Global Inequality

Understanding Socioeconomic Inequality

Session 5

Catarina M. Liberato | Visiting Teaching Assistant | cmll3@kent.ac.uk | @CataMLiberato | Marburg, 14th of November 2023
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Goals for Today

1. Understanding the link between poverty,

development and global inequality
2. Making sense of global inequality, its
contours and why it matters
3. Comprehending the importance of
economy in global politics
4. Understanding development through the
politics of international aid

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Poverty & Inequality
 Different perspectives on
inequality

Multidimensional Approach
(Therborn 2013)
• Health/Mortality
• Existential degrees of freedom, dignity and respect
• Resources of income, wealth, education and power

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What causes Inequality?

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 Standards of Poverty
Absolute Poverty Relative Poverty

Linked with the idea of basic needs - • A standard of poverty based on:
Maslow's 1943 hierarchy of needs • Deprivation of people’s living
A standard of poverty based on: conditions and amenities
• An income level • Conditions are customary in the
• Access to resources (food, clothing society in which they belong.
and shelter) • Brings the social dimension of poverty
Misses the social dimension of poverty to the discussion

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 Poverty & Inequality
Relative Poverty

Redistribution of wealth • A standard of poverty based on:

Promotion of equality • Deprivation of people’s living
conditions and amenities
• Conditions are customary in the
Raised political questions on the society in which they belong.
reduction/eradication of poverty
• Brings the social dimension of poverty
to the discussion

Established a link between poverty

and inequality

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The Politics of Poverty
• The World Bank assume a growing
responsibility for global poverty reduction
• Standards of extreme poverty calculated
at purchasing power parity (PPP) as an
income level of a $ a day
• United Nations’ use of human development
as a central approach to global poverty
• Human Development Reports
• Human Development Index (HDI) Sources: World Bank, UNDP
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Source: HNDP/HDI
Global Inequality
 Global Inequality
“The unequal interpersonal distribution of wealth and income measured at the global level.”
(Lockwood 2021, 422)
 Global Inequality (1)
Lockwood’s (2021) Arguments

• GI is political, shaped by historical political

decisions, institutions, and structures of power.
• GI is perpetuated by contemporary financial,
trade, and immigration practices.
• GI is sufficiently distinct from both national
inequality and global poverty to constitute an
analytically distinct object of inquiry within IPE.

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Global Inequality (2)
Lockwood (2021)
 Measuring Global Inequality (1)
• Per capita GDP to calculate Gini coefficients
✅ Good for the analysis of the wealth
The most commonly used measure or income distribution in a country

of inequality within a country

❌ But… it does not indicate the
country's overall wealth or income

Variation between
complete equality = 0 1 = complete inequality

Slovenia = 0.24 South Africa = 0.63

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 Measuring Global Inequality (2)
Lockwood (2021)

• Per capita GDP to calculate Gini coefficients > method with shortcomings
• Why? It fails to account for:
• the income distribution within countries
• obscures a substantial source of variation in income and wealth
• weight countries on the basis of their population > which might not be appropriate

• Historical trends in GI are (Milanovic 2003):

• highly sensitive to whether we use weighted or unweighted per capita GDP as our measure
• owing to the outsize influence of China and India – both of which have seen growth rates well above the world
average

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Measuring Global Inequality (3)
Preferable measure of global inequality is an interpersonal one:

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What impact has globalisation had on global
patterns of poverty and inequality?
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 World-Systems Theory
World history + social change
Inter-regional & transnational division of labour
World economy is rooted in the capitalist system
Core | Peripheral | Semi-peripheral

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Criticism of Globalisation
• Globalisation + biases within the world trading system
• Gap between the richest and the poorest countries has been increasing in recent decades
• As the rich get richer, the poor get poorer

• On the other hand, studies have argued that the world has generally become a more equal place (Kay
2004, Wolf 2005, Friedman 2006)

• How can one be sure?

• Advance of economic globalisation <-> trends in income disparities = correlation?

