Why is there global inequality,
and is it getting worse?

Pro globalisation

There is mounting evidence that inequalities in global income and poverty are decreasing and that globalisation has contributed to this turnaround. For example, the World Bank notes that China's opening to world trade has brought it growth in income from $1460 a head in 1980 to $4120 by 1999. In 1980, American's earned 12.5 times as much as the Chinese, per capita. By 1999, they were only earning 7.4 times as much. The gap between rich and poor is also shrinking with most nations in Asia and Latin America. The countries that are getting poorer are those that are not open to world trade, notably many nations in Africa. (Care is required when statistics are used. See the note on statistics at the bottom of this page.)

Poor countries that have lowered their tariff barriers have gained increases in employment and national income because labour and capital shifts from import-competing industries to expanding, newly competitive export industries. In addition to providing jobs, companies moving to developing countries often export higher wages and working conditions compared with those in domestic companies operating in the country. While wages are often lower in developing countries than those in developed countries they reflect lower levels of education and productivity. The experience in countries like Korea is that as countries develop their wage levels rise and the focus shifts from labour intensive to more capital and knowledge intensive industries.

Links:

The World Bank 2000/2001 World Development Report: Attacking Global Poverty finds that the share of people in absolute poverty in the world is shrinking
http://www.worldbank.org/poverty/wdrpoverty

Globalisation, Growth and Poverty: Building an Inclusive World Economy is a World Bank report on globalisation and development. The report finds that in developing countries that have integrated into the world economy globalisation has helped reduce poverty and improve living standards, whilst in those that have failed to do so, poverty has increased. The report puts forward a plan of action for helping all developing countries.
http://www.econ.worldbank.org/prr/subpage.php?sp=2477

The Australian Departments of Treasury and Foreign Affairs and Trade report Globalisation and Poverty - Turning the Corner is also available for download at details unprecedented income growth and poverty reduction in developing countries that have managed to open to the world economy in the second half of the 20th century.
http://www.treasury.gov.au/contentitem.asp?pageId=&ContentID=66

The WTO study Trade, Income Disparity and Poverty examines globalisation and developing countries. It finds that trade liberalisation helps poor countries to catch up with rich ones and that this faster economic growth helps alleviate poverty. It also outlines significant economic and social benefits that have accrued to developing countries in the last decade.www.wto.org/english/news_e/pres00_e/pr181_e.htm

The paper The Disturbing 'Rise' of Global Income Inequality by Xavier Sala-i-Martin provides another study on global income inequality. The ironically titled paper finds the global poverty rates have fallen dramatically over the last 25 years, with no evidence of rising inequality. http://papers.nber.org/papers/W8904

Global Envision believes that the more that we understand about the free market system, how it affects us and our neighbors all over the globe, and how it can benefit us all, the better our chances that the global economy will thrive for the prosperity of all. By featuring educational resources, articles, stories and opinions about how economic policy and development can be made more inclusive, Global Envision provides models of how free markets can be a positive force in creating a more fair, just, and stable future. http://www.globalenvision.org

The Statistics on International Development by the UK Department for International Development reports on progress against Millennium Development Goals. Among other things it finds a reduction in poverty in the developing world. http://www.dfid.gov.uk/

The WTO paper Growth is Good for the Poor by David Dollar and Aart Kray provides further evidence of a reduction in global income inequality.
www.wto.org/english/news_e/pres00_e/pr181_e.htm

Economists Peter Lindert and Jeffrey Williamson of the U.S. the National Bureau of Economic Research answer their question, Does Globalization Make the World More Unequal? in the negative. http://www.nber.org/books/global/

Robert Hormats, Vice Chairman of Goldman Sachs (International), gives a lecture entitled "Reducing International Divisions in the Global Economy" presenting the perspective of business. See http://www.gwu.edu/~elliott/news/transcripts/index.html

A lecture by Joseph Stiglitz, controversial former chief economist of the World Bank, "Globalisation and its Discontents: How to Fix What's Not Working", enlightens on what can be done about inequality - http://idpm.man.ac.uk/idpm/stiglitz.html

In a lighter vein, Robert Wright concedes that globalisation makes us richer, but asks does it make us happier? For the already rich, more wealth seems to bring little gain in happiness; in poor countries money really can buy happiness, but only if the poor can cope with the fierce pace of change. See Will Globalization Make You Happy?
http://www.foreignpolicy.com/issue_sept_2000/essay.html

A paper by Professor Ron Duncan from the Australian National University argues that although globalisation may increase inequality in some countries, this can be remedied with structural responses. A rise in poverty among the poorest countries results from their not taking part in globalisation.
http://www.arts.monash.edu.au/ausapec/duncan.PDF

Anti globalisation

The gap between the rich and poor nations of the world is increasing. The figures used most frequently are those from the UNDP 1999 Development Report which find that over the past ten years, the number of people earning $1 a day or less has remained static at 1.2 billion while the number earning less than $2 a day has increased from 2.55 billion to 2.8 billion people. The gap in incomes between the 20% of the richest and the poorest countries has grown from 30 to 1 in 1960 to 82 to 1 in 1995.

By the late 1990s the fifth of the world’s people living in the highest-income countries had:


Critics of globalisation say that rising inequality is the inevitable result of market forces. Given free reign, market forces give the rich the power to add further to their wealth. Hence, large corporations invest in poor countries only because they can make greater profits from low wage levels or because they can get access to their natural resources.

The free market does nothing to address re-distribution of wealth. It assumes that wealth will ‘trickle down’ to the poor. The former British Prime Minister, Margaret Thatcher, once said, "It is our job to glory in inequality and see that talents and abilities are given vent and expression for the benefit of us all."

Links:

The in common campaign focuses attention and action on the elimination of poverty. Dr. Gerry Helleiner argues that the expansion of trade, or expanding market access for exports, are not, in themselves, rational policy for any government promoting the social system. http://incommon.web.ca/anglais/index.html

Arie Kacowicz, of the Hebrew University of Jerusalem, in a paper entitled The Dark Side of the Moon: Globalization and Poverty as a Global Problem, assesses the complex relationships between the phenomena of globalization and poverty. Examples are drawn from Latin America and Africa - http://www.isanet.org/archive/kacowiz.htm

Susan George, Assistant Director of the Transnational Institute in Amsterdam, presents a paper outlining how belief in markets inevitably results in inequality.
http://www.tni.org/george/talks/bangkok.htm

The Church aid organisation, World Vision International presents three perspectives on globalisation and poverty.
http://www.worldvision.org.uk/world_issues/global_economic/index_intro.htm

The aid organisation, Oxfam, has a report connecting globalisation and world poverty.
http://www.oxfam.org.uk/policy/papers/millsum/millsum.htm

Statistics on poverty and growth

People will be struck by the difference in the way that pro-globalisation and anti-globalisation supporters assess the poverty gap. The reasons for this are differences in the way comparisons in wealth are measured. The UN development report measure of wealth is denominated in US dollars. The gap has widened with the steady increase in value of the US dollar against other currencies in recent years. The World Bank uses Purchasing Power Parity (PPP) which assesses what can be bought in local currency. A currency may devalue against the US dollar, but most products inside a country are paid for by local currency. They do not fall in price because the US dollar appreciates.