- Global income inequality has increased substantially since the 1980s according to measures of the gap between the richest and poorest countries. While absolute poverty has declined in some Asian countries, it has increased in others. - The "winners" of globalization have been middle-income groups in emerging Asian economies like China and India whose incomes multiplied rapidly, while the "losers" were lower-income groups in rich countries whose growth was modest. - Liberal views argue that open markets and policies like free trade reduce poverty through growth, but critics argue they often increase inequality and unemployment in developing nations. The impacts of globalization on inequality are complex and depend on local and global factors.

1. INEQUALITY AND GLOBALIZATION
Essay by Marco F. Pereira
Master in Political Science
School of Sociology and Public Policies
INTRODUCTION
In my essay, I try to explain the relation between the economic dimension of
globalization and inequality. There are many dimensions to inequality. We could talk about
how globalization influences disparities in areas like education, health access, or gender
inequality, but the focus here is the income inequality.
“One way in which poorer countries have become integrated into world trade has been
on the basis of what is sometimes called the ‘Washington Consensus’, pursued through
organizations such as the World Bank and International Monetary Fund” (Martell, 2007:162).
Organizations and richer states provide financial support to poorer countries to deal with crises
or stimulate development, requiring these countries to liberalize and open up to world
economy.
The twentieth century has witnessed ‘unequalled’ levels of income growth and the
highest population ever recorded. In fact, twentieth century economic growth, measured by the
country’s gross domestic product, has been extremely unequally distributed between
continents (Sutcliffe, 2007). Africa’s share of world GDP declined in the end of the twentieth
century, for instance, and although developing countries have seen their share decline in the
first half of the century, this trend was reversed due to Asia’s record of growth.
Bob Sutcliffe (2007) examines the inequality between incomes of people and
households by plotting the ten poorest and the ten richest countries and their average national
incomes, the ‘10/10’ ratio. Even if it has limitations, this ratio declined between 1950 and 1980
but increased substantially after the 1980s. Bob Sutcliffe concludes that although in some
Asian countries inequality is lower today than it was, the gap between the rich in developed
countries and the very poor in poor countries greatly increased. As he points out, “the world
rulers in 2000 generally look back at 1900 and judge that the century went their way, was even
a triumph for liberal democratic capitalism” (2007:69).

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In this essay I’ll show empirical data of global inequality, some theoretical views about
the relation of global governance with the rising inequalities and others that contradict this, by
saying that inequality is not a consequence of globalization.
MEASURING INEQUALITY
It’s important to explain first that when we talk about inequality different matters come
to mind. Within the subject, one could talk about income, education, health or gender
inequality. In context of globalization, we should focus on income inequality, even if it is
interlinked with other kind of inequalities. Inequality can be measured in many different ways.
Branko Milanovic (2007) uses three concepts: Concept 1 refers to unweighted
international inequality; Concept 2 tracks weighted income inequality; and Concept 3, global
inequality. The former measure the inequality between countries gross domestic products
(GDPs). Concept 1 measures the differences between the countries mean incomes and does
not take into account the size of the populations. Concept 2 is the same as Concept 1, but with
the countries populations taken into account. Concept 3, global inequality, measures the
differences of income of the individuals of the world, as if the world was only on country.
These three measures show different trajectories from 1950 to 2000. Unweighted
international inequality (Concept 1) has generally been on the rise with an upward trend since
the late 1970s, while weighted international inequality has decreased particularly since around
1978. This is due to the growth of China and to a lesser degree India (Bourguignon, 2016;
Milanovic, 2007). Global inequality doesn’t show a clear pattern. Based on three household
surveys, made in 1988, 1993 and 1998, the data shows us a strong increase between 1988
and 1993 and then displays a little decline from 1993 to 1998. Even if global inequality was
extremely high in 2007, about 62-66 Gini points, its direction remained unclear (Milanovic,
2007).
The Gini coefficient is the most common tool to measure income inequality. It ranges
from 0, when everyone has exactly the same income, to 100 (or 1), when a single individual
receives all the income of the society (the perfect inequality). In continental Europe, Gini
coefficients are between 0.25 and 0.30. In the United States, the figure tends to be around
0.40. In the most unequal countries, such as South Africa, the Gini coefficient exceeds 0.60.
When considering all the world population, the Gini comes to 0.70 – a figure that no country is
known to have ever reached (Bourguignon, 2016).
The overall inequality between world citizens is greater in the early 21st
century than it
was more than half a century ago. It is estimated that global inequality, measured by the Gini
coefficient, to have been about 53 Gini points in 1850 (Milanovic, 2011). In fact, the gap
between the richest and poorest country has risen to about 80:1.

