Globalization, Income Distribution and Sustainable Development

A theoretical and empirical investigation

Ramesh Chandra Das

• Publisher: Emerald Publishing Limited
• Year: 2022
• ISBN:
  9781801178723
• Topic: Business
• Subtopic: Business General
• Index: Business

Most countries in the world today have entered an advanced phase of globalization with the objective of increasing growth of output and employment. With the evidence suggesting that this has been the case at a general level incorporated with a good sign of reducing income gap at the global level and an acceptable trend towards a global village, some inequalities across different groups of economies have been increasing in hand with the resultant increase in the aggregate pollution levels. The combined effects of these two negative impacts gives rise to the problem of maintaining sustainable development.

Globalization, Income Distribution and Sustainable Development: A theoretical and empirical investigation addresses these feasibility issues of globalization, focusing on the impact of globalization on income distribution in a wider perspective and exploring the impact of globalization on sustainable development in a range of countries across the globe.

With the help of new theories and the latest data, Globalization, Income Distribution and Sustainable Development asks the question: Are we eyeing for a better future?

Section I
Linkages among Globalization, Income Distribution, and Sustainable Development in Groups of Economies

Chapter 1

Globalization, Income Inequality, and Wealth Disparity: Issues and Evidence

Asim K. Karmakar and Sebak K. Jana

Abstract

The catch word “Globalization” has been defended by advocates for lifting people out of poverty and the inequality in the world. But it has been criticized by opponents for failing to solve the problem of poverty, inequality, and for increasingly creating wealth disparity. This raises the question. The fact is that the contemporary world exhibits very high levels of inequality of income and wealth both between countries and within countries. Wealth inequality is more pronounced than that of income inequality across the globe and within-countries. Evidence suggests that rising inequality and wealth disparity arising out of globalization drive is choking off the potential benefits to the poor. In this backdrop, a composite assessment has been made in the present chapter to answer the question “whether globalization with its particular ideology, the market fundamentalism has benefited many and whether the performance on the distributional front has really been impressive.” From facts and evidence, the study finds that inequalities in income and wealth, also in wages have widened in many developed, developing developed, and developing countries. Technological change and globalization are their main sources.

Keywords: Capitalism; globalization; global inequality; Heckscher–Ohlin framework; income inequality; market fundamentalism; wealth disparity

Above all things, good policy is to be used so that the treasures and monies in a state are not gathered into a few hands. Money is like muck, not good except it be spread.

–Francis Bacon (“Of Seditions and Troubles”, Essays, 15)

Introduction

A few things or subjects have polarized people throughout the world as much as globalization. Some see it as the way of the future, bringing unprecedented prosperity to everyone, everywhere. Others find faults with globalization as source of the untold problems, from the destruction of native culture and tradition to increasing poverty and inequality and wealth disparity. The argument that globalization leads to inequality is based on the basic premise that since globalization emphasizes efficiency, gains will accrue to countries which are favorably endowed with natural and human resources. Apart from the possible iniquitous distribution of income among countries, it can be argued that globalization and liberalization which have so far given more weightage to the market have excluded many sections of population and ultimately leads to widening income gaps within the countries as well and become the main cause in wealth disparity. This happens both in the developed and developing economies. The higher growth rate achieved by an economy can be at the expense of declining incomes of people who may be rendered redundant. In this way in many countries of the world, globalization has brought huge benefits to a few with a few benefits to the many. Very often several measures of trade openness are associated with higher inequality, and that this effect is lower in countries where land and capital are abundant and higher where skills are abundant. They also show the effects of trade openness on inequality depend on factor endowments in a way consistent with several recent case studies but not with the Heckscher–Ohlin framework (Spilimbergo, Londoño, & Székely, 1999).

In fact the countries that have globalized their economies by the guidance of IMF (International Monetary Fund) and other international institutions have not done well (Hickel, 2017). Many also believe that global inequalities are very much the product of globalization (Holton, 2012, p. 1). The international institution's particular ideology, the market fundamentalism (i.e., the belief that markets are self-correcting, allocate resources efficiently, and ensure full employment) has now been called into question as never before after the great Depression of 1930s. The Seattle protestors had already pointed to the absence of democracy and of transparency. Following globalization drive, what actually happens is that trade liberalization, rather than moving workers from low-productivity jobs to high-productivity ones, moves them from low-productivity jobs to unemployment. Rather than enhanced growth, the effect is increased poverty and inequality. That is what we see in case many countries – jobless growth and growing inequality without any redistributive changes.

