Actually, the world isn't flat - Pankaj Ghemawat

Main Ideas

Pankaj Ghemawat argues that the world is much less interconnected than people often assume. The popular idea that national borders have become nearly irrelevant is shared by both enthusiastic advocates of globalization and its critics, who fear it as an overwhelming force. Ghemawat says that claims about globalization should be tested against data rather than accepted as slogans.

How Much Crosses Borders?

Ghemawat’s approach is to compare cross-border activity with the total amount of that activity worldwide. The figures he presents suggest that international connections are significant, but far from dominant:

• Telephone calls: About 2% of voice-calling minutes were international. Including internet telephony might raise the figure to 6–7%.
• Immigration: First-generation immigrants made up about 3% of the world’s population.
• Foreign investment: Foreign direct investment accounted for less than 10% of total real investment in 2010.
• Trade: Official export-to-GDP figures are a little above 30%, but they can count components multiple times as goods cross borders during production. Pascal Lamy’s estimate, as relayed by Ghemawat, put the figure below 20% after adjusting for this double- and triple-counting.
• Facebook friendships: Around 10–15% of users’ Facebook friends were in other countries. Ghemawat attributes this to social networks reflecting existing relationships rather than forming randomly across the globe.

Taken together, these examples show that cross-border activity is nowhere near the 85–95% levels that would suggest national borders barely matter.

“Globaloney”: The Gap Between Perception and Reality

Ghemawat calls the tendency to exaggerate globalization “globaloney.” In surveys—including one of Harvard Business Review readers—people generally estimated cross-border activity much higher than the measured levels. He says this pattern appeared across many groups and countries.

He offers three reasons people may overstate globalization:

1. A lack of data in public debate: Broad claims about a “flat world” are often repeated without supporting measurements. Ghemawat urges audiences to seek out and examine data for themselves.
2. Peer pressure: Describing the world as borderless can sound modern and informed, while questioning that description can make someone seem out of touch.
3. “Techno-trances”: People may assume technology will quickly erase cultural, political, and geographic barriers. But technology such as Facebook operates on top of existing social relationships, which remain heavily shaped by local ties.

Why Accurate Estimates Matter

Ghemawat argues that exaggerating globalization can have harmful effects:

• It hides opportunities for further integration. If people believe the world is already fully connected, they may see little reason to pursue additional gains. Recognizing that only a portion of activity is international leaves room for beneficial progress.
• It can intensify fears. Inflated perceptions of cross-border flows may contribute to heated debates about immigration, aid, and globalization more broadly.

He gives two examples of perception gaps:

• In France, people estimated that immigrants made up about 24% of the population; the figure he cites is 8%.
• Americans surveyed by the Chicago Council on Foreign Relations estimated that 30% of the federal budget went to foreign aid—a share far above the actual level. Some respondents became more open to increasing aid after learning the real figures.

He also notes a stark imbalance in spending on poverty: OECD countries spend roughly 30,000 times more per poor person at home than per poor person in poor countries, based on calculations by Branko Milanović. Ghemawat suggests that even reducing that ratio to 15,000 to 1 would represent substantial progress and would meet aid targets agreed at the Rio summit.

Overall Lesson

The world is neither fully local nor borderless. Ghemawat’s closing point is that because societies remain relatively closed, even incremental openness could produce meaningful improvements in global welfare.

Speakers and Sources Featured

• Featured speaker: Pankaj Ghemawat
• People cited or discussed: Tom Friedman; David Livingstone; Pascal Lamy (then director of the World Trade Organization); Branko Milanović
• Organizations and publications cited: World Trade Organization; Harvard Business Review; Chicago Council on Foreign Relations; World Bank; OECD; Foreign Policy; Rio summit