Globalization and International Development: Critical Issues of the 21st Century

Ch 4 - Globalization and Inequality among Nations

57 4 Globalization and Inequality among Nations Joseph P. Joyce Wellesley College In 1870, at the beginning of the first modern era of globalization, the world’s average per capita GDP was $873 (see Table 4.1).1 Average income in the richest nations—the United States, Canada,Australia, and New Zealand—was $2,419, while income in the poorest—the African nations—was $500, a spread of 5:1. By 1950, at the start of the second era of globalization, income had risen to $9,268 in the same upperincome group, but only $890 in the African nations, and the spread had risen to 13:1. By 2003, the corresponding income levels were $28,039 and $1,549, and the spread between the top and the bottom of the international distribution of income stood at 18:1. These aggregate figures masked even greater disparities among countries. In 2006, the Democratic Republic of the Congo, a country with a population of approximately 57 million people, had a GDP per capita of $649. That same year, France, with a population of 60 million, recorded per capita income of $28,877.2 The ratio of the income of the average French citizen to a citizen of theAfrican country was over 40:1. The disparity in global income has become the focus of much scrutiny , inquiry, and debate. The questions that have arisen include: What are the causes of these disparities? Is inequality among nations a consequence of globalization? How should the upper-income countries respond? Among those who have sought to answer these questions have been a number of noted philosophers, including Rawls (1999), Pogge (2002, 2005), Risse (2005a,b,c) and Nussbaum (2006). Rawls, for example, in The Law of Peoples (1999), writes: “ . . . the causes of the wealth of a people and the forms it takes lie in their political culture and in the religious, philosophical, and moral traditions that support the basic 58 Joyce structure of their political and social institutions, as well as in the industriousness and cooperative talents of its members, all supported by their political virtues” (p. 108). The “burdened societies” lack the ability to function at a level of economic activity which allows their citizens to secure the minimum levels of subsistence, shelter, health care, etc. Rawls (1999) contends that the “well-ordered” societies have a duty to assist these burdened nations. However, the duty is not a distributive one; rather, the goal of assistance is to help these nations manage their own affairs. Nussbaum (2006) criticizes Rawls for his assumption that states have equal standing in the global economy. She writes that to “ . . . assume a rough equality between parties is to assume something so grossly false of the world as to make the resulting theory unable to address the world’s most urgent problems . . .” (p. 235). She states that we need to “ . . . acknowledge the fact that the international economic system, and the activities of multinational corporations, creates severe, disproportionate burdens for poorer nations, which cannot solve their problems by wise internal policies alone” (p. 240). Economic analysis cannot evaluate the philosophical merits of these different responses, but it can shed some light on the reasons for the disparity across nations in income levels and the role of globalization in their propagation. A better understanding of the reasons for economic inequality can yield insights into the reasons why some nations prosper over time but others do not, and what could be done about this disparity. Table 4.1 Per Capita GDP (1990 international dollars) 1870 1913 1950 1973 2003 Western Europe 1,960 3,457 4,578 11,417 19,912 U.S., Canada, Australia, NZ 2,419 5,233 9,268 16,179 28,039 Asia 556 696 717 1,718 4,434 Latin America 676 1,494 2,503 4,513 5,786 Eastern Europe & USSR 941 1,558 2,602 5,731 5,705 Africa 500 637 890 1,410 1,549 World 873 1,526 2,113 4,091 6,516 Spread 4.8 8.2 13.0 11.5 18.1 SOURCE: Maddison (2007). Globalization and Inequality among Nations 59 This chapter reviews several studies that have sought to clarify these issues. The next section of this chapter offers a survey of the different explanations that have been offered to explain the disparity in global income and the results of empirical analyses that have sought to distinguish among them. The...