What Are the Implications of Globalization on Sustainability?—A Comprehensive Study

Abstract

It is becoming more and more certain that globalization is not just purely an economical phenomenon; it is exhibiting itself on a worldwide level. Amid globalization’s observable appearances, the most obvious are the larger international mobility of goods and services, flows of finance capital, data and information and most importantly people. On top of that, there are technological progresses and more international cultural interactions, which are facilitated by the enhancement of free trade of large quantities of more differentiated goods and also through immigration and tourism. The political changes and ecological concerns play an important part in this regard. In the current study, sustainability Indices are linked with the KOF Globalization Index to understand if more globalized countries are performing better in terms of sustainable development and its dimensions, especially environmental sustainability. Sustainability indices such as Human Development Index (HDI) and Environmental Performance Index (EPI) showed a stronger relation with different levels of globalization while others (Red List Index (RLI), Environment Sustainability Index (ESI)) did not. The results reveal that globalization has a positive implication on sustainability in the overall perspective.

1. Introduction

One of the great economic and political stories of our time is related to Globalization. For the “post-modern society” it was supposed to be one of the big new ideas [1]. Globalization gave fresh importance to spatial economics along with the significance of financial and monetary layouts. This is because of the longitudinal spread of specific economic activities in different geographical places and the reduction of specific business in others [2,3,4]. The existing trend of globalization is a mere subdivision of massive operational alterations which are the results of the Schumpeterian progression in the technology, the spatial strength and possibility of connections between many factors at different levels of the economy [5,6]. However, there are a lot of confusion and differences over discussions as the process of globalization has diverse implications to various people [7,8,9]. Once there were hopes that globalization would provide benefits to everybody universally. With the passage of time, globalization’s disadvantages become more and more apparent [10,11,12]. It was initially expected, on the basis of neoclassical equilibrium theory, that there would be an inflow of money into developing countries due to the supposed higher rate of return there, resulting from relative scarcity as compared to the developed world. The experience and observation indicates a flow in the opposite direction. Joseph Stiglitz et al. [13] wrote that “Globalization seems to have unified so much of the world against it, perhaps because there appears to be so many losers and so few winners…” Globalization, when well-managed, can provide better results to everyone or most of us. However, this has not happened. In the present scenario, globalization’s outreach has encompassed more and more nations and people, making it untamable. For example, due to production globalization many millions of Chinese obtained jobs, but there was a less than expected trickle-down effect in their well-being due to uneven distribution of income which continued to be extremely concentrated [14,15,16].

The sustainability of globalization may or may not flow in a similar way for all countries. Some of them like the United Kingdom and Japan might experience a better local atmosphere due to the globalization process, while others like Bangladesh and Mexico can experience a declining and fading environment. [17]. The same thing is applicable to the economic or social effects of the globalization procedure. Moreover, sustainable development in one of the areas of globalization that may not essentially be connected to sustainable growth in other domains, and what is practical for a nation might not be possible for the international environment [18,19]. Of course, the desired result of globalization for most people is one in which the global environment, society and economic system develops sustainably, and all domestic environments improve including the welfare of all nations. However, globalization is unlikely to achieve all of these objectives simultaneously [20]. This complexity of the globalization procedures hence calls for a truly unified approach, joining social, economic as well as ecological characteristics. Under a globalizing domain, policy-makers should be conscious of the growths that take place all together in different fields, and the growing interconnectedness requires being the initial point for sustainable international policies [21]. If global economic processes and consumerism do have poisoning side-effects, the particular direction these dynamics require to acheive justifiable future needs to be enquired. The long-existing “growth versus environment” tension can be exposed, for which the term “sustainable development” has been invented. The demands for ecological protection and economic growth are supposed to be conflicting [22]. It is claimed to be an everlasting competition by some, whereas, others highlight a potential win-win situation [23,24].

Though there are various ways to define the complexity of the processes related to globalization, the current paper uses an indicator-based approach [25,26]. The definition of globalization we adopt is that of a phenomenon which explains the procedure of generating networks of associations among actors at intra- or multi-continental distances, facilitated through a variety of flows including people, data and concepts, capital, and commodities. It is a process that wears down national borders, assimilates national economies, cultures, technologies and governance, producing complex associations of conjoint interdependence [27]. For answering the questions related to the overall impact of globalization on the countries’ sustainability, as well as to assess the significances of globalization in a rational and scientific manner, the KOF Globalization Index is linked with Sustainable Development, Environmental, Red List and Human Development Indices in this paper, for analyzing if more globalized nations are performing better in relation to sustainable growth and its dimension.

