-cost countries that may be included in thenext membership round, including Croatia,Romania, and Ukraine. All three countriesclimbed in the index, largely due to increasedlevels of investment. Croatia jumped seven

spots, while Romania and Ukraine moved upfour notches apiece. Trade flows for each ofthese countries were up between 26 percentand 36 percent, and fdi inflows increased by

a home in Canada, which opened 56 new callcenters in 2002 and 2003. Canada has beenable to use its somewhat lower labor costs,English-language skills, and cultural links toattract call centers from the United States. Beingjust across the border has helped as well: U.S.companies that balk at the disruption associatedwith setting up shop in India have been morewilling to relocate next door. The rise in Cana-dian call centers reflects the country’s growingtechnological sophistication, which helped itretain its strong sixth-place ranking. Canada,which is home to Research in Motion, the com-pany that invented the BlackBerry, ranked sixthin technological connectivity in 1999 and nowranks second. Canada also lags behind onlythe United States in the number of secure serversper capita. Internet users have grown from one

quarter to one half of the population between1998 and 2003, and there are now about 500personal computers for every 1,000 Canadi-ans, up from 376 in 1999.

1999 2000 2001 2002 2003

2,223

4,869

6,674

8,497

13,346Secure serversin Canada

The EU Effect

Canada Plugs InThe term “outsourcing” conjures up imagesof call centers in Bangalore, Hyderabad, andNew Delhi. But as India has become theback office to the world (and a focus of thedebate about globalization’s costs and ben-efits), Canada has quietly taken a big pieceof the action. In recent years, a growing seg-ment of the outsourcing industry has found

more than 50 percent for Croatia and bet-ter than doubled for Ukraine. But they maybe in for a dip soon: New eu members suchas the Czech Republic, Slovakia, and Slove-nia all slipped in this year’s index, with fdiinflows falling by more than two thirds foreach of the three countries as they lost theircost competitiveness following eu integra-tion. It’s good to be a member, but you haveto pay your dues.

6,310

4,9845,639

8,483

2,583

496 595 792 6931,424

1999 2000 2001 2002 2003

Ukraine

CzechRepublic

Foreign direct investment(in millions of U.S. dollars)

Source: United Nations Conference on Trade and Development. Includes inflows only.

Source: Netcraft Secure Server Survey, December 2004

Political Freedom

Less free

More free

Globalization Score

Perceived Corruption

More corrupt

Less corrupt

0

10

9

8

7

6

5

4

3

2

1

0

1.0

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

Singapore

IrelandUnited StatesNetherlands

AustriaUnited Kingdom

Czech

Republic

Israel

Spain

Malaysia

Portugal

Slovakia

Japan

SouthKorea

Philippines

Chile

Taiwan

Tunisia

Ukraine

Mexico

Nigeria

Saudi

Arabia

Thailand

SouthAfric

a

Pakistan

Colombia

Russia

China Turkey

Brazil

Egypt

Indonesia

India

Iran

May | June 2005 59

W ith all the recent talk about spreadingdemocracy, we revisited the question ofhow freedom and globalization fit

together. Comparing the index with FreedomHouse’s annual rankings of political rights andcivil liberties in countries worldwide, we foundthat they work together quite nicely: There is astrong positive relationship between globalizationand political freedom. Globalization may also beone of the best ways of keeping politicians honest,as more globalized countries have far lower levelsof perceived corruption, as measured by Trans-parency International.

Engaging countries at the bottom of the global-ization index such as Iran and Egypt may help foster

increased political rights and civil liberties for theircitizens. Furthermore, increased integration maylead to the adoption of higher international standardsfor transparency, which in turn would discouragecorruption and increase government efficiency.

Of course, there are always exceptions to the rule.Singapore, the world’s most globalized country, ishome to a modern, open economy that exists along-side tight government control over the media andlimited individual liberties. On the other end of thespectrum, South Africa has a relatively high level ofpolitical freedom but a mediocre globalization rank-ing. Going global does not offer any guarantees,but it clearly can give countries a leg up.

Will Globalization Set You Free?

Highly globalizedcountries are oftenless corrupt and more free

60 Foreign Policy

The data sources and methodology used to construct the fifth annual A.T. Kearney/Foreign PolicyGlobalization Index are available at www.foreignpolicy.com and on the Web site of A.T. Kearney’sGlobal Business Policy Council at www.atkearney.com.

The International Monetary Fund (imf) warns that U.S. trade imbalances and ballooning fiscaldeficits might undermine the global economy in U.S. Fiscal Policies and Priorities for Long-RunSustainability (Washington: imf, 2004). A.T. Kearney’s Paul A. Laudicina advises businesses on howto cope with the turbulence of globalization in World Out of Balance: Navigating Global Risksto Seize Competitive Advantage (New York: McGraw-Hill, 2005). Neil Smith critiques the Bushadministration’s attempt to spread neoliberalism around the world in The Endgame of Globalization(New York: Routledge, 2005).

Over the last several years, Foreign Policy has provided extensive coverage of trends in eco-nomic, political, and cultural globalization. Historian Niall Ferguson worries that globalization mayunravel without a superpower in “A World Without Power” (July/August 2004). In “Five Wars ofGlobalization” (January/February 2003), Moisés Naím warns that governments will continue to losethe struggle against the illegal trade in drugs, arms, intellectual property, people, and money unlessthey adopt new strategies. Andrew V. Papachristos describes how the United States, the Internet, andglobalization are bringing gang violence to a town near you in “Gang World” (March/April 2005).

»For links to relevant Web sites, access to the FP Archive, and a comprehensive index of relatedForeign Policy articles, go to www.foreignpolicy.com.

[ Want to Know More? ]

Today, few countries straddle more political faultlines than Iran. The ongoing efforts by severalEuropean states to negotiate an end to the coun-try’s uranium-enrichment program are dominatingheadlines. But shuttle diplomacy by foreign diplo-mats doesn’t really qualify as opening up to theworld—and it hasn’t helped Iran attract foreigninvestors. Iran again took lastplace in this year’s index, a spot ithas now occupied five years in arow. The country’s economy isstill hobbled by U.S. sanctionsand low investor confidence.Meanwhile, the regime’s frequentcrackdowns on the Internet havekept the country’s scores for tech-nological ties to the outside worldnear rock bottom. Iran has fewersecure servers per capita than anycountry in the index other thanBangladesh. And it’s not just

online that the Iranian regime keeps its citi-zens in check. Iran is dead last in terms of the

personal contact its citizens have with the rest ofthe world. Total tourism arrivals and departuresas a percentage of the population were only 7percent—even less than Senegal’s 10.5 percent. Bycomparison, Saudi Arabia’s tourism arrivals anddepartures equaled 47.2 percent of the population.Clearly, Iran is going nowhere fast.

0.740.40

2.53

1.341.16

1999 2000 2001 2002 2003

Foreign directinvestment in Iran(as a percentage of GDP)

Iran, the Bottom Dweller

Source: United Nations Conference on Trade and Development. Includes inflows and outflows.

[ Measuring Globalization ]

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