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KOF Globalization Index Ranking
There is hardly a country in the world that closes itself off completely to the global community. But how well are individual countries actually globalized and how can this be measured?
What do you think? What country is rated the most globalized? China, the economic power? Not even close. In an unimpressive showing, the country ranked 77th. The United States, the global power? No. It only made it to 24th place. Perhaps an up-and-coming city-state and financial center like Singapore? A bit better, but even the Asian tiger only came in 20th place. The nation that actually tops the list of 196 countries has no seaport and doesn’t even have a city with a million people. It is Switzerland.
More Than Just the Economy
These findings are from Globalization Index published by the Swiss Federal Institute of Technology (ETH) in Zürich at the end of 2022. The creation of the index, first published in 2002 and reissued annually, falls under ETH’s Swiss Economic Institute (KOF). The researchers don’t work with the latest data. For example, last year’s index is based on data from 2020. The methodology behind the KOF Index differentiates it from other globalization rankings. The research team resisted the temptation to just consider bare-bones economic data. This is the most common approach, but they thought it clearly fell short. They determined the level of globalization using three aspects: economic, social and political. They looked at 42 variables while giving them different weights. From an economic standpoint, Singapore had the highest scores in the 2022 index. Luxembourg scored highest for social globalization, while Italy had the edge from a political perspective.
KOF Globalization Index
De facto and de jure: The KOF evaluated each of the three aspects based on factual data (de facto) and the country’s framework of regulations (de jure).
Economic Globalization: Some examples: trade in goods and services, customs duties, taxes, trade restrictions, foreign investments, investment restrictions, capital account openness, investment agreements.
Social Globalization: This includes visa restrictions, tourism streams, migration, international airports, students and patent filings, trade and high technology, freedom of the press, access to the Internet, civil rights, gender equality, level of education, registration of international brand rights, number of McDonald’s restaurants and IKEA stores.
Political Globalization: This mainly involves the number of embassies and international non-governmental organizations, membership in international organizations, conclusion of international agreements and participation in UN peace missions.
Europe Dominates
In the end, a mix of all three rankings determines the degree of globalization. This is where the “old world” dominates the list. Without exception, the top 15 countries are in Europe. In addition, except for Switzerland and the United Kingdom, they are all members of the European Union and are closely interwoven economically, socially and politically. Non-European states (Canada and Singapore respectively) first appear in the 18th and 20th spots. Something else stands out too: The top 20 largely includes relatively small countries. Fourteen of them have a population of about 10 million or less. The KOF researchers came up with this explanation: “Due to a high degree of integration, with neighboring countries, for example, small countries tend to be more highly globalized than large ones. In the latter cases, a large portion of the exchanges take place within the country.” But what’s the reason for Switzerland’s top ranking? The authors highlighted the country’s high rate of foreign trade, bolstered by its export-oriented chemical and pharmaceutical industries. Switzerland also plays a prominent role in the global financial system as a banking center. Due to the many international holding companies that have their headquarters in Switzerland, the country is “closely interlinked with countries abroad.” Switzerland also gets high marks as a multilingual country with cultural diversity, high income levels and a geographic position in the heart of Europe. Finally, many international organizations make their home in Switzerland (with many based in Geneva), including the World Trade Organization and the International Red Cross. Known for its neutrality, the country is well-positioned internationally with a range of broadly-based advantages.
Small countries tend to be more highly globalized than large ones.
Global Cities
While the KOF closely examined the globalization levels of nations, other studies have zeroed in on cities. For one thing, they are considered agile. This gives them the opportunity to make measurable progress relatively quickly. The international consulting firm A. T. Kearney has been gathering data for its Global Cities Index for a decade, evaluating economic activity, human capital, information-sharing, cultural offerings and political engagement. New York and London scored the highest in 2022. But both cities have lost points over the last few years – especially in the areas of economic activity and human capital. Both recovered more slowly from the impact of the Covid pandemic than other metropolises in the ranking. London is also battling the aftereffects of Brexit. This is especially clear from the number of international students in London. It is just half what it was in 2020. Still, the British capital topped the list of the world’s most globalized cities for years – a position that the United Kingdom as a whole is still far from achieving. Will the onetime empire be able to catch up in coming years? The next KOF indexes will tell the tale.
This article originally appeared in ESSENTIAL, Freudenberg Sealing Technologies’ corporate magazine that covers trends, industries and new ideas. To read more stories like this, click here.
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