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Inequality and Globalization
When it comes to wealth and income, people tend to compare themselves to the people they see around them rather than to those who live on the other side of the world. The average Frenchman, for example, probably does not care how many Chinese exceed his own standard of living, but that Frenchman surely would pay attention if he started lagging behind his fellow citizens. Yet when thinking about inequality, it also makes sense to approach the world as a single community: accounting, for example, not only for the differences in living standards within France but also for those between rich French people and poor Chinese (and poor French and rich Chinese).
When looking at the world through this lens, some notable trends stand out. The first is that global inequality greatly exceeds inequality within any individual country. This observation should come as no surprise, since global inequality reflects the enormous differences in wealth between the world’s richest and the world’s poorest countries, not just the differences within them. Much more striking is the fact that, in a dramatic reversal of the trend that prevailed for most of the twentieth century, global inequality has declined markedly since 2000 (following a slower decline during the 1990s). This trend has been due in large part to the rising fortunes of the developing world, particularly China and India. And as the economies of these countries continue to converge with those of the developed world, global inequality will continue to fall for some time.
Even as global inequality has declined, however, inequality within individual countries has crept upward. There is some disagreement about the size of this increase among economists, largely owing to the underrepresentation of wealthy people in national income surveys. But whatever its extent, increased inequality within individual countries has partially offset the decline in inequality among countries. To counteract this trend, states should pursue policies aimed at redistributing income, strengthen the regulation of the labor and financial markets, and develop international arrangements that prevent firms from avoiding taxes by shifting their assets or operations overseas.
THE GREAT SUBSTITUTION
Economists typically measure income inequality using the Gini coefficient, which ranges from zero in cases of perfect equality (a theoretical country in which everyone earns the same income) to one in cases of perfect inequality (a state in which a single individual earns all the income and everyone else gets nothing). In continental Europe, Gini coefficients tend to fall between 0.25 and 0.30. In the United States, the figure is around 0.40. And in the world’s most unequal countries, such as South Africa, it exceeds 0.60. When considering the world’s population as a whole, the Gini coefficient comes to 0.70—a figure so high that no country is known to have ever reached it.
Determining the Gini coefficient for global inequality requires making a number of simplifications and assumptions. Economists must accommodate gaps in domestic data—in Mexico, an extreme case, surveys of income and expenditures miss about half of all households. They need to come up with estimates for years in which national surveys are not available. They need to convert local incomes into a common currency, usually the U.S. dollar, and correct for differences in purchasing power. And they need to adjust for discrepancies in data collection among countries, such as those that arise when one state measures living standards by income and another by consumption per person or when a state does not collect data at all.
Such inexactitudes and the different ways of compensating for them explain why estimates of just how much global inequality has declined over the past two-plus decades tend to vary—from around two percentage points to up to five, depending on the study. No matter how steep this decline, however, economists generally agree that the end result has been a global Gini coefficient of around 0.70 in the years between 2008 and 2010.
The decline in global inequality is largely the product of the convergence of the economies of developing countries, particularly China and India, with those of the developed world. In the first decade of this century, booming economies in Latin America and sub-Saharan Africa also helped accelerate this trend. Remarkably, this decline followed a nearly uninterrupted rise in inequality from the advent of the Industrial Revolution in the early nineteenth century until the 1970s. What is more, the decline has been large enough to erase a substantial part of the inequality that built up over that century and a half.
Even as inequality among countries has decreased, however, inequality within individual countries has increased, gaining, on average, more than two percentage points in terms of the Gini coefficient between 1990 and 2010. The countries with the biggest economies are especially responsible for this trend—particularly the United Sates, where the Gini coefficient rose by five percentage points between 1990 and 2013, but also China and India and, to a lesser extent, most European countries, among them Germany and the Scandinavian states. Still, inequality within countries is not rising fast enough to offset the rapid decline in inequality among countries.
In a dramatic reversal of the trend that prevailed for most of the twentieth century, global inequality has declined markedly since 2000.
The good news is that the current decline in global inequality will probably persist. Despite the current global slowdown, China and India have such huge domestic markets that they retain an enormous amount of potential for growth. And even if their growth rates decline significantly in the next decade, so long as they remain higher than those of the advanced industrial economies, as is likely, global inequality will continue to fall. The prospects for growth are less favorable for the smaller economies in Latin America and sub-Saharan Africa that depend primarily on commodity exports, since world commodity prices may remain low for some time. All told, then, global inequality will likely keep falling in the coming decades—but probably at the slow pace seen during the 1990s rather than the rapid one enjoyed during the following decade.
The bad news, however, is that economists might have underestimated inequality within individual countries and the extent to which it has increased since the 1990s, because national surveys tend to underrepresent the wealthy and underreport income derived from property, which disproportionately accrues to the rich. Indeed, tax data from many developed states suggest that national surveys fail to account for a substantial portion of the incomes of the very highest earners.