2. The KOF Globalization Index (KOFGI)

The KOF Globalization Index (KOFGI) is used in this study as a measure of globalization which is calculated on a yearly basis from 1970 to 2015 [25,27]. The KOF Globalization Index measures the economic, social and political dimension to globalization. It is used in order to monitor changes in the level of globalization of different countries over extended periods of time. The data are normalized implying that each variable is transformed to an index with a scale from one to one hundred, where 100 is assigned to the maximum value of a specific variable over the whole sample of countries and the entire period of time which is the analogue to a transformation of the series according to the percentiles of its original distribution. The procedure is called panel normalization which is different to annual normalization where data are normalized across all countries in the same year only. The resulting data are well-behaved in terms of sensitivity to outliers. Principal components analysis is performed on a 10-year rolling window of data to determine time varying weights for the individual variables which mean observations for t-10 until t-1 are used to compute the weights for time t. The weights for the years 1970 to 1979 are set equal to the weights of the year 1980 given the shorter time window. Principal components analysis partitions the variance of the variables used in each sub-group and the weights are determined in a way that maximizes the variation of the resulting principal component. The weights are calculated using the entire sample of countries at the same time. With the time-varying weights for the variables, the weighting procedure has the possibility to adapt to changes in the relevance of certain variables to capture globalization over time. While the weights of individual variables can change over the years, the weights of the sub-indices are held fixed over the time horizon. While de facto globalization measures actual flows and activities, de jure globalization measures policies, resources, conditions and institutions that, in principle, enable or facilitate actual flows and activities. Most globalization indices focus on de facto globalization.

Economic globalization is composed of trade globalization and financial globalization, of which each gets a weight of 50 per cent within the economic dimension. Social globalization consists of interpersonal, informational and cultural globalization, each of them contributing a third to the social globalization index. Similarly weights are determined for political globalization. Economic, social and political globalizations are aggregated to the Globalization Index using again equal weights.

Social globalization consists of interpersonal globalization, information globalization and cultural globalization, where each contributes one third. Each segment consists of its own de facto and de jure segments. Interpersonal contact is measured within the de facto segment with reference to international telephone connections, tourist numbers and migration. The de jure segment is measured with reference to telephone subscriptions, international airports and visa restrictions. Flows of information are determined within the de facto segment with reference to international patent applications, international students and trade in high technology goods. The de jure segment measures access to TV and internet, freedom of the press and international internet connections. Cultural proximity is measured in the de facto segment from trade in cultural goods, international trade mark registrations and the number of McDonald’s restaurants and IKEA stores. The de jure area focuses on civil rights (freedom of citizens), gender equality and public spending on school education.

The sub-domain of political globalization regarding the de facto segment is measured with reference to the number of embassies and international non-governmental organizations (NGOs), along with participation in UN peacekeeping missions. The de jure segment contains variables focusing on membership of international organizations and international treaties (see

Table 1. 2018 KOF Globalization Index structure (adopted from Gygli 2019).

Globalization Index, de Facto	Weights	Globalization Index, de Jure	Weights
Economic Globalization, de facto	33.3	Economic Globalization, de jure	33.3
Trade Globalization, de facto	50.0	Trade Globalization, de jure	50.0
Trade in goods	38.8	Trade regulations	26.8
Trade in services	44.7	Trade taxes	24.4
Trade partner diversification	16.5	Tariffs	25.6
		Trade agreements	23.2
Financial Globalization, de facto	50.0	Financial Globalization, de jure	50.0
Foreign direct investment	26.7	Investment restrictions	33.3
Portfolio investment	16.5	Capital account openness 1	38.5
International debt	27.6	Capital account openness 2	28.2
International reserves	2.1
International income payments	27.1
Social Globalization, de facto	33.3	Social Globalization, de jure	33.3
Interpersonal Globalization, de facto	33.3	Interpersonal Globalization, de jure	33.3
International voice traffic	20.8	Telephone subscriptions	39.9
Transfers	21.9	Freedom to visit	32.7
International tourism	21.0	International airports	27.4
Migration	17.2
International students	19.1
Informational Globalization, de facto	33.3	Informational Globalization, de jure	33.3
Used internet bandwidth	37.2	Television	36.8
International patents	28.3	Internet user	42.6
High technology exports	34.5	Press freedom	20.6
Cultural Globalization, de facto	33.3	Cultural Globalization, de jure	33.3
Trade in cultural goods	28.1	Gender parity	24.7
Trademark applications	9.7	Expenditure on education	41.4
Trade in personal services	24.6	Civil freedom	33.9
McDonald’s restaurant	21.6
IKEA stores	16.0
Political Globalization, de facto	33.3	Political Globalization, de jure	33.3
Embassies	36.5	International organisations	36.2
UN peace keeping missions	25.7	International treaties	33.4
International NGOs	37.8	Number of partners in investment treaties	30.4