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The rise of NICs

• Positive impact of globalisation working as a benefit to the country

• Countries that adopted similar strategies:
• India, Brazil, Mexico, Malaysia, East Asian Tigers (HK, S, SK, T)

• Evidence that strategic integration in the world economy = rising GDP per capita
• Refusal to integrate = low growth or economic stagnation

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Does economic globalisation promote prosperity and
opportunity for all?
YES NO
Makes the rich richer but it also makes the poor less poor. • The crisis of globalisation has shown the emergence of new
entrenched patterns of inequality
International trade allows countries too specialise in the
production of goods or services in which they have a • Critical theorists have argued that the real winners are TNCs
comparative advantage. and the industrially advanced states

Transnational production and TNCs role is to:

• While in the developing countries we have:
• spread wealth • low wages
• widen employment opportunities • weak or non-existent regulation
• improve access to modern technology • production is increasingly orientated around global
markets rather than domestic needs

Developing world governments are keen to attract inward • Economic globalisation is a form of neo-colonialism
investment
• It forces poor countries to open up their markets and allow
It is the most reliable mean of reducing poverty their resources to be plundered by rich states

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 Current Trends of GI

• Equalizing Trends > Economic progress made by China

and India (40% of World Pop.)
• China halved the number of people in EP (2008)
• Disequalizing Trends > Continued and deepening
poverty in sub-Saharan Africa

• General Trend > Within-country

inequality to grow

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Can you think of a recent event that might
have had an effect on poverty levels
globally?
 Case study 1
Do you think the Covid-19 pandemic had an
effect on poverty levels globally?
Activity 1 | Search online
World Bank Blogs: “Poverty is back to pre-COVID levels
globally, but not for low-income countries”

Source: World Bank Blogs

 Main results

• The pandemic caused the largest single-year increase in

global inequality and poverty since at least 1990.
• The pandemic erases at least 3 years of progress.
• The global Gini index in 2020 increased by around 1%
compared to 2019.
• The number of people living below the international
poverty line of $2.15-a-day PPP USD increased by 90
million people.

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Source: Mahler et al. (2022)
 Possible reasons for the
increase in poverty

• The increase in poverty is driven

by the countrywide economic
shocks that almost all countries
experience.
• The increase in the Gini is driven
by poorer countries facing larger
economic shocks from the
pandemic.

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Source: Mahler et al. (2022)
It could have been even worse… • In low-income countries, this is likely due
to the pandemic not hitting rural areas
• The fact that populous countries • If the pandemic had hit all people (where the poor predominantly live) as
experienced a decline in inequality within countries equally, its impact forcefully.
neutralised the increases in global on global inequality would have • In high-income countries, this is likely due
inequality and poverty. been even larger. to the extensive social protection programs
implemented in 2020.

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Source: Mahler et al. (2022)
Why should we care about global
inequality?
 The importance of Global Inequality
Attitudes towards equality have been shaped by:

• Ideological orientation
• Support equality and social justice vs inequality is inevitable and is even beneficial
• Social Equality: P + C + PW
• Power = unequal word is unjust and exploitative, global justice requires reduction of AP
• Conflict = link between Ineq. & C > social disparities breed hostility and resentment
• Personal Well-being = link between Ineq. & PW
• human security and happiness are affected by the perception of people’s social position >
marginalisation and disempowerment
• this perception has also stimulated migratory flows
 But…
One can also argue that..

• Emphasis should be placed on poverty over inequality

• AP is the real issue!
• Ineq. has economic advantages
• Social levelling leads to economic stagnation
• The moral & political argument
• Distribution of income or wealth within or between countries is morally and politically less
important than how that distribution is achieved
• Equality is less important than freedom (sovereignty and foreign interference)
The politics of Development
 Do rich countries have a moral
obligation to help poor countries?
Development ethic
Source: FDR Presidential Library & Museum

Eleanor Roosevelt holding poster of the Universal Declaration of Human Rights

FOR (in English), Lake Success, New York (November 1949).

1. Principle of general benevolence (Peter Singer, 1993)

• ‘If we can prevent something bad without sacrificing anything
of comparable significance, we ought to do it.’
2. The doctrine of human rights
• A combination of economic rights and third-generation
solidarity rights led to the idea of a right to development

3. Attempts to rectify past injustices

• If the wealth of the North has substantially been based on the oppression and exploitation of the
South (in particular through colonialism and neo-colonialism), this imposes powerful obligations
on rich countries to make amends, compensate or bring about restitution for past actions.
Development ethic
AGAINST
1. Poverty trap
• Aid helps to entrench deprivation and perpetuate global disparities
• Aid tends to promote dependency, sap initiative and undermine free markets
2. Corruption and Good Governance
• Gov-to-Gov aid to authoritarian or dictatorial regimes has benefited elite groups
• Programmes since the 1990s stress the importance of good governance conditions
3. National Interests Influence
• Provided aid reflects the donor-state national interests
• E.g.: US official international aid is usually linked to trade agreements
• This practice is highly discouraged by the EU
 Case study 2
Does international aid work?
 Case study 2
Does international aid work?
Activity 2 | Teamwork & Classroom Debate
Traditionally, international aid has been seen as the main way of fighting poverty and
spurring economic growth in poor countries.
If we want to promote development, the solution is to give more.
The vexing challenge for humanitarians is nevertheless that there has been a lack of
evidence that aid is effective.