Global Inequality and Globalization

Global economic inequality refers primarily to the systematic differences in wealth, incomes and working conditions that exist between countries. The challenge for social scientists is not merely to identify such differences but to explain why they occur and what the social consequences are (Christiansen & Jensen, 2019).

In the wake of the 2008 global financial crisis, self-styled “Occupy” movements protesting against corporate greed and corruption emerged in many countries, starting with the Occupy Wall Street demonstrations in the United States of America in September 2011. The central and recurring theme has been the grossly unequal distribution of wealth, both within individual societies and at the global level.

The development charity Oxfam produced two reports, published in 2014 and 2015, which gave further credence to the “99% campaign.” Oxfam calculated that the 85 richest people in the world owned as much of wealth as the bottom 50% of the global population and that over the past 30 years the rich has been getting richer (Oxfam, 2014). The recent Credit Suisse Global Wealth Report (https://www.credit-suisse.com) shows that in India, the share of richest 1% of Indians in total wealth increased from 40.3% in 2010 to 58.4% in 2016. The report adds that India's top 10% of the population holds over 74% of the total national wealth. In China, the top 10% of wealth holders receive 41–42% of national wealth. Seven out of 10 people live in countries where inequality is growing fast, those at the top of society are leaving the rest behind.

Just as we can speak of the rich and poor, high and low status, or the powerful and powerless within a single country, we can also see these and investigate their causes within the global system as a whole in the backdrop of globalization and capitalist development. And this is what we exactly doing in this chapter.

As firms, in the globalized environment, have sought to modernize production and recruit more skilled workers, the difference between skilled and unskilled wages has risen. In addition, financial sector liberalization has directed financing toward large firms, with the largest share of loans going to a few powerful economic agents. Small and medium-sized firms, rural and indigenous producers and women excluded from borrowing, thereby accentuating inequalities.

Besides, opening up to trade has been associated with rising inequality in earnings in many countries. Not surprisingly, trade is heavily skewed toward the rich and middlle-income countries (including developing developed better-off countries).

Liberalization of trade in all participating countries would lead to free trade, and this free trade acts ultimately against the good output for developing countries. In real world, trade takes place in a multi-country, multi-factor, and multi-goods complex, in which most of the assumptions of Heckscher–Ohlin (HO) and Stolper–Samuelson (SS) [corollary to the HO theorem] do not hold good (Karmakar, 2011, p. 105). Critics of the Washington Consensus challenged the logic of free-trade. Some critics of the theory that treats exports as the engine of growth argue that one country may succeed in increasing its share of exports in the world trade but if all countries try to do it, the result in cut-throat competition may start the race to the bottom (Bhaduri, 2005).

If globalizations with one of its weapons: structural adjustment – is a medicine, then why Africa's GDP from 1990 to 2005 grew by an annual per capita rate of only 0.5%, Latin America did experience a “lost decade” of development in the 1980s, and Russia's income dropped by a third. In contrast, in China and Vietnam, however, which rejected the Fund-Bank policy prescription in favor of a more cautious and partial transition to a market economy, income increased by 135% and 75% respectively during the same year (Green, 2012, p. 298). In fact, Washington consensus missed one concern: a concern for income distribution as well as rapid growth. And so, it proved, rising inequality became one of the most alarming features of globalization.

“Globalization,” as such is a very uneven process, with unequal distribution of benefits and losses. This imbalance leads to polarization between the few countries and groups that gain, and the many countries and groups in society that lose out are marginalized and fall under the prey of subordination (Heywood, 2017, p. 372). The uneven and unequal nature of the present globalization process are manifested in the fast-growing gap between the world's rich and poor people and between developed and developing countries, and in the large differences among nations in the distribution of gains...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Table of Contents
• List of Figures and Tables
• About the Contributors
• Foreword
• Acknowledgment
• Introduction
• Section I: Linkages among Globalization, Income Distribution, and Sustainable Development in Groups of Economies
• Section II: Aspects of Growth and Convergence of Socioeconomic and Environmental Indicators at Country Levels
• Index