According to the most drastic corrections for such underreporting, as calculated by the economists Sudhir Anand and Paul Segal, global inequality could have remained more or less constant between 1988 and 2005. Most likely, however, this conclusion is too extreme, and the increase in national inequality has been too small to cancel out the decline in inequality among countries. Yet it still points to a disheartening trend: increased inequality within countries has offset the drop in inequality among countries. In other words, the gap between average Americans and average Chinese is being partly replaced by larger gaps between rich and poor Americans and between rich and poor Chinese.
INTERCONNECTED AND UNEQUAL
The same factor that can be credited for the decline in inequality among countries can also be blamed for the increase in inequality within them: globalization. As firms from the developed world moved production overseas during the 1990s, emerging Asian economies, particularly China, started to converge with those of the developed world. The resulting boom triggered faster growth in Africa and Latin America as demand for commodities increased. In the developed world, meanwhile, as manufacturing firms outsourced some of their production, corporate profits rose but real wages for unskilled labor fell.
Economic liberalization also played an important role in this process. In China, the market reforms initiated by Deng Xiaoping in the 1980s contributed just as much to rapid growth as did the country’s opening to foreign investment and trade, and the same is true of the reforms India undertook in the early 1990s. As with globalization, such reforms didn’t just enable developing countries to get closer to the developed world; they also created a new elite within those countries while leaving many citizens behind, thus increasing domestic inequality.
Economists might have underestimated inequality within individual countries and the extent to which it has increased since the 1990s.
The same drive toward economic liberalization has contributed to increasing inequality in the developed world. Reductions in income tax rates, cuts to welfare, and financial deregulation have also helped make the rich richer and, in some instances, the poor poorer. The increase in the international mobility of firms, wealth, and workers over the past two decades has compounded these problems by making it harder for governments to combat inequality: for example, companies and wealthy people have become increasingly able to shift capital to countries with low tax rates or to tax havens, allowing them to avoid paying more redistributive taxes in their home countries. And in both developed and developing countries, technological progress has exacerbated these trends by favoring skilled workers over unskilled ones and creating economies of scale that disproportionately favor corporate managers.
MAINTAINING MOMENTUM
In the near future, the greatest potential for further reductions in global inequality will lie in Africa—the region that has arguably benefited the least from the past few decades of globalization, and the one where global poverty will likely concentrate in the coming decades as countries such as India leap ahead. Perhaps most important, the population of Africa is expected to double over the next 35 years, reaching some 25 percent of the world’s population, and so the extent of global inequality will increasingly depend on the extent of African growth. Assuming that the economies of sub-Saharan Africa sustain the modest growth rates they have seen in recent years, then inequality among countries should keep declining, although not as fast as it did in the first decade of this century.
To maintain the momentum behind declining global inequality, all countries will need to work harder to reduce inequality within their borders, or at least prevent it from growing further. In the world’s major economies, failing to do so could cause disenchanted citizens to misguidedly resist further attempts to integrate the world’s economies—a process that, if properly managed, can in fact benefit everyone.
In practice, then, states should seek to equalize living standards among their populations by eliminating all types of ethnic, gender, and social discrimination; regulating the financial and labor markets; and implementing progressive taxation and welfare policies. Because the mobility of capital dulls the effectiveness of progressive taxation policies, governments also need to push for international measures that improve the transparency of the financial system, such as those the G-20 and the Organization for Economic Cooperation and Development have endorsed to share information among states in order to clamp down on tax avoidance. Practical steps such as these should remind policymakers that even though global inequality and domestic inequality have moved in opposite directions for the past few decades, they need not do so forever.
13 Comments on "Inequality and Globalization"
Davy on Tue, 15th Dec 2015 6:32 am
The problems with this articles and so many others is not their scope it is the basis. I am an egalitarian. I am against inequality. I am against exploitation of the commons by nations or private interests. I could go on and on why these are such important ideas and goal. My point with most of what comes out of global academia is the basis of discussion is flawed. That basis is the status quo.
You cannot talk about these topics properly with use of the status quo. This is the same type of denial these articles many times criticize. Denial is the basis of the status quo today. Anything written in the context of the status quo is therefore limited in scope by this denial. If your model is flawed how are you going to have good results?
The world cannot grow population and consumption much more. This is earth system physics. Do the math. If the world cannot grow than the basis that underlies these and so many other academic reports is pointless. It is an exercise in futility. How are you going to lower the “Gini” if decline and decay are the basis but your policies and goals are based upon status quo growth?