Source: Heywood (2011, 379)

 Does international aid work?
YES NO
• Ineffective help for the poor
It helps to counter disparities created by the structural bias of the global
economy by ensuring a counter-flow of money and resources from the
• Little reliable evidence that aid boosts economic growth and contributes to
poverty reduction.
North to the South
• Decades of international assistance have not been associated with
Building domestic capacity meaningful economic progress in sub-Saharan Africa in particular.
• Increasingly targeted at long-term development projects and is • It entrenches patterns of global inequality, discouraging initiative and self-
orientated around capacity-building for the future. reliance = a culture of dependency.
• Economic infrastructure, food production, health services and • Distorting markets
education.
• External assistance tends to upset the fragile balances of a market economy.
Aid Effectiveness is evident • Reduced incentives prevent the growth of entrepreneurship and lead to
• Cases of China, India, Brazil and Thailand. economic inefficiency and low productivity.
Emergency relief — Humanitarian aid • E.g.: Food aid weakens domestic agricultural production contributing to
rural poverty.
• Context of civil wars, ethnic conflict, climate change, pandemics,
natural disasters, etc. • Corruption and oppression
Moral duty to provide international aid • Aid is channelled to elite groups and bureaucracies are concentrated in
power of few alongside with poor mechanisms of accountability.
• The wealth and prosperity of the North has been built on its • Aid may foster corruption and deepen oppression
mistreatment of the South.
• The international community agrees that it has a moral obligation to • Autocratic rulers may use aid funds to support their own affluent lifestyles
act in emergency situations. and to widen their own political control by subverting opponents and
benefiting favoured ethnic or tribal groups.
Concluding Remarks
 Main Takeaways
✦ Trends in global inequality are often highly complex and contradictory
✦ Recent decades brought the growing importance of emerging economies which has had an
equalizing impact
✦ Impact counter-balanced by deepening poverty in sub-Saharan Africa and a general trend
towards greater within-country inequality

✦ The impact of globalisation on levels of poverty and inequality cannot be resolved through
empirical trends alone
✦ Globalisation will eventually ‘raise all boats’
✦ Globalisation is based on structural disparities that inevitably benefit some countries and
areas at the expense of others

✦ International aid is often viewed as the key mechanism of development

✦ Development ethics suggests that rich countries have an obligation to support poor countries
and reduce global inequality.A
✦ Aid provides ineffective support for the world’s poor because it undermines markets and
tends to promote corruption and oppression.
 Bibliography & Further Readings

Andrew Heywood (2011) “Poverty and Development” in Global Politics.

Houndmills: Palgrave Macmillan, Chapter 15, 352-381.
Alastair Greig, David Hulme, and Mark Turner (2007) Challenging Global
Inequality: Development Theory and Practice in the 21st Century. London: Red
Globe Press.
Branko Milanovic (2016) Global Inequality: A New Approach for the Age of
Globalization. Cambridge, Massachusetts: Harvard University Press.
Jason Hickel (2018) The Divide: Global Inequality from Conquest to Free
Markets. New York: W. W. Norton & Company.
Erin Lockwood (2021) The international political economy of global inequality,
Review of International Political Economy, 28:2, 421-445, DOI:
10.1080/09692290.2020.1775106
Dietmar Fehr, Johanna Mollerstrom, and Ricardo Perez-Truglia (2022) Your Place
in the World: Relative Income and Global Inequality. American Economic
Journal: Economic Policy, 14:4, 232-268, DOI: 10.1257/pol.20200343

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Podcast
Suggestion

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Study Questions
1. Why has poverty increasingly been measured in terms of human development?
2. What are the advantages and disadvantages of the development as a growth model?
3. Do poorer countries need an explicit strategy for development?
4. What does this imply for models of economic policy/governance?
5. Are developing countries truly developing?
6. Does development take place internally? How is it impacted by external factors?
7. Why is there so much disagreement about trends in global inequality?
8. To what extent can growing poverty be blamed on the advance of globalisation?
9. Why do developed states provide development assistance to poorer countries?
10. Does writing off developing world debt make both moral and economic good sense?

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Let me know what you think

https://forms.gle/SoxAPd5RqXaWEeAS9

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Catarina M. Liberato | Visiting Teaching Assistant | cmll3@kent.ac.uk | @CataMLiberato | Marburg, 14th of November 2023