We recently released the DHL Global Connectedness Index 2012, which tracks the depth and breadth of trade, capital, information, and people flows across 140 countries that account for 99% of the world's GDP and 95% of its population. Based on data covering the period from 2005 to 2011, it charts how globalization has evolved since the onset of the financial crisis at the global, regional, and national levels. The full report is available as a free download and, to whet your appetite, here are some of its most striking findings:

• Global connectedness declined sharply at the onset of the financial crisis from 2007-2009, and despite modest gains has yet to recapture its 2007 peak. Capital markets are fragmenting and while merchandise trade recovered strongly since 2009, the intensity of services trade has remained stagnant. We compare trends across 10 distinct types of flows within its 4 pillars: trade (merchandise and services), capital (FDI and portfolio equity), information (internet bandwidth, telephone calls, trade in printed publications), and people (tourism, international education, migration).

• The world's most globally connected country (the Netherlands) is hundreds of times more connected than the least connected country (Burundi). Our report provides full country rankings and explains how the depth and breadth of countries' connectedness varies with factors such as countries' levels of economic development, population sizes, and geographic locations. It also summarizes patterns of connectedness at the regional level. Europe is the world´s most globally connected region and sub-Saharan Africa the least, but it is encouraging to note that sub-Saharan African countries averaged the largest increases in global connectedness from 2010 to 2011.

• Countries' levels of global connectedness are impacted both by their domestic and their foreign policies. Improving a country's domestic business environment can go a long way toward strengthening its international connections. We found a set of structural and policy factors that explain nearly 80% of the variation among countries' global connectedness depth scores.

• Industries vary widely in their levels and patterns of globalization, contrary to the still popular notion that every kind of business is rapidly integrating across national borders. We compare the depth and breadth of 20 industries' global connectedness before delving into three case studies: pharmaceuticals, passenger cars and mobile phones. We also plot the evolution of production and consumption in developed versus developing countries for the three focal industries, showing how the world's shifting economic center of gravity is reshaping industry level connectedness.

Why does all of this matter? Because deepening global connectedness has the potential to contribute to trillions of dollars in economic gains as well as various non-economic benefits. Despite the evidence, Global Trade Alert reports that three times more discriminatory, than liberalizing or transparency-enhancing, trade policy measures have been implemented since November 2008. We cannot simply take for granted that future generations will enjoy the benefits of a more connected planet.

Perhaps the greatest value of report such as the DHL Global Connectedness Index lies in its detailed country-by-country profiles providing hard data and analysis on virtually every country's level of globalization. Why? Because those profiles reveal the limited extent of globalization where it matters to people — at home — which can go a long way toward putting fears about globalization into perspective.

The United States, for example, has a serious problem with its trade deficit which needs to be solved. However, when one recognizes that the U.S. ranks only 134th out of 140 countries on the depth of its merchandise imports in relation to its GDP (15%), one gets a useful reminder that our economic problems are primarily home grown and require domestic solutions.

To cite one more example — focusing on people flows instead of trade — respondents to a recent public survey in France estimated that immigrants make up 24 percent of the country's population. The correct figure is only 10 percent. Would anti-immigrant rhetoric have been so prominent in the 2012 French elections if the public had a more accurate read on the present extent of globalization?

The DHL Global Connectedness Index aims to provide the most comprehensive and timely source of hard data and analysis depicting the actual extent and direction of globalization around the world. Please take a look and let us know what you think.

It is inevitable that prices don't always account for all the costs and benefits for all the people touched by a transaction. Externalities can come in good forms and bad. But the most frequently discussed externalities are those associated with harms to the environment.

Of course, globalization has an impact on the environment, but it is a mixed one and generally far less scary than many people think. Most ecological problems are still local as opposed to global, and while cross-border integration can make the environment dirtier in some places, it can also help with cleaning it up.