We are only going to accurately address these important issues with good data and realistic policy. I would argue we need to stop even talking about these issues and focus completely on the collapse process ahead. This process will require everything we have. It will require trade-offs of immense proportions. People’s lives will be traded not their wealth. I am not advocating killing what I am advocating is such things as ending the huge material expense of keeping people alive in their final 6 months often with no quality of life. This is just an example of enormous changes to attitudes and lifestyles that are needed across the board.
Rich and poor alike must in a relative fashion agree to lower living standards and lifespans. You are not going to get much social justice on the global scale. This means those with comparative advantage will do relatively better than those without. Those with luck will fare better. You cannot change the global system much with rate and degree of change without collapse with large loss of life for “ALL”. This can only be done at a rate that the system can bare. Nature could give a shit about “Gini”. Nature has ecosystem survival rules and yes even for humans. These need to be our basis not lofty human ideas.
The global system of our modern status quo will be forced into change. It will enter crisis that will end it slow or fast. We just don’t know the rate of fall of this earth system rebalance. What we can do is leave a basis of denial like what we see in this article and begin tough choices even if these are only national. Do you think an article like this would appear if the end of the status quo would be acknowledged? An article like this with that basis would almost surely seem out of place.
makati1 on Tue, 15th Dec 2015 6:40 am
The great global leveling is finally making the news. The plan is working.
Foreign Affairs, the mouthpiece of the One Worlders. No? Take a look at the people on it’s board…lol.
http://www.cfr.org/about/people/board_of_directors.html
Apneaman on Tue, 15th Dec 2015 4:00 pm
Nigeria eh? How are the common folks at home doing?
Flint, Michigan, Declares State of Emergency Over Amount of Lead in Drinking Water
http://www.slate.com/blogs/the_slatest/2015/12/15/flint_declares_state_of_emergency_because_of_lead_in_drinking_water.html
kanon on Tue, 15th Dec 2015 9:33 pm
Davy: “You cannot talk about these topics properly with use of the status quo. This is the same type of denial these articles many times criticize. Denial is the basis of the status quo today. Anything written in the context of the status quo is therefore limited in scope by this denial. If your model is flawed how are you going to have good results?”
Yet no one can hear you if you do not talk in the context of the status quo. It is nearly impossible for most people to even conceive of anything that is contrary to the status quo. The premise is assumed with such measures as GINI coefficiet. As long as FF is associated with prosperity or consumerism is valued the status quo continues. Articles that describe inequality in these terms are, as Davy says, subtle propaganda for the status quo.
Go Speed Racer on Wed, 16th Dec 2015 4:40 am
i thought this website was about peak oil? no, i misunderstood, peakoil website is about social justice and doomsteads.
Davy on Wed, 16th Dec 2015 6:20 am
When you have been around the board as long as I have you start having the same conversations between people. I have had this conversation before. If you accept peak oil then you accept doom of the status quo. Doomsteads are in order in context to a decaying status quo. I would say doomsteads are in order during any times for multiple reasons.
Doomsteads are healthier preaching localized food. Doomers stress the importance of lower waste of food and fuel by leading simple lives. We believe in collecting knowledge and tools for a more simple and efficient life. We talk about health both mental and physical. There is an element of going off the radar screen to avoid trouble. Trouble cannot be hid from but most of the trouble I ever got in was from my own dumbass. We talk about community involvement and good neighbor relations. Many take it a step further with leaving jobs that have little realness in relation to what man has done most of his history and embracing concrete activities like food production or craftsmanship. We believe in security and protection.
To become a doomer you practice relative sacrifice. We all are bound by family and tribe to a certain extent. This tribal context along with location dictates wealth and living environment. Within that environment lower your footprint. Walk lightly so to speak. Downsize with dignity into a smaller physical and mental footprint. Do this because many times it is healthier and a stronger arrangement. What has strength a McMansion of 8,000 sq/ft or my 12X40 log cabin? Drop down a couple of living sizes and make what you have better quality instead of quantity. Do this for nature and your fellow man but first do it for yourself.
When you do this sacrificing, and downsizing keep balance with reality. These kind of actions can be destructive and counterproductive. Move slowly with thought. Respect your family and community in the process. If you do and this turns out right it is contagious. You are in effect a contagion of good.
I take it further and practice stoicism with sparten living again relatively speaking. I do this as a physical and mental workout. I fast twice a week eating nothing on those days. I also do an hour workout of weights and bike riding when fasting. I do this because it is good for my health to give my digestion a rest and physically challenge my body. I also do this to experience hunger and its discomforts. If collapse comes kiss your three meals a day goodbye.
I am a fanatic about waste. It disturbs me so I make sure any activities I do are thought out when they are energy related. I buy food and use food systematically to avoid waste. I try to avoid junk food because junk food is not food it is a waste.