).

Economic, social and political globalizations are aggregated to the KOF Globalization Index using equal weights. The complete KOF Globalization Index is computed as the normal of the de facto and the de jure KOF Globalization Index. Once the weights were determined, the aggregation consisted of adding up individual weighted variables instead of using the aggregated lower-level indices. This has the advantage that variables enter the higher levels of the index even if the value of a sub-index is not reported due to missing data. Observations of indices were reported as missing if more than 40% of the observations of the underlying variables were missing or at least two out of three sub-indices could not be calculated [28]. The index measures globalization on a scale of 1 to 100. The figures for the constituent variables are expressed as percentiles. For the purpose of this study, the 2018 KOF Globalization Index which consists of a ranking for 195 countries for the year 2015 is used.

However, in the construction of this index, not all data were accessible for all nations and all years. Missing values within a series were imputed using linear interpolation. Missing values at the beginning or the end of a series were substituted by the closest observation available. Due to their higher degree of interdependence, for example, with neighboring countries, smaller countries tend to be placed higher up in this ranking than larger countries. This leaves the most significant national economies around the world in the mid-range as indicated in

Table 2. Top 10 and bottom 10 countries on the basis of the KOF Globalization Index (KOFGI).

Top 10	Bottom 10
Belgium	Bhutan
Netherlands	Guinea-Bissau
Switzerland	Togo
Sweden	Chad
Austria	Myanmar
Denmark	Burundi
France	Haiti
United Kingdom	Central African Republic
Germany	Eritrea
Finland	Lithuania

.

3. Sustainability Indices

Sustainable development is a growth parameter that meets requirements of the current time without negotiating the capability of future generations in meeting their own requirements [29,30,31]. An evolution has been experienced of the concept of sustainable development over time from the earlier time where focus was on the environmental dimension to the present understanding that sustainable development is a process that incorporates economic, environmental, and societal objectives [32,33]. Though sustainable development is a challenging concept, its fundamentals are very clear which states the maintenance of the integrity of bio physical and natural systems. It ensures that a proper functioning economy must be present and cultivating or upholding human wellbeing and health is of utmost importance. Sustainable development requires meeting the basic needs of all and extending to all the opportunity to fulfill their aspirations for a better life. A world in which poverty is endemic will always be prone to ecological and other catastrophes. Some authorities argue that basic needs also include the rights of all to preserve their cultural identity, and their right to not be alienated from their own society, and their own community [34]. For investigative purposes, in present paper, a perception is followed that states that sustainable development along with globalization is an idea that can be operationalized through use of science and technical based criteria and indicators [35].

People have different perceptions of sustainability criteria and for some the basic impression of sustainability is to mainly focus on the depletion of resources while other consider it as a concept where sustainability includes contamination, conservation of ecology and its ecological aspects. Some include traits of the quality of human life or human well-being. For exploring the question of globalization and its sustainability, we have selected indices that characterize diverse aspects of sustainable development stated above, as well as an overall sustainable development index [36,37,38].

3.1. Human Development Index (HDI)

HDI (Human Development Index) was formed to highlight the fact that individuals and their abilities should be the final criteria for measuring the growth of a country, not economic development alone. The HDI is a composite measure for assessing achievements in three key areas of human development: healthy and long life, knowledge accessibility and decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions. A healthy living is measured by life expectancy at birth; knowledge is determined by an average of expected and mean years of schooling and standard of living by the GNI per capita (PPP $). In the current paper, data and information from the 2018 statistical update has been used [39].