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However, while the number living in absolute poverty increased between 1820 and
1980, the World Bank (cited in Martell, 2010) said in 2002 that between 1990 and 2000 an
extra 864 million people rose out the poverty line of 1$ a day income, a decrease from 27.9
per cent of the world’s population to 21.3 per cent (Kaplinsky 2005 and World Bank 2002, in
Martell 2010). Despite this improvement, the number of people living on less than 1$ a day
exceeds 1.2 billion. If we measure those who live on less than 2$ a day, a measure sometimes
used to calculate poverty, which I think is way more reasonable, the number rises to 2.8 billion
people (UNDP 2003, in Martell 2010), and, according to UN, 963 million people, 14 percent of
the population, do not have enough to eat. According to the Human Development Report,
around 80 percent of the world’s population only have 6% of the world wealth, and the richest
people hold more than 50 percent of the wealth (UNDP 2005: 5).
“Over time, some parts of the world – Western Europe, America, and later East Asia –
took off while the rest grew very slowly, when at all, and often lost ground after bursts of
expansion” (Rodrik, 2011). Much of the improvement in poverty has been accomplished in
China and in other parts of Asia. In India, absolute poverty declined by 100 million. In China, it
went from 250 million in 1978 to 34 million (Wade and Wolf, 2002 in Martell, 2010). This may
seem a positive picture, but in Africa, Latin America, Eastern Europe and Central Asia, those
living below the poverty line actually increased. If you leave the growing countries out of the
picture, China and other East Asian countries, the absolute number of poverty grew due to
growing world population. In sub-Saharan African countries, poverty below the 1$ a day line
increased from the already high position of 53.3 per cent to 54.4 cent between 1985 and 1990,
more 74 million people (UNDP 2003, in Martell 2010).
What are the income groups that gained the most? Branko Milanovic (2016) plotted
percentage gain in income against the original income to answer this question. As expected,
he concluded that the gains were unequally distributed. In fact, some people had no gain at
all. The true winners of globalization are the people from the emerging Asia economies, mainly
China, but also India, Thailand, Vietnam and Indonesia. These are not the richest people in
this countries, they are the middle-income groups. In China, the per capita income multiplied
by 3 and about 2.2, respectively, between 1988 and 2008. For Indonesia, median urban
incomes almost doubled, and rural incomes increased by 80 percent. In Vietnam and Thailand,
real incomes around the median-income group more than doubled. These are the main
“winners” of globalization between 1988 and 2008 (Milanovic, 2016:19). Who lost? The people
who belong to the lower halves of their income distributions.
While the Asian middle classes may grab the top prize as far as income gain is
concerned, they were not the only winners. Those who were already very rich (the global top
1 percent) gained almost as much as the Asian middle classes. Milanovic calls them the “global
plutocrats”, also the winners of globalization. (Milanovic, 2016:22).

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According to Bourguinon and Morrisson (2002 in Goldin and Reinert, 2012), the
persistence of world poverty over the long term was associated with an increase in global
inequality. If the distribution pattern of 1980 remained unchanged, the number of poor people
would have been 650 million in 1992 rather than 2.8 billion and the number of extremely poor
people 150 million instead of 1.3 billion.
Milanovic plotted percentage gain in income against the original income to see which
income groups gained the most from globalization processes in the last few decades. He
concluded that the clear winners were most of the emerging Asian economies (China, India,
Thailand, Vietnam and Indonesia). But it is important to see that this people, although they
benefited the most, they are still very poor compared to the richest countries. Milanovic calls
these groups the “emerging global middle class”. While these were the clear winners of
globalization, the people that belong to the lower halves of rich countries only had a little
amount of cumulative growth. This is the “lower middle class of the rich world and they are the
“losers” of globalization (2016:20).
THE LIBERAL VIEWS
The liberal approach to inequality says that we should not worry about it. If poor
countries open their markets to global economy they will, in a long-term, raise their incomes
and reduce poverty. The ‘Washington Consensus’, defended by institutions like the World
Bank and IMF, is a set of economic reforms that should in theory make the markets better.
Organizations or richer countries provide financial support for poorer countries to deal with
crises or stimulate development, if they meet certain conditions. This includes strengthening
property rights, liberalizing the markets, privatizing state-owned companies and public
services, and opening the market to free trade (Martell, 2010; Wade, 2007).
Liberals say that by adopting neoliberalism economics, the poor countries can become
competitive and attract income to their populations.
While this may be true in some cases, some of the effects of neoliberal policies in
developing countries have been higher unemployment, poorer public services and a higher
cost of living. “Structural adjustment policies might actually make poverty and inequality worse”
(Martell