I engage in spirituality by reading and reflection. I practice a small amount of religion for family and reasons of tradition. I do not care if there is or is not anything after I die but religion is part of my life’s tradition with family and upbringing. I respect it for this reason. If you ignore the many times empty dogma and embrace the community aspects you can utilize the good found in religious communities. Religion is not a doomer activity but community is. If it takes religion to find community do it.
I have physical preps for short term survival. Many people should have this even if you are not a doomer. If you are in a region where natural disaster can strike you should have some prep. If you can prep financially have some cash and gold. Food and water is a must.
I am here every day because it is my lookout for danger. You guys are assisting me by watching my back for things I cannot see. I come here also to think and to write. I am getting older being in my early 50’s. My mind and body is beginning to fail. Writing and engaging in intellectual subjects is a mental workout. Idea battles that are often emotional and mentally strenuous is further mental exercise. Conflict and the humility of lost battles is strength not weakness.
I doom because I like it. A doomer must get good at many things. Yesterday my electric tankless heater in my cabin blew an element. I had to do plumbing and electrical work. This kicked my ass but I save money and learned something. Being in shape helped because the asswipes that built this cabin put the friggen heater in a covey not fit for a man to work in.
As for social justice if you doom you are practicing true social justice by lowering your footprint out of respect for the commons of nature and your fellow man. Your actions of community involvement are actions of human empathy and compassion. Most cannot leave the status quo like I did but you can end the worst of the status quo in your lives. If you can leave you owe it to nature and your fellow man to take the journey. If you are a psychopathic narcissist well there are some benefits to prepping for a collapse that might save your crooked ass.
Dooming is the future and dooming has a future. Dooming means learning and growing into the unknown. I may not see a collapse. I may not survive a collapse but I will have tried. The basics of all species are survival except with humans. Humans because of self-consciousness have the option of being a dumbass or truly human.
GregT on Wed, 16th Dec 2015 9:07 am
Doomer = plan for the worst, and hope for the best
Cornucopian = expect the best, argue with anyone that threatens that world view
Apneaman on Wed, 16th Dec 2015 10:32 pm
Capitalism’s Cult of Human Sacrifice
“HOUSTON—Bryan Parras stood in the shadows cast by glaring floodlights ringing the massive white, cylindrical tanks of the Valero oil refinery. He, like many other poor Mexican-Americans who grew up in this part of Houston, struggles with asthma, sore throats, headaches, rashes, nosebleeds and a host of other illnesses and symptoms. The air was heavy with the smell of sulfur and benzene. The faint, acrid taste of a metallic substance was on our tongues. The sprawling refinery emitted a high-pitched electric hum. The periodic roar of flares, red-tongued flames of spent emissions, leapt upward into the Stygian darkness. The refinery seemed to be a living being, a giant, malignant antediluvian deity.
Parras and those who live near him are among the hundreds of millions of human sacrifices that industrial capitalism demands. They are cursed from birth to endure poverty, disease, toxic contamination and, often, early death. They are forced to kneel like bound captives to be slain on the altar of capitalism in the name of progress. They have gone first. We are next. In the late stages of global capitalism, we all will be destroyed in an orgy of mass extermination to satiate corporate greed.”
more
http://www.truthdig.com/report/item/capitalisms_cult_of_human_sacrifice_20151213
kissmanga on Tue, 19th Jun 2018 2:46 am
The problems with this articles and so many others is not their scope it is the basis. I am an egalitarian. I am against inequality. I am against exploitation of the commons by nations or private interests. I could go on and on why these are such important ideas and goal. My point with most of what comes out of global academia is the basis of discussion is flawed. That basis is the status quo.
Cornucopian = expect the best, argue with anyone that threatens that world view
Makati1 on Tue, 19th Jun 2018 3:52 am
“Polluted water bodies (partial list)”
Ohio River, ranked as the most polluted river in the United States in 2010[9]
Onondaga Lake
Aliso Creek (Orange County)
Bubbly Creek
Cuyahoga River
Duwamish River
Elizabeth River (Virginia)
Houston Ship Channel
Housatonic River
Hudson River
Kamilo Beach
Love Canal
Newark Bay
Newtown Creek
New River (Mexico – United States)
Passaic River
Lake Erie
Lake Gribben
Savannah River[10]
https://en.wikipedia.org/wiki/Water_pollution_in_the_United_States
Pointing fingers at other countries in the hope that no one will notice the same in the Us.
Davy on Tue, 19th Jun 2018 5:10 am
3rd world, there are many rivers in the US not polluted but in China very few. In the P’s your rivers are in decline and or unfit near large urban areas. I have seen many pictures of the trash in them and you know the affluents are there too. Beaches are being closed down because of sewage.
vedant on Fri, 4th Jan 2019 12:20 am
Thank you so much for this sharing.
jenny on Sun, 13th Jan 2019 8:24 am
This is really good