Global Inequalities

Robert J. Holton

• Publisher: Bloomsbury Academic
• Year: 2014
• ISBN:
  9781350314283
• Edition: 1
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

What causes global inequality? Why should we be concerned about it? Is inequality getting worse or are there signs of improvement and progress? This critical analysis of the current state of global inequality pushes beyond ideological prejudice and simplistic explanations, to address these important questions. Offering a distinctive response to the many challenges in the area, the text presents a holistic account of inequality by:
- Taking a multidisciplinary approach, incorporating perspectives from sociology, politics and economics;
- Recognising the influence of historical trends on inequality today;
- And viewing inequality from a global perspective, as well as a national one. Drawing on major theories of inequality and up-to-date evidence, Robert J. Holton guides readers through the complex issues at hand, making this text a valuable resource for students of sociology, global studies, politics and development studies.

1

Introduction

The world is a very unequal place. The gap between rich and poor is getting wider rather than narrowing. Wealthy individuals and households from business, politics, and celebrity culture live in a comfortable elite world of pleasure, prestige, and power. Meanwhile millions of children starve, tens of thousands of women experience domestic violence, and poorly paid workers struggle to survive. Behind these stark interpersonal contrasts lie powerful institutions, customs, and ideologies, each strongly implicated in structures of inequality. This state of affairs generates anguish and misery, social criticism and conflict, and for many, a strong sense of moral outrage.

A vital point to make at the outset is that inequality is global as well as national in scope. We often think of inequality as a feature of individual countries. Yet there are profound contrasts in income, wealth, health, and social participation between countries as well as within them. Many also believe that global inequalities are very much the product of globalization. The suggestion is that unless globalization is radically reformed or countered by some alternative set of social institutions, levels of global inequality will get worse.

Alongside these issues, there is a growing sense that the scale of global inequality is undermining the legitimacy of the global economy and the way it is organized through global markets, corporations, and forms of governance. This was reflected at the January 2014 World Economic Forum at Davos. Here a number of elite participants expressed concern that global inequality had reached a level that could intensify social conflict and increase pressure on governments to regulate global business (Kennedy and Martinuzzi 2014). The status quo, it seems, is unsustainable.

Global inequality is then a matter of extremes. One way of summing this up, suggested by Philosopher Thomas Pogge (2002, 2007), is through the notion of radical inequality. This has the following five elements:

1. The worse-off are very badly off in absolute terms, evident in poor health and vulnerability to insecurity of food supply.

2. They are also very badly off in relative terms, because the gap between rich and poor is widening.

3. It is difficult for the very badly off to improve their position.

4. Inequality is multidimensional affecting all aspects of life, not income alone.

5. Inequality is avoidable because the better off could easily afford transfers to the poor.

The idea of radical inequality encapsulates the challenge that this book takes up. Put simply, I ask how and why radical inequality has arisen? What types of global inequality are most important and how far are they increasing or decreasing? Is there one dominant pattern and, if so, is there one basic reason for inequality? Or are there many types of inequality and multiple causes to be taken into account?

Not everything about the world is bleak. Long-term aggregate income growth and better access to health and education have been achieved. Social and human welfare are amenable to social reform, and some inequalities can and have been challenged and addressed. What then can be done about global inequality? How successful is development aid? And which policies and programmes work and which do not? The answers to such questions turn out to be not quite as simple as rival ideologues of ‘free markets’ and ‘state regulation’ would have us believe.

This book offers a critical guide through evidence of global inequality, but it offers more than that. What is added is an extensive search for the intellectual resources – be they theories, concepts, research strategies, or critical research findings – that are most useful both to understanding inequality and taking practical measures to combat it. While there is a vast literature on inequality, this book offers a distinctive response to the many challenges involved, for three main reasons:

(a) It takes a multidisciplinary approach to inequality centred on sociological analyses of the reasons behind it.

(b) It looks at inequality historically and how the past influences the present.

(c) It takes a global rather than purely national perspective on what causes inequality and what can be done about it.

(a) The Need for a Multidisciplinary Approach

Most academic accounts of inequality begin with inequalities of income and look to economists to provide insights into trends in inequality and explanations of these trends. This book takes a different approach. Income inequality as studied by economists is very important. Yet it is not by itself sufficiently broad to take in the multiple dimensions of inequality beyond income. This requires that attention be given to the wider social, political and historical context in which markets function.

Due regard must be given to the pioneering work of economists on inequality. We may start with the contribution of the American economist Simon Kuznets (1955). He developed an inverted U-shaped theory of the trajectory of inequality over time. Kuznets argues that inequality of income was relatively low in pre-industrial societies, where most were poor, rose in the early phases of industrialization, but then declined again in the 20th century with increased education and state redistribution of resources. This has become a major middle-range theoretical reference point in subsequent debates.

Like most economists he focusses on income as the key to understanding inequality. This is because income is a key resource for access to many kinds of human welfare, including health and education, as well as food, clothing, and shelter. It can also be measured, at least for societies that care to and can afford to assemble statistics.

