The auditing firm Ernst & Young recently surprised all of Mexico (and possibly the world) with the results published in their “Winning in a polycentric world” report, which ranks economies based on their level of globalization.
In this ranking, which EY coordinates with the Economist Intelligence Unit (EIU) think tank, Mexico is placed in a very respectable #36, surpassing China (39) Japan (42) and Brazil (46) among others as “most globalized.” Hong Kong, Ireland and Singapore rank at the top of the index. The United States does not fare are well as one would expect, placed as #28, only 8 slots from its neighbor to the south.
Why does the Ernst & Young report throw out these unexpected figures and why is it so important? Granted, there are many types of studies and rankings that provide different lists. However, what makes “Winning in a polycentric world” a very relevant report and an important piece to further study, is the fact that this is one of the few reports that measures globalization in relative terms, linked to the size of the economy measured by GDP. This is done to some extent, in order to level the playing field.
The report has 20 indicators grouped under five broad categories: movement of goods and services, movement of capital and finance, exchange of technology and ideas, movement of labor and cultural integration. Thanks mostly to strengthened economic ties (mostly fueled by NAFTA) and improvements in our financial and banking systems, Mexico gets high points for trade and movement of capital. If these were the only variables to analyze, the report would paint a profitable future for Mexico. However, the category in which the country gets its lowest grades is technology and innovation and that is very bad news.
In the book As the Future Catches You, Juan Enriquez Cabot makes a strong case for the importance of innovation and harvesting ideas as opposed to relying on commodities and primary resources to boost an economy. He looks at where most of the added value in the supply chain lies in answering the question “how can countries rich in natural resources get so poor during this century?”. Enriquez wrote the book more than 10 years ago but we can prove he was right when we see Hong Kong, Ireland and Singapore at the top of Ernst & Young’s rankings mostly due to their ability to turn a profit without large natural resources.
Though our relative to GDP quantity of exchanged goods and capital allows us to rank higher than China and Japan, this should not cast a shadow on the fact that Mexico’s long-term relative decline may very well rest on the fact that we are lagging behind in terms of improving education systems, creating new ideas and investing in technology. As Enriquez wrote, “in a borderless world, those who do not educate and keep their citizens will lose most intellectual wars.”
The Globalization Index rankings cannot be considered a promise of long-term growth or wealth accumulation for Mexico. Number 36 makes a nice headline, especially when most of what we are hearing these days about the country has to do with grim pictures of violence and a failing state. But the challenge of producing knowledge in-country and in favor of Mexicans still stands. In a globalized world, the most valued currency is and will be effective brain matter put to value-creating use.
Special thanks to Diego Del Pozzo from Ernst & Young and Salvador Treviño from Tec de Monterrey for providing the sources for this post.
*Arjan Shahani is a contributing blogger to AmericasQuarterly.org. He lives in Monterrey, Mexico, and is an MBA graduate from Thunderbird University and Tecnológico de Monterrey and a member of the International Advisory Board of Global Majority—an international non-profit organization dedicated to the promotion of non-violent conflict resolution.