3.2. Environment Sustainability Index (ESI)

The Environment Sustainability Index has been constructed by taking into account four areas (i) energy consumption, (ii) carbon dioxide emission, (iii) forest area, and (iv) mortality rate attributed to household and ambient air pollution. Data from UNDP Human Development Report 2018 Dashboard 4: Environment Sustainability for 189 countries, are used to construct the index by ranking countries based on their performance in the four areas with the most efficient receiving rank one and so on [40]. In the arena of energy ingestion two indicators are used fossil fuel energy utilization which is the level of entire energy ingestion which originates from non-renewable energy sources which consists of coal, oil, petroleum, and natural gas products; and sustainable power source usage which is the share of renewable energy in total final energy consumption. Inexhaustible sources include geothermal, hydroelectric, sun powered, wind, tides, biomass, and biofuels. As an indicator of carbon dioxide emission human-generated carbon dioxide releases curtailing from the burning of non-renewable energy sources, gas spreading and the manufacturing of concrete and carbon dioxide produced by woodland biomass through exhaustion of timberland areas are included. Nations are graded according to the releases communicated in tons per capita (based on midyear population) and in kilograms per unit of Gross Domestic Product (GDP) in 2011 purchasing power parity (PPP) dollars. The third dimension takes into account the percentage alteration in the forest area, which is land covering more than 0.5 hectares with trees taller than 5 meters and a canopy cover of more than 10 percent or trees able to reach these thresholds in situ. Mortality rate attributed to household and ambient air pollution considers deaths resulting from exposure to ambient (outdoor) air pollution and household (indoor) air pollution from solid fuel use for cooking, expressed per 100,000 populations. Encompassing air contamination is the result of emissions from households, industrial action, car, and trucks. The ranks across all indicators are aggregated, attaching equal weights to obtain the Environment Sustainability Index. Lower values of ESI indicate greater efficiency in terms of environmental sustainability.

3.3. Environmental Performance Index (EPI)

EPI (The Environmental Performance Index) focuses on two main environmental goals: (i) reducing environmental stresses to human health; (ii) endorsing ecosystem vitality and comprehensive natural resource management. Both of the goals also replicate the policy significances of environmental specialists around the globe and the international community’s intentions for the adoption of Goal 7 of the Millennium Development Goals (MDGs) for ensuring environmental sustainability. The two supreme objectives are evaluated through 25 difference performance indicators trialed in six well-developed policy categories. All of them are then combined for creating to create a final score. In this paper the 2018 EPI scores have been used [41].

3.4. Red List Index (RLI)

RLI, (Red List Index) is a measure of the aggregate extinction risk across groups of species. RLI is based on honest changes in the number of species in each group of extinction risk on the International Union for Conservation of Nature Red List of Threatened Species. The range progresses from 0, where all species which are categorized as extinct, to 1 for those species categorized as being of least concern. The Red List Index (RLI) was established to display trends in global extinction risk for species and deliver a gauge which can be used by governments to trail their development in accomplishing targets that decreases biodiversity loss. In the present paper, statistics of 2018 have been used [42,43,44,45].

3.5. Sustainable Development Goal Index (SDGI)

The 2030 Agenda for Sustainable Development, including the Sustainable Development Goals (SDGs) was adopted in 2015. The 17 new Sustainable Development Goals, also known as the Global Goals, aim to end poverty, hunger and inequality, take action on climate change and the environment, improve access to health and education, build strong institutions and partnerships, and more. Compared to the Millennium Development Goals (MDGs), the SDGs are applicable to all 193 UN Member States and therefore both to developing and developed countries alike. In order to assist countries in measuring their SDG baselines and to measure future progress, the Bertelsmann Stiftung and the Sustainable Development Solutions Network (SDSN) jointly released the first SDG Index and Dashboards in July 2016. This report aims to achieve four main objectives:

• Establishing Sustainable development goals in the form of a valuable, working device for strategic action.
• Supporting national debates on prioritizing basis and formulate SDGs with application plans.
• Accompanying efforts to develop of a robust SDG checking structure by the UN Statistical Commission.
• Identifying SDG data gaps, requirements for investments in arithmetical capability and research, and new forms of data.