This model is optimistic and does fit the trajectory of some Western countries where income inequality follows something like an inverted U-curve. It has also been extended by economists onto a global scale in the study of economic development. Here economic openness to trade, deregulated markets, and efficient financial institutions are seen as a key to greater opportunity and rising income right across the world. The main problem with it, as argued by a less optimistic school of economic reasoning, is the widespread evidence of increasing global income inequality over the long term, both between countries and within many countries.

One way of capturing this is to compare the ratio of the income of the top 10% with the bottom 10% of the world’s income distribution. Milanovic (2011, 152) calculates that the top 10% receive 56% of the world’s income, while the bottom 10% receive 0.7%, meaning that the ratio between the two is around 80 to 1. If allowances are made for different price levels between rich and poor countries, the relative shares of the top group expands and the bottom group contracts further, worsening the ratio in the process.

Global inequality has then worsened for most of the 19th and 20th centuries during the phase of industrialization and Western global dominance. Statisticians measuring inequality use an indicator called the Gini coefficient to provide a headline number on a scale where 100 equals complete inequality and 0 complete equality. (More discussion of this measure is available in Chapter 3.) For the moment, we use this index to underline the historical worsening of global inequality, from a figure around 50 around 1820, rising to 61 in 1910 and 66 in 1992 (Bourguignon and Morrison 2002). In the last 20 years, the rise seems to have been halted, but at a very high level of around 70 (Milanovic 2011, 150). This is higher than any individual country, where the index varies between highs of around 60 in Brazil and South Africa to over 40 in the United States and Russia and the low to mid 30s in the EU, lowest of all in Scandinavia.

The worsening of inequality over this period occurred during the phase of global market expansion associated with industrialization, global mobility of capital, labour and commodities, and the freeing of markets from intrusive political regulation. This process has been very dynamic economically, but has persistently failed to reduce global inequality. Markets may or may not be efficient, but they do not contain mechanisms which necessarily distribute economic rewards in a manner that is fair, just, or able to guarantee a decent life. They also create periodic instability and crisis, like the recent Global Financial Crisis.

This is not to deny that market liberalization can and does increase opportunities and income in a number of countries and sectors of the economy. However, such optimistic stories coexist with darker and more depressing evidence of extreme poverty and a growing gap between the richest and the poorest. Consequently market solutions clearly have limits as means to reduce global inequality, and it is an important task of this book to determine why this should be.

Economists are not of course apologists for any necessarily optimistic account of patterns of global inequality. They vary in assessments of just how much inequality there is and whether things are getting better or worse. The evidence here is quite complex, and we shall explore the relevant literature when examining global income inequality in more depth in Chapter 4. Income trends are very important, but social inequality and human welfare more generally are not simply matters of income derived from employment or business. Other forms of income transfer matter, such as welfare payments and public subsidies (such as food or energy price controls) which cheapen the cost of living. And beyond this are a range of other aspects of social life which bear upon human welfare, including educational and health provision, rights to social participation, and freedom from violence and abuse. These must all be taken into account in assessing what inequality means, including aspects of life that cannot be easily or clearly measured.

The case for moving beyond economistic accounts of inequality

It is helpful then to clarify the reasons why an income-focussed account of global inequality, as studied by economists, is inadequate. The following issues are relevant here:

• Economics says very little about the broader social and philosophical standards by which welfare and inequality are judged.

• Economics does not take sufficient note of the social as distinct from economic origins of inequality.

Broader social and philosophical yardsticks for considering inequality

The need for a broader approach to human welfare quickly becomes apparent if we ask the question ‘what exactly do we mean by inequality?’ or, put more starkly, ‘inequality of what?’. To speak in terms of inequality presumes some sense of difference in the welfare of individuals and households, both within and between nations. But what kinds of differences matter most, and are all differences relevant to issues of inequality?

One common answer is that differences of income and wealth matter most. This approach is widely held because material resources are seen as critical to all aspects of human well-being, including access to health, education, and effective social inclusion within community life, as well as consumer goods regarded as necessary to leading a decent life. This economic focus is shared both by economists and many other social scientists, but there remain a variety of views about which kinds of economic difference are most salient.

For many it is poverty and the extremes of economic inequality that matter most, rather than broader patterns of differences in income and wealth across the board. Some economists believe that much inequality is simply a product of different human skills and assets, and is inevitable in any system which relies on the incentives of higher incomes for those who possess skill and capital. The focus on poverty directs attention to the large proportion of the world’s population with an income of US$1 or US$2 per day, rather than systemic disparities in the distribution of income and wealth per se. Inequality in outcomes is less troubling to this school of thought than inequality of opportunity (Wade 2007, 104–105).