As pressure mounts to reduce carbon emissions, the logistics involved with cross-border trade are often cited as an unnecessary cause. With dark-green-tinted spectacles, many call for a return to only locally grown or manufactured products. But let's face it: Consumer demand and expectations have changed a lot since the days of zero cross-border trade. Since a collective global vow of poverty seems unlikely to be taken soon, keeping up with modern demands without cross-border trade would actually do more harm to the environment than good. For example, in 2007, the U.K.-based supermarket chain Tesco decided to ban rose imports from Kenya in a bid to save on emissions. But research revealed that the Dutch roses it relied on instead generated six times as much in the way of greenhouse gases, largely because they were literally grown in greenhouses.

And how much of energy-related greenhouse gas emissions do you think international transport really produces? Since the bulk of internationally-traded merchandise travels by sea, shipping should be the first port of call. Estimates indicate (PDF) that international shipping causes 2-3% of energy-related CO2 emissions (PDF). This may come as a surprise when you think about the long distances ships travel to transport cargo. But on a per-ton-kilometer basis, a cargo ship emits just 15-21g of CO2, as compared to a truck's equivalent 50g (PDF). So carrying something a long distance across the ocean can actually work out to be less harmful than transporting goods a shorter distance over land.

Of course, goods (and people) often travel by plane, too, so we should add the estimated 1-2% of energy-related CO2 emissions caused by international air transportation to the mix (part of its estimated 3% contribution to human-induced climate change (PDF)). This is a fraction of the 20%+ the general public tends to guess, and transport-related emissions from international aviation are one-tenth as much as those from (mostly domestic) driving. Transport used to facilitate international trade does cause some harm to the environment, but it pales in comparison with the domestically-caused damage.

So far I have focused on the direct effects on the environment caused by increased cross-border flows, but what about possible indirect effects? Again, while these effects do exist, they are a mixture of positive and negative, and need to be balanced for a realistic perspective. An example of an indirect composition effect that economists tend to worry about is dirtier industries migrating to (generally) less developed countries with laxer regulations. A recent study (PDF) found that in low-income countries, more trade is associated with higher per capita energy consumption, while the opposite applies to high-income countries. This fits with the idea that imports into rich countries are more pollution-heavy than their exports. But such broad analysis fails to take details into account.

With different countries implementing different rules of varying severity, some differences in energy consumption are to be expected. But there is also evidence that Foreign Direct Investment (FDI) can actually help to spur adoption of cleaner production methods. To maintain consistency across plants (and avoid negative publicity), foreign companies often bring in new technologies and implement higher environmental standards than local firms. More specifically, Germany's high green standards have actually spilled over in some instances to China, where some exporting companies have started to match German requirements even in their domestic products.

The direct and indirect effects of globalization on the environment are less pronounced than many think, but that does not mean that globalization can be ignored in the search for solutions to real environmental problems. The attention to distance sensitivity that is crucial to properly understanding levels and patterns of globalization provides a useful guide as to how to scope environmental solutions. For distance-sensitive pollutants that stay more or less within borders, local solutions are appropriate. But for pollutants that span regions, cross-border cooperation can be crucial for any attempts at a cleanup. For example, cooperation between the U.S. and Canada (most notably the 1991 U.S.-Canada Air Quality Agreement) has helped to reduce North American sulfur dioxide emissions by roughly two-thirds since 1980, going a long way toward addressing the problem of acid rain in that region.

Climate change is by far the most difficult environmental externality of all to combat because of its (unusual) distance-insensitivity. Therefore, in order to tackle it we need more, rather than less, international cooperation. Of course, with the variety of cross-country distances and differences between all the nations that make up the world, such cooperation will need to be both complex and innovative. The failure of the 2009 Copenhagen Conference of the Parties to reach a binding accord on targets for reduction of greenhouse gases shows how it is not as simple as putting a bunch of leaders in a room and getting them to come up with a plan.

