From the DHL Global Connectedness Index 2012.
The Netherlands retains the top rank on this year’s DHL Global Connectedness Index, and 9 of the 10 most connected countries are in Europe.
Pointer from Timothy Taylor. (How does he find these things?) Taylor writes,
Globalization is near an all-time high by this measure [world exports of goods and services divided by world GDP], but notice that it after the drop associated with the Great Recession, this measure of globalization is about the same in 2011 as it was in 2007.
It is not clear why a statistic with GDP in the denominator should experience a drop during a recession. However, my guess is that the answer has to do with the location of the recession. If some emerging economies continued growing while Europe slumped, one would observe world GDP holding up better than world trade.
From a PSST perspective, all GDP is trade. Some of it is intra-border and some of it is cross-border. Trade patterns that were based on unsustainable conditions, primarily inefficient firms remaining in business, were broken by the conditions that emerged in 2008. Firms go out of business all the time. All the time, new businesses are starting and some are growing. I take the view that since 2008 an unusually large number of troubled firms failed and unusually small number of high-growth businesses emerged. To me, calling this a decline in aggregate demand is begging the question–it is simply putting another label on the phenomenon, not explaining it. It could be that stress at banks is a cause of it, but I think instead that it is a symptom. But that leaves me struggling to tell a story that accounts for the sudden, sharp drop in GDP that took place in 2008-2009.
I too was struck by that chart. But I think there is increased economic activity which is being shifted in part to the consumer by the institution, a sort of DIY group of skill sets that does not gain monetary representation in the overall transaction. And that is just a part of the knowledge skills use growth that has not found recorded collaboration yet. We need to find ways to record and maintain collaborations if institutions are to be able to continue such DIY shifts.
“It is not clear why a statistic with GDP in the denominator should experience a drop during a recession.”
International trade is concentrated in goods and goods production is more volatile than services or overall GDP.
“But that leaves me struggling to tell a story that accounts for the sudden, sharp drop in GDP that took place in 2008-2009.”
I suggest that “Fear” and “Leverage” will be at the root. Or in your (Arnold’s) model – the patterns of trade specialization, and debt, were not sustainable, and this was discovered in an unfortunately abrupt way.