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04 05 Lecture Notes - Globalisation, poverty, inequality - social justice in the 21st century.docx

7 Pages

Course Code
Geography 3312A/B
Haroon Akram Lodhi

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st Globalisation, poverty and inequality: social justice in the 21 century - Global poverty is going to fall by 2 billion – due entirely to falls in poverty in China (the world has done nothing) - Unequal income distributions in everywhere but Canada, US and most of Europe - Cloud Minders: the richest fifth of the world’s population received 82% of the world’s income - The richest 10% of the world’s richest adult own 85% of the global wealth (need $61,000 in net assets) - In 2000: o The richest 1% of the world’s richest adults own 40% of the global wealth (need $500,000 in net assets) o The poorest 50% of the world’s adult population owned less than 1% of the world’s net assets o If wealth was equally distributed, we would each receive $20,500! - The world is poor and unequal – and becoming more so - 60% of world consumption in the 1990s went to the top 10% (the remainder went to China) - 1997 and 2007 in China o the poorest 10% of the population saw their income increase by 42% o the middle 10% of the population saw their income increase by 115% o the richest 10% of the population saw their income increase by 168% - Therefore, the richest in China are benefitting the most - The 3 richest people in the world have greater wealth than the poorest 48 countries - There are now 946 billionaires (23 Canadian with an average of $3.7 billion and 20 Chinese with an average of $1.4 billion – they are more likely to be women and more likely to have earned their money.) - Ontario o 1976: richest 10% earned 27 times as much as the poorest 10% o 2004: richest 10% earned 75 times as much as the poorest 10% o Remains even when you consider tax (with 8 and 11 times, respectively) o 40 percent of Ontario families have seen very little or no gains in the past 30 years - We are living in an era of a new plutocracy: the rule of the wealthy, in circumstances of o high inequality o limited social mobility - Robert Hunter Wade: 1. Faster growth in the North: between 1965 and 1989 industrial country production per person grew 2.4% per year, while in the least developed countries it grew by 0.1% per year, as we saw in lectures 2 and 8 2. 2. Explaining 1, in part, is faster population growth in the South than in the North, as we saw in lecture 7 3. 3. There was also especially slow economic growth in rural China, rural India and Africa 4. At the same time, there was rapidly widening output and income differences between urban China and both rural China and rural India, as we saw in lectures 8 & 9  A lot of the income change in the world has come about because of China – though inequality is getting crazy - Thus, China, the world’s 2 largest economy, may be on course to be the world’s biggest economy by 2050, but over 700 million people live on less than US$1.08 PPP a day - The real income of China’s poorest 10 % of the population—130 million people!—fell by 2.4 % between 2001 and 2003 - Conversely, China has 100 citizens whose average income is $500m - The number of dollar billionaires is increasing - The under-five infant mortality rate is 8 per thousand in Beijing, which is comparable to the US, but 60 per thousand in Guizhou, which is comparable to Namibia o Huge inequality in terms of income and social service access - There is a dark underbelly to the Chinese Industrial Revolution - So: Sub-Saharan Africa, rural India and rural China are being left behind o Rural India: the economy has been changing so rapidly in cities. - These trends have deeper causes: technological change and financial liberalization since the 1980s have rapidly increased the wealth and incomes of the rich, without reducing the number of poor o technological change and productivity growth is slower in agriculture than non- agriculture (lecture 9) o the benefits of the ICT revolution are concentrated in (parts of) the North o the benefits of the ‘financialization’ of the economy are concentrated in (parts of) the North - These forces have been propelled, as we saw in lecture 6, by globalization: shifts in production, sourcing and sales strategies have been made possible by technological change, particularly in transport and information technology, and financial liberalization o In 1970, computers were not made in China and shipped to Canada – China had a central economic system and people were farmers. - This impact has been strengthened, to a degree, by population growth, as explained in lecture 7, which adds poor households faster than it adds rich households - Thus, despite globalization, the ICT revolution and financialization has meant that the prices of industrial goods and services exported from the North continue to increase faster than prices of goods and services exported from the South o We sell more expensive goods to everyone else than we buy. - Many developing countries have gained very little from globalization - This is a version of the Prebisch-Singer hypothesis discussed in lecture 4 - There is thus, according to Wade, a double marginalization: o through divergence in incomes (lecture 6) o through divergence in prices (lectures 4 & 9) - which current forms of globalization has affected (lecture 6) and which previous forms of globalization—colonialism—also affected (lecture 3) - Technological change and financial liberalization drive income-based differentiation, as wealth accumulates to those already wealthy - Prices of products that are sold on global markets drive price-based income differentiation, which separates the rich from the poor - This is, in part, accelerated by China and India’s entry into global markets o a massive increase in the global supply of relatively cheap labour (lecture 7)  allowed companies to source components from places where wages and productivity (unit labour costs) benefit them. o a massive increase in low priced goods and services exported to the rich countries (lectures 3 & 4) o this disproportionately benefits the rich because the increase in labour supply has put a downward pressure on global wages, especially for the less skilled o this has kept wage costs down, boosting profits: the share of profits in US GNP and GDP is at a 40 year high as real wages have not kept up with productivity growth (lecture 9) o this has increased the share of income that goes to those that receive profits, the rich, thus reinforcing income concentration  Our purchasing power has not kept up, our wages have stagnated. The profits from these products have seen the biggest increase in their income – the people who had the money to begin with (the 1% or 0.1%) - Even the IMF has asked whether workers benefit from globalization, as it has documented that the share of income going to labour has declined globally relative to profits - However, the Fund argues that despite this, workers are better off from o increased productivity o falling prices in traded goods o increased prices of rich country exports o which have increased the total economic pie - Moreover, the World Bank argues, there is a rapidly growing global middle class with incomes between US$4000 and US$17000, who make up 7.6 % of the world’s population but who will constitute 16 %, or 1.2 billion, by 2030 - This may be true: but this merely reinforces the point that a global minority are benefiting from current patterns of globalization, while a majority are left behind - In this light, it would appear that poverty processes are closely linked to structures of inequality - The growth of global inequality has now returned to be a significant concern of the multilateral institutions - the UN system producing 3 major reports in the past 6 years, and a number of very good, but lesser known, reports - the World Bank and the IMF are now investing heavily in research into the relationship between inequality, poverty and growth - What then does the major international institution that purports to ‘attack poverty’ claim? - According to the World Bank’s World Development Report 2006, inequality is not necessarily bad if bottom incomes do not fall: economic growth has the power to reduce poverty - A particular concern here is the relationship between economic inequality and economi
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