Unlike many supposed failures and fears associated with increased global integration, in the case of the environment, globalization has had a part to play. However, it has been a bit part, as opposed to a starring role. And it should be weighed up with gains from cross-border integration, for a more balanced view. Of course, this is not to say that global strategy should ignore environmental externalities. Quite the opposite, integration should be used as a tool for addressing externalities that affect more than one country and for sharing knowledge on greener techniques where effects are localized. And given limited capacity for truly global action, it is useful to recognize that only the most distance-insensitive environmental externalities, such as climate change, require completely global coordination.

In my previous post, I argued that the potential gains from globalization are larger than most people think. Since I only addressed possible benefits, it is perhaps unsurprising that readers were quick to point out many potential downsides. The global recession has recently and directly impacted the lives of many, most obviously in the form of rising unemployment — and the finger of blame is often pointed at globalization. Other alleged harms range from environmental degradation and increasing inequality to the rising prevalence of obesity. These are serious issues that deserve serious examination and so I will be looking at them in future blog posts — and will conclude that many such worries are misplaced or greatly exaggerated, but that some do require appropriate policy responses.

In this post I'll focus on one type of market failure: market concentration. There is often a lot of negative discussion buzzing around globalization and market concentration. As people see their local shops replaced with multinational chains and industrial megamergers make headlines, there is a perception that a small number of powerful competitors are taking over the world. This is one of the most widespread beliefs about globalization — in a survey of business executives I conducted a few years back, 58% agreed that "globalization tends to make industries become more concentrated." And among the general public, another survey reveals concentration to be the leading worry about the market economy in the U.S., Britain and Germany: people worry that large corporations will squeeze out small firms.

Why is this so scary? The concern is that if market power is in the hands of a few multinational companies (MNCs), there would be less competition, allowing the remaining global colossi to raise prices or reduce the quality or variety of products and services on offer, harming consumers. But fortunately, the data indicate no such global trend toward increasing industry concentration.

I have been keeping track of industry concentration data now for more than a decade and have analyzed more than 30 industries. As I describe in World 3.0, the data suggest that, in general, globalization isn't leading to higher levels of global concentration across a range of industries. Take the auto industry, for example. Back in the 1920s, Ford accounted for 50% of global auto production. Fast forward to 2010, and a total of six companies accounted for the same percentage. So why were senior executives at auto companies surprised to learn that global concentration has been decreasing in autos since the heyday of Ford's Model T? It is presumably not unconnected to the fact that they have been bombarded for decades now with bombast about how only a handful of full-line automakers will survive globalization.

Autos are not an isolated example. Between the 1980s and 2000s, I compared concentration in 11 industries. Six of these industries showed increases (carbonated soft drinks, cement, steel, oil production, aluminum smelting and paper/board) while five had decreases (automobiles, cargo airlines, copper, iron ore and passenger airlines). On average across these industries 5-firm concentration ratios, or the market share held by the top five biggest companies, did rise from 35% to 38% between the 1980s to the late 1990s. But the five-firm concentration ratios then declined back to 35% by the late 2000s. This is hardly evidence of an across-the-board trend toward rising concentration.

I later repeated the same type of analysis for 37 categories of consumer products. I found that average 5-firm concentration ratios rose from 32% in the early 2000s to 35% at the end of the decade. This rise of 3% was exactly the same as that in the earlier 11 industry sample, in which case the increase in concentration was later reversed.

And not only is globalization not systematically reducing competitive intensity by increasing concentration, it can actually help correct the problems involved when a small number of competitors take control of a market. When competition is lacking in domestic markets, consumers suffer from high prices, poor quality products, or a lack of variety. This is where foreign competition can lend a helping hand. Whether through trade or foreign direct investment, competition from abroad can provide consumers with immediate relief, as well as spur producers to up their game. Returning to my auto example, the entrance of foreign automakers into the U.S. market forced the U.S. big three to improve their quality, design, and efficiency, to the extent that GM is now the market leader in China.

