by JAYATI GHOSH
A recent UNICEF report points to increasing economic inequalities and suggests that those in power, even in democracies, want it that way.
Children in tents pitched near a busy road in New Delhi. Inequality results in slower and less sustainable economic growth and creates health concerns and other social problems. PHOTO/Amit Bhargava/Bloomberg News
This was supposed to be the period of economic convergence. Global interconnectedness and the reduction of the impact of distance in physical terms was supposed to lead to the reduction of economic distance as well, creating much greater convergence in per capita incomes. And the catching up was supposed to extend beyond cross-country patterns to reduce divergences within countries as well. The often-repeated idea was that trade and investment openness would create new employment opportunities and make the poor (especially in the developing regions) better off.
But, despite the much-heralded success of the Chinese economy in terms of rapid growth, global (or inter-country) convergence is not really all that evident for the vast majority of countries in the world. And within-country inequality has mostly increased rather than decreased except in a few countries where there has been active state intervention directed at reducing poverty. The result is that the world is more unequal possibly than ever before, with social and political implications that are becoming evident as in the growing unrest in the developing world.
A new research report from the United Nations Children’s Fund (UNICEF) brings out, with almost frightening clarity, the most recent trends in inequality, which must come as a surprise even to those who were cynical about the positive claims of corporate-driven globalisation (Isabel Ortiz and Matthew Cummins; “Global Inequality: Beyond the Bottom Billion – A Rapid Review of Income Distribution in 141 Countries”; UNICEF Social and Economic Policy Working Paper, April 2011).
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When nominal exchange rates are used, it turns out that global inequality is even more intense than is generally supposed. As the authors of the report point out, the data “reveal an incredibly unequal planet. As of 2007, the wealthiest 20 per cent of mankind enjoyed nearly 83 per cent of total global income compared to the poorest 20 per cent, which had exactly a single percentage point under the global accounting model. Perhaps more shocking, the poorest 40 per cent of the global population increased its share of total income by less than 1 per cent between 1990 and 2007.”
At this rate of progress, it will take more than 800 years for the bottom billion to achieve even as little as 10 per cent of global income. There are many reasons for this trend towards dramatically increased inequality. Perhaps foremost among them is that the nature of recent corporate-driven globalisation, in particular the role of finance, has not just changed relations between countries and forced a “race to the bottom” for workers everywhere; it has also changed political equations within countries. Economic inequalities keep increasing because those in power want it that way, and that is so because the wealthy have an inordinate and growing power even in democracies, which should depend on wider public legitimacy.
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