Such approaches were associated in the latter part of the 20th century with the development policies of international organizations like the World Bank and International Monetary Fund (Woods 2006). Founded originally to underwrite balanced global growth, the role of these organizations has expanded over time to include crisis-intervention and policy advice together with loans of various kinds. They have also been great globalizers, supporting market deregulation and free movements of capital, which is assumed to have a buoyant effect on the lowest incomes. Critics felt that the policy discourses involved centred on growth and economic development rather than income redistribution or broader social and political rights. The World Bank, over the last few decades, has undoubtedly expanded its social outreach in areas such as education and social infrastructure, with social development and inequality reduction becoming far more prominent objectives.

Certainly the challenges of reducing global inequality require a broader developmental perspective beyond earlier emphases on economic growth alone. The alternative approach focusses directly on all those types of inequality which undermine the capacity of individuals, households and communities to enhance their life chances. This includes obstacles like lack of access to literacy, education, and social participation or lack of access to clean water, effective sanitation, and good health.

The Indian economist and philosopher Amartya Sen (1985, 1996, 1999) and the American social philosopher Martha Nussbaum (2000, 2011) are associated with what has been termed the ‘human development’ or ‘capabilities’ approach to global welfare. For Sen, rights to enter markets to choose consumer goods supplied by processes of economic growth are too narrow an approach to freedom. What matters more is the freedom to ‘choose a life one has reason to value’ (1999, 74–75). For Nussbaum (2011), human welfare focusses on the struggle for ‘human dignity’, and this centres on ‘what each person is able to do and be’ (ibid. 18). This enlargement of the idea of human development goes well beyond economic growth to include all aspects of well-being. It also goes well beyond the sphere of statistical measurement, to evidence about human lives drawn from personal histories.

Sen’s concept of choice warrants further attention. This is not only because it goes beyond market choice or electoral choice, but because it even extends to the choice of a way of life that entails inequality. This particular version of the human development approach seems to privilege choice over equality (Walby, op. cit. 9), or at least equality of opportunity over equality of outcome. This has led to criticism that the emphasis on choice may entail the maintenance of inequality. An alternative way of thinking about broader human development goals is then in terms of direct reduction of inequality, focussing on outcomes rather than choice. This is the approach to global inequality taken up by the United Nations Development Programme (UNDP) and enshrined in the UN’s Millennium Development Goals.

The case against a primary focus on economic welfare is, as we shall see in this book, a strong one. It relies on the point that welfare is not measured by income alone. Better incomes, for example, do not necessarily correlate with better health. Thus, the health of low-income groups and nations can vary considerably, depending on variations of diet or community education as much as income, while the health of higher-income groups and nations can also vary depending on lifestyle choices in matters such as exercise, alcohol consumption, or smoking. This is not an argument against reducing income inequality, rather it is an argument for taking factors additional to income into account, such as chronic illness, premature death, or vulnerability to violence and environmental crisis, when investigating inequality. Put another way, there are multiple types of inequalities, not one single overarching form of inequality.

In the light of this, throwing material resources at problems is either not enough or not always relevant. Inequalities based on cultural and political prejudices involving race, gender, and ethnicity, for example, require legal, educational, and cultural changes to better regulate abusive behaviour within institutions and interpersonal relationships. These in turn may reduce aspects of economic inequality in the functioning of labour markets, but their main impact is likely to be on those broad issues of human dignity and the right to do and be what one wishes that lies at the heart of the human development approach.

A second general point about social differences is that they are not in and of themselves equivalent to inequality. The sociologist Sylvia Walby puts this well when she asks, ‘when is something a positively valued difference and when is it inequality?’ (2009, 21). This question draws explicit attention to the crucial importance of values in the way that inequalities are perceived and understood. There are several aspects to this. One is that concern about inequality depends in large measure on the positive valuation of equality. Social differences in income, access to education or to political power, only become live social and political issues if such differences are regarded as unjust, unfair, and unnecessary. This in turn presumes some kind of moral or evaluative yardstick against which such differences are assessed and judged. In an epoch of intensifying globalization, such yardsticks have come to include the population of the world as a whole. Inequality manifest anywhere in the globe is taken to be unjust when judged against standards such as human rights to a decent life free from want and oppression, or human development capable of realizing the human potential of everyone.

The connections between inequality and valuation are however more complex than this, because different and sometimes conflicting ways of life and forms of social organization are valued. A second set of problems arise from this. Is someone who chooses a way of life that values cultural or spiritual values above material goods suffering inequality in the same way as those who have little or no effective choice? In the lives of women, do social differences arising from the contrasts in material resources available from paid work as against unpaid domestic labour simply represent a case of gender inequality? Or are they to be seen rather as two valued but different social activities?

In the absence of value consensus about the merits of different ways of life, there seems to ...

Table of contents

• Cover
• Title page
• Copyright
• Contents
• List of Tables
• Acknowledgements
• List of Abbreviations
• 1. Introduction
• 2. Theories of Social Inequality
• 3. A Short Historical Sociology of Global Inequality
• 4. Global Inequalities of Income and Wealth
• 5. Global Social Inequality
• 6. Does Globalization Cause Global Inequality?
• 7. What Is to Be Done? Policy Responses to Global Inequality
• Bibliography
• Index