That last point raised the important distinction between global concentration and national or local concentration. In all but the least distance-sensitive industries, it matters more what products are available in your own local or national market and how much they cost there, than what's on offer globally. Even if there were fewer major automakers globally (which there aren't), it's probably still more relevant to know how many automakers are present in a particular country or region, since it's rather difficult and quite costly to go buy a car on a different continent.

What are the policy implications? One approach to problems of excess market concentration is to break companies up before they get to the stage where they can dominate local or national markets. But what makes opening up to foreign producers so much more appealing than breaking companies up is that it combats market power with competition rather than regulation. This can be less disruptive and it leaves a country with its strongest potential international competitors intact. Thus, with respect to concentration, openness can serve as a substitute for regulation.

So, while there are some other factors to think about regarding globalization and market concentration that I describe in World 3.0, my conclusion is that we don't need to get too worried about globalization increasing market concentration. Instead, we should see if opening up can help us address problems of excess national market concentration. What do you think? Share your comments below, and please watch this space for future posts about globalization and other types of market failure: externalities (focusing on the environment), and the risks associated with informational imperfections. I'll also look at market fears that globalization is supposed, by its detractors, to exacerbate.

In a previous post, I presented evidence that the world is far less globalized than most people believe, which implies there is also much more headroom to expand globalization than many think. Whether we should favor a more globalized world or not, of course, is an entirely different question, requiring an honest weighing of the pros and cons. And with the Eurozone still at risk, tough talk on U.S.-China trade, and periodic threats of "trade wars" (the latest stemming from the EU's carbon taxes), such an assessment could hardly be more timely.

In this post, I take up the pro side of the argument, laying out a rough quantification of the potential benefits of increasing integration. Ironically, because most pro-globalizers buy into the globaloney of a world that is already or soon will be perfectly integrated, they seldom bother to articulate their case in a systematic way. So, much of this will be news even to those who favor more globalization.

Start with the gains from expanding merchandise trade. The traditional economic models developed for assessing trade agreements provide estimates of how much global output would expand if tariffs and some kinds of non-tariff barriers to trade are reduced or removed. The gains such models estimate — about 0.1% of world GDP for the stalled Doha round of trade negotiations and roughly 0.5% for complete liberalization of merchandise trade — aren't very inspiring, but they actually leave out far more than they include.

Traditional models exclude many powerful policy tools for expanding trade. One such tool alone, trade facilitation, could grow global GDP by 1%. And in calculating the benefits of additional trade, these kinds of models focus almost exclusively on growth generated by reductions in production costs as each country's output becomes more specialized, a limited fraction of the potential gains.

To broaden the range of benefits covered, I use a modified version of the ADDING Value Scorecard, which I originally developed to help businesses evaluate international strategies. ADDING is an acronym for the following sources of value: Adding Volume, Decreasing Costs, Differentiating, Intensifying Competition, Normalizing Risk, and Generating and Diffusing Knowledge.

Because traditional models assume full employment (especially problematic in times like these) and leave out scale economies, they capture only part of the gains in the first two categories, Adding Volume and Decreasing Costs. And they leave out the last four categories entirely, whose benefits can be seen clearly, for example, in the U.S. automobile industry. Japanese entrants decades ago offered consumers differentiated (more reliable) products. Increased competition prompted U.S. automakers to improve their own quality. Now, GM sells more cars in China than in the U.S., diversifying its risks and helping it recover from the crisis. And cars are becoming "greener" faster because of international knowledge flows.

Taking this broader set of factors into account, I put the gains from expanding merchandise trade at 2-3% of world GDP or more.

Next, consider services trade. The service sector is roughly two-thirds of world GDP but only one-fifth of international trade. Barriers to services trade are more complex and some services (like haircuts) will always be delivered locally, but potential gains from opening up services trade are at least 1.5% of global GDP, putting total gains from trade liberalization at 4% of global GDP or more.

Then, look at potential gains from flows other than trade, such as people, capital, and information. Completely eliminating restrictions on migration could double global GDP, but that's obviously not in the cards. More realistic limited increases in non-trade flows could expand GDP at least 4%, bringing the economic gains to 8% or more. And complementarities among the different types of flows push this estimate up even farther.

