In a recent study released by the McKinsey Global Institute, a research unit associated with the consulting firm McKinsey & Company, the United States was ranked third among all nations for its connectedness to the rest of the globe.
The MGI has developed an index to measure the degree to which countries are a part of global flows of goods and financial transactions and movement of people, services and data.
This connectedness index attempts to measure the absolute volume of flows of the targeted factors across country borders and the total value of the flows of these key factors as a percentage of each country’s gross domestic product. The combination of these two measurement methodologies allows countries such as Hong Kong and Singapore to be ranked second and fourth, respectively, by this index.
Germany led the global rankings. The United States’ northern neighbor, Canada, ranked eighth. Mexico came in at 27th. Some of the other countries joining the U.S. in the top 10 included the Netherlands, Russia, France and the United Kingdom. Toward the bottom of the reported rankings were countries such as Tunisia, Egypt and Pakistan.
According to MGI, global flows are accelerating as a result of two primary factors. First, increasing overall global prosperity is benefiting more and more people and countries. When a country’s key resources and policies are focused on economic growth and job creation, far-reaching benefits can be observed. The second key factor is the ever-increasing digital connectedness and the rapid adoption of digital technologies. According to the MGI study, between the years 2005 and 2012, cross-border global Internet traffic grew eighteenfold.
As reported in this study, most of the knowledge-intensive flows across borders occur in the developed global economies. For the purposes of this measure, knowledge-intensive flows are those deemed to include embedded information, ideas or expertise. In this ranking, the U.S. ranks highest, with China coming in second and Germany in third.
In years past, economic growth was often centered around physical trade routes. Shipping channels, railroads, ports and other sorts of hubs facilitated the transport and exchange of goods. As the world continues to become more connected, countries need to position themselves to participate in the increasing global flows of knowledge-intensive goods and services. Digitization of products will continue to affect the need to transport physical goods.
Kirby Brown is the CEO of Beneficial Financial Group, which is based in Salt Lake City.