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Lecture 8

SOC101Y1 Lecture Notes - Lecture 8: Gini Coefficient, International Inequality, Consumerism

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Lorne Tepperman

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Global Inequality
Monday, March 12, 2018
2:29 PM
Let’s define “global inequality
Global inequality: the widely different opportunities people in different societies have for
securing a good (i.e., healthy, prosperous) life
The Global North: countries in the northern, high-income countries like the US, Canada
and western Europe
The Global South: countries in the southern hemisphere which generally have less
A handy measure of income and wealth inequality the Gini Index
Many low-income countries are more unequal than higher-income ones
Scandinavia, Canada, Australia, and Western Europe are fairly equal
The wealthiest people in the world control most of the world’s wealth
The top 20% of the world’s population control over 80% of the world’s wealth
The world’s wealthiest .001% control 30% of the world’s wealth

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This reflects huge differences in per capita wealth around the world
Over time, world income inequality is declining though still high (Gini= 61.3)
This is due to the gradual movement of wealth to the Global South, 1800-2015
Measures of global wellbeing (1): Gross Domestic Product (GDP) per capita
We can gauge a country’s well-being from the total income of all residents of a country, divided
by its population GDP per capita (USD, 2015)
U.S. ----------$55,836
Canada -----$43,249
World --------$10,004
Mexico -----$9,009
Nigeria -------$2,640
Note large national differences even if we consider "PPP" (which means the local cost of living)
Social inequality influences how well-being is distributed in a country
Most of the world’s millionaires live in a few countries (mainly in the Global North)
Most poor people live in Global South countries
But even in high income countries, many are poor
And in low income southern countries, some are rich
Measures of well-being (2): Human Development Index (HDI)
HDI: a tool developed by the UN to measure countries’ levels of human development
The HDI combines 3 measures of wellbeing :
1. Standard of living: measured (once again) by the GDP per capita
2. Life Expectancy: average longevity and health, measures by life expectancy at birth
3. Human Capital: average formal education and knowledge, measures by adult and youth
literacy measures
Comparing the two measures: The GDP ignores inequality, so it can be misleading
In a highly unequal country, a few people may monopolize the society’s wealth while most
people are poor
The HDI is far more likely to capture the experience of average people
Some countries rank far higher on the HDI than on the GDP per capita measure and vice versa
Canada has a high HDI score but not the highest GDP per capita
Kuwait and the United Arab Emirates have high GDP but not the highest HDI score

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Explaining Global Inequality: The Wealth of Nations (1776)
The systematic study of global inequality began about 250 years ago, with Adam Smith’s The
Wealth of Nations
Why are some nations wealthy and powerful? Because of trade
Trade allows individuals to maximize their well-being through specialization
i.e. nations benefit from specialization and trade
The nature of specialization:
e.g., making a nail
Person A mines the metal
Person B refines the metal
Person C shapes a metal rod
Person D cuts the rod
Person E makes the nail head
Person F makes the pointed end
Person G sells the nail
Benefits of mechanized specialization: the nail factory
Effectiveness: Can produce accurate duplicates
Efficiency: Can produce nails at lower cost per unit
More effectiveness and efficiency create mores and cheap nails for trade
Trade produces profits, prosperity and wealth
So, why don’t all nations modernize and profit equally?
i.e., Why do some nations specialize and industrialize later than others?
Why does global industrialization produce less modernity and prosperity in some nations than
There are some arguments worth considering
The “values argument”
Some (e.g., Weber) have argued that certain values and attitudes are necessary to produce
modernization and prosperity:
e.g., Protestant (this-worldly) religious values, capitalist profit making values
However, modernization has occurred in countries that ae neither Protestant nor capitalist,
e.g., Russia, China
The “institutions argument”
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