Finally, and more subjectively, consider non-economic benefits. Culturally, globalization expands the range of choices available to individuals wherever they live even as it blurs somewhat the distinctions at national borders. Politically, cross-border flows (especially information flows) tend to strengthen democracy. And trade ties also seem to improve national security. The parts of the world that are isolated economically experience far more military intervention by outsiders.

To summarize (see chart), the benefits of expanding merchandise trade are much larger than traditional models indicate, and to those one needs to add gains from services trade to have a complete picture of the benefits of increased trade flows. Then, on top of trade, other kinds of cross-border flows double the estimated economic benefits to at least 8% of global GDP. And beyond that there are complementarities and non-economic benefits that I find compelling but are harder to quantify in GDP terms.

I'm sure many readers by now are champing at the bit to raise offsetting concerns about globalization's negative effects. I promise to address those in another post. But for now, what do you think of the potential upside from expanding globalization? Which benefits of globalization do you find most compelling?

As readers of this blog already know, markets are far less integrated internationally than popular views of globalization presume. So many of you are probably wondering why a game of chicken initiated in the U.S. Congress could wreak havoc as far away as Asia, or how problems in the Eurozone might cloud U.S. prospects. And of course, you want to know what is to be done.

Our current problems stem, in part, from the special characteristics of finance, which as Keynes noted, is highly dependent on sentiment and, as Hyman Minsky emphasized, therefore particularly susceptible to crises. Their conclusions are corroborated not just by empirical experience but by experimental research on asset markets by Nobel Laureate Vernon Smith, among others.

Such problems are amplified in a cross-border context by decay of trust across borders and with distance described in my previous post, and exemplified by the data on Western Europeans trusting their own fellow citizens more than twice as much as citizens of other Western European countries and nearly four times as much as citizens of countries outside Western Europe. Also recall that sympathy and, one would presume, solidarity in matters such as bailouts are much more distance-sensitive. Furthermore, fear leaps borders faster than confidence. All this suggests a particular fragility of confidence in and commitment to foreign financial assets when the times get tough.

Smarter Financial Integration

The importance of dispelling the globaloney that capital respects no boundaries is the obvious first implication of the contrast between real flows and irrational fears. If investors recognize the limited real connections between economies, they should be less prone to panic at distant signs of distress.

It is also clear, or at least clearer than just a few years ago, that policymakers should favor FDI and, more generally, equity investment over other types of capital flows, because FDI is less prone to be withdrawn when an economy is in trouble, and investment in building or upgrading real productive capacity is particularly suited to spurring much-needed growth. Conversely, short-term international borrowing, especially in foreign currencies, should be treated with caution.

More controversially, international capital imbalances such as persistent current account surpluses and deficits need to be curbed as well. Before the crisis, many authors advanced frameworks in which international capital imbalances were supposed to be a "win-win" phenomenon. And indeed, it is hard to see how capital imbalances could be a problem in a world with perfect international integration of capital markets. One would simply expect ebbs and flows, whether balanced or not, to lead to the outcome mistakenly asserted 150 years ago by David Livingstone: "capital, like water, tends to a common level." Incomplete international integration of capital markets — the reality of what I call World 3.0 — is what opens up the possibility of problematic international capital imbalances.

This problem is worth stressing because imbalances may be moving back into a danger zone. For capital flows, the historical data suggest that policymakers should start paying attention when the absolute values of capital accounts add up to 3% of GDP and start getting worried when they exceed 4%. For the twelve countries with historical data reaching back to 1870, this quantity decreased from a very worryingly high 5% of GDP in 2008 to 3% in 2009, but then edged back into the danger zone by rising to 3.5% in 2010. And for a broader sample of more than 180 countries, it dropped from 5.5% in 2008 to 3.9% in 2009, before rising to 4.2% in 2010 with further increases forecast.

The need to manage international capital imbalances doesn't imply, however, that all one can or should do is blame foreigners for our present predicament. Rather, domestic problems are often at the root of international imbalances. As Lorenzo Bini Smaghi put it back when the global financial crisis first erupted three years ago, "[E]xternal imbalances are often a reflection...of internal imbalances." This does not seem to be a bad characterization of the current problems in the United States and in the Eurozone.

To summarize, the good news associated with taking World 3.0's limited levels of integration seriously is twofold. First, fear is more contagious than actual links justify. And second, contrary to common assertions, many of the problems that we face can be dealt with nationally or regionally instead of requiring global solutions. (Nothing wrong with the latter — it's just that they are very hard to achieve). The bad news is related to the recent record of politicians in the U.S. and in the Eurozone in dealing with their respective "debtacle," which does not inspire much confidence that they will manage to handle problems that still are, in principle, manageable.

So far, 2011 has been a remarkable year. With events like those that have changed the power dynamics throughout the Arab world, or the tsunami in Japan that disrupted many global supply chains, it's easy to think that the world is becoming ever more connected and interdependent.

So this year, as in years past, to get a sense of how people are thinking about globalization, I begin many of my speaking engagements with a brief test, a simple multiple-choice question:

Did you pick the third quote? If so, you're in good company. Among the several dozen audiences to which I have administered this test over the years, that third quote, which suggests that the we live in one, integrated world — what I call World 2.0 — is the one that garners the most support, usually a majority. Spouting such attitudes — the flattening of the world, the death of distance, and the disappearance of differences across countries — seems to be considered a hallmark of global thinking.

But I prefer to think of it as globaloney.

Why? Because economic data simply don't support the view that we live in a flat, connected world, even if we are technologically connected with everyone, everywhere, all of the time. Data show that most types of economic activity that could be carried out across national borders are actually still concentrated domestically. For example, take foreign investment. Of all the capital being invested around the world, how much would you think is foreign direct investment by companies outside of their home countries? 25%, maybe? More, if you've heard the globaloney about "investment knowing no boundaries"? The fact is, the ratio was less than 9% in 2009 and, while it may be pushed higher by merger waves, has never reached 20%.

As the chart below demonstrates, the actual levels of globalization associated with telephone calls, long-term migration, university enrollment, stock investment, and trade as a fraction of gross domestic product (GDP) — look at the blue bars — resemble the data presented above: they fall much closer to 10% than the levels close to 100% that one would expect if one took the gurus of globaloney at their word.

Most people aren't, of course, quite that credulous. But globaloney does seem to have influenced their perceptions. Thus, 400 respondents to a (pre-crisis) poll about globalization levels on HBR.org came up with the responses summarized in green in the chart below. Note the systematic tendency to overestimate globalization levels, and by a wide margin: the responses (the green bars) averaged 30% versus real values (the blue bars) that averaged 10%. And to aggravate matters, respondents with more than 10 years' experience actually are farther off the mark than ones with less experience!

Globalization: Reality versus Perceptions

Even though there are many skeptics, as I was recently reminded when the Economist presented some of these data in its Schumpeter column, stirring a lot of skeptical commentary online, the fact is that the world is far from being completely integrated and that the rhetoric of globaloney is far removed from reality.

Why are smart people so susceptible to globaloney? One reason is that we tend to believe whatever we most desire or fear. For businesspeople, there is the big draw of unbounded profits in a borderless world. And for many others, there are deep seated fears that globalization might be exploitative, harmful to our cherished cultures, dangerous for the natural environment, and so on. In reality, both of these perspectives are misguided. Increasing cross-border integration offers the potential for huge economic and other gains, but not through the development of stateless corporations that sell the same things to everyone, everywhere. And most of the prevalent fears about globalization are also overblown, or otherwise amenable to mitigation.

If you were as surprised by these data as some of the folks in my audiences this year so far, what do you make of it? Are you, too, susceptible to globaloney?

Pankaj Ghemawat is the Anselmo Rubiralta Professor of Global Strategy at IESE Business School in Barcelona, and the author of World 3.0: Global Prosperity and How to Achieve it (HBR Press, 2011).

How well do you really understand the world beyond your own country's borders? Do you value all human beings equally or are you more sympathetic toward people who are closer and more similar to you? What does it matter for business and for society?

Several readers of my previous post have commented that mindsets or perceptions about globalization can be at least as important as actual levels of globalization. I agree. Mindsets matter. They have big real world consequences, particularly as is the case now with Europe's debt crises and bailouts, when collective prosperity depends on the extension — as opposed to contraction — of cooperation, trust, and sympathy across borders and distances.

Consider the following data on trust levels based on surveys conducted in various Western European countries. As the graph below shows, more than twice as many Western Europeans trust their own fellow citizens "a lot" as compared to citizens of other Western European countries (48% vs. 20%). And only 13% place the same level of trust in citizens of countries outside of Western Europe.

More systematic research shows that bilateral trust decreases with geographic, linguistic, religious, genetic, and somatic distance (measured by an index of body type differences) as well as with income differences and a history of wars — findings that hit on all four dimensions of my CAGE framework (Cultural, Administrative, Geographic, and Economic), with particular focus on the cultural dimension. And levels of trust influence more than just whom you're inclined to lend to, to bail out in a crisis. Moving from lower to higher levels of bilateral trust has been shown to increase trade, direct investment, portfolio investment, and venture capital investment by 100% or more, even after controlling for other characteristics of a pair of countries.

It's easy to say you trust foreign people on a survey, but what about actually doing something that reflects how much you care about distant and different people? Data on foreign news coverage and foreign aid provide some indication of how much human sympathy declines with distance. As it turns out, trust is relatively insensitive to distance in comparison to sympathy.

First, some disturbing data about news coverage, which given the importance of ratings probably provide a reasonable reflection of what the general public cares about. A study of more than 5,000 natural disasters suggests that from the standpoint of U.S. media coverage, each dead European is "worth" three South Americans, 43 Asians, 45 Africans, or 91 Pacific Islanders. To summarize in rough terms, as shown on the graph above, news coverage indicates we care about people in neighboring countries about 10% as much as we care about our own fellow citizens, and this figure declines to 1% as you move to countries farther from home.

Then, consider actual willingness to help distant people in need. Compare aid to the domestic poor versus official development assistance (ODA) to the rest of the world's poor, using the approach outlined by Branko Milanovic. Based on weighted per-person averages for fourteen developed OECD economies, national governments spend 30,000 times as much helping each domestic poor person as each poor foreigner. Or put differently, when it comes to aid, the foreign poor are valued at 0.003 percent (1/30,000th) as much as the domestic poor. And if you're wondering where this would stand if the rich countries all gave 0.7% of their GDP in foreign aid, as they promised to do in 1992 at Rio de Janeiro, that would only mean the foreign poor would receive 1/15,000th as much as the domestic poor. Hardly a promise to value every human being equally.

A host of business and social problems could be solved more easily if people broaden their mindsets and shift their own personal sympathy decay curves a little closer to horizontal. In business, imagine how much better multinational corporations could function if there was more trust between headquarters and far flung country operations. In the social sphere, an interesting study by David Anthof and Richard Tol relates carbon prices to levels of sympathy, showing that it would be far easier to address climate change if we placed more weight on the harms inflicted on others.

What do your own trust and sympathy decay curves look like? What curves are embodied in the values of your organization and its workforce?

Please click the button below and answer the survey questions. In a future post, I'll report back the results.

Or try out the full Global Attitude Protocol (GAP) from which these questions were drawn. For more suggestions on how to change individual mindsets, see the last chapter of my new book World 3.0: Global Prosperity and How to Achieve It, and for ideas for corporations on how to foster this mindset shift within their organizations, refer to my most recent HBR article, The Cosmopolitan Corporation.