The global SDG Index score and scores by goal can be interpreted as the percentage of achievement. The difference between 100 and countries’ scores is therefore the distance in percentage that needs to be completed to achieve the SDGs and other goals. Sweden’s overall Index score (85) suggest that the country is on average 85% of the way to the best possible outcome across the 17 SDGs. For all countries, the same basket of indicators (variables) is used to produce comparable scores and rankings. The differences in rankings may be due to small differences in the aggregate score which must be noted. The SDG Index score indicates position of a country between the worst (0) and the best or target (100) outcomes. Data from the 2018 Global SDG Index and Dashboards Report is used in this paper [46,47].

4. Methods and Results

For indicating the crude relationship between sustainability indices and the KOFGI, the Spearman correlation and linear regression between each of the sustainability indices and the KOFGI are used and the results for the correlation are shown below in

Table 3. Spearman‘s rho correlations for KOFGI and the sustainability indices.

	HDI	ESI	EPI	RLI	SDGI
KOFGI	0.8285 **	−0.1107	−0.4817 **	0.1587 *	0.7842 **
KOFGI domains
Economical	0.7028 **	−0.1202	−0.4429 **	0.1635 *	0.6310 **
Social	0.9107 **	−0.2472 **	−0.4787 **	0.1169	0.8132 **
Political	0.4766 **	0.0798	−0.3549 **	0.1430	0.5471 **

* Significant at 0.05 level; ** Significant at 0.01 level.

. Cross-section data on 179 countries for the year 2015 has been used for this purpose.

In

Table 4. Linear regression coefficients for KOFGI and the sustainability indices

	HDI	ESI	EPI	RLI	SDGI
constant	0.32 **	80.29 **	36.38 **	0.82 **	42.23 **
Coefficient β	0.01 **	0.11	0.30 **	0.00	0.35 **
R-square	0.6020	0.0088	0.2196	0.0088	0.5365

* Significant at 0.05 level; ** Significant at 0.01 level.

and

Table 5. The T-test (means between low and high globalized countries).

	HDI	ESI	EPI	RLI	SDGI
t	−14.04 **	−2.36 *	−5.30 **	−0.66	−13.04 **

* Significant at 0.05 level; ** Significant at 0.01 level.

, linear regression results of the sustainability indices on the KOFGI are presented. We use correlation and regression analysis to develop some evidence that may hint at causality, acknowledging that correlation (and regression) cannot prove causality in such complex issue such as globalization.

From Table 3 it can be seen that, except ESI, there is correlation between all sustainability indices and KOFGI. The HDI and the Sustainable Development Goal Index shows positive correlation with KOF Globalization Index with Spearman ranked correlation values of 0.8285 and 0.7842, respectively. There is a significantly negative correlation between Environmental Performance Index and KOFGI with a Spearman ranked correlation of −0.4817. A substantial low affirmative correlation exists between KOFGI and Red List Index (rs = 0.1587). In addition there is no significant correlation between KOFGI and the Environment Sustainability Index (rs = −0.11).

As far as, globalization’s individual domains are concerned, Table 3 shows that economic and social areas of globalization are the primary drivers of correlations. Except for ESI, economic globalization is significantly correlated with all sustainability indices. Concerning ESI and RLI, no significant correlation was found between them and political domain of globalization. Similarly, between RLI and the social domain, no significant correlation was identified.

Regression analysis outcomes are shown in Table 4. Results depict that, an increase in globalization results in higher values of HDI and SDGI with R-squared values of 0.60 and 0.54, respectively. The R-square between KOFGI and EPI is smaller, while there is no relationship between KOFGI and ESI and between KOFGI and RLI.

For comparing the variance in score of sustainability indices among more and less globalized nations, they (nations) are divided into two sub-samples in accordance to their overall KOFGI rating. Mean KOFGI mark (= 67.40) is considered to differentiate among more and less globalized nations. Two-sample t-test is applied for exploring null hypothesis. This states that no significant difference is found between the mean value of more and less globalized nations regarding sustainability indices (Table 5). This can be explained as beneath:

• H0: HDI more globalized nations = HDI less globalized countries    reject
• H0: ESI more globalized nations = ESI less globalized countries    reject
• H0: EPI more globalized nations = EPI less globalized countries    reject
• H0: RLI more globalized nations = RLI less globalized countries    accept
• H0: SDGI more globalized nations = SDGI less globalized countries    reject

Observing the KOFGI 2018 statistics, it is seen that the more and more globalized nations (in comparison to less globalized nations) are doing better in areas of Human Development and Environment Performance and have significantly higher values of SDGI indicating better performance across all 17 Sustainable Development Goals. There are no significant differences between higher and lower globalized nations in relation to the Red List Index. In terms of ESI, the performance of more globalized countries is slightly worse, which can be attributed to high energy consumption and carbon dioxide emissions in those countries.

5. Discussion

Observing the sustainability indices, some differences can be noticed. Some of the sustainability indices addressing a specific issue (like human development (HDI), environmental performance (EPI), show the strong relationship with the level of globalization while others (Red List Index (RLI), Environment Sustainability Index (ESI) do not. The HDI (Human Development Index) is the average achievement of a nation in three different areas. This includes a healthy and long life, knowledge access and a decent standard of living. [39] Achievements in human development are correlated with—and, by construction, partly reflect—levels of income per capita and education. Economic and social globalizations are therefore important drivers of the HDI. In addition, globalization is found to have significant positive effect on economic growth which can positively affect HDI through increasing per capita income. [27,28]

Similar to the Human Development index, there is correlation between per capita GDP with EPI’s higher performance. This might have given rise to a lower value R-square. Specifically, overall scores of EPI are greater in nations which have $10,000 or higher per capita GDP. The degree of freedom of association; expression and free media have been combined in the EPI showing a constructive correlation in the environmental performance. Similarly, the comprehensive measurement of the comparative weaknesses and strengths of major and emerging national economies shows a strong positive association with environmental performance [41]. The process of globalization has an influence over these underlying EPI indicators.

Red List Index is the degree of the collective extinction risk across groups of different kinds targeting areas of biodiversity loss. The lack of (or low) relationship between the level of globalization and the biodiversity potential may in part be due to the complexity of the globalization biodiversity level, which is highly spatially explicit (and hence, difficult to compare on a county by country basis).

ESI does not have any substantial relation to globalization; this result is likely due to the fact that both positive and negative implications of globalization are reflected in the sub-indicators of ESI. Still, there is some relationship between ESI and the social domain of globalization which can be attributed to the possibility that increasing citizen’s quality of life through education and awareness might create a better environment for tackling household pollution and create greater reliance on renewable energy sources as compared to fossil fuels.

The Sustainable Development Goal Index, which is constructed by taking all the 17 SDGs into consideration and which is the most comprehensive measure into of sustainability, shows a strong and positive relationship with the level of globalization. This result seems to imply that globalization has a favorable implication on sustainability overall.

It is necessary to take into account that all indices have component indicators and information on the country level, without an explicit spatial dimension. Globalization interacts with sustainable development at levels that make computation challenging like trans-border environmental concerns, cultural alterations and a so-called “global awareness”. For example, the data do not show us that the most globalized countries might have a higher HDI or EPI because they have exported their pollution or because the costs of the goods and services they enjoy (and which contribute to their lifestyles) are borne by people and environments in other parts of the world.

6. Conclusion

In this paper we have measured the impact of the recent process of globalization on the sustainability of world development in the light of various sustainability indices. Observing the results, globalization can be characterized as both more complicated and more surprising than was anticipated. One clear lesson can be learned from the many global assessments that have been produced over the past decades: dogmatic predictions regarding the earth‘s future are unreliable, ill-founded and misleading, and can be politically counterproductive. So, this analysis is beset with the uncertainties and assumption that apply to global statistical indicator analysis. Moreover, looking at a more detailed (variable) level, the analysis becomes somewhat more complex. If consumerism and global economic processes do have polluting side-effects, it needs to be asked which direction these dynamics need to take for a sustainable future.

Though the prevailing view is that globalization has mostly negative impacts, especially in the case of developing nations, it is probably too early to pass such judgment and globalization may not be as “evil” a phenomenon as it is deemed to be. What is clear is that the increasing complexity of our global society means that sustainable development cannot be addressed from a single perspective, country or scientific discipline. Planning for sustainable development in the context of globalization is far more intricate and complex compared to most problems that have to been dealt with in the past and requires global, cross-country policies and the setting up of an international initiative to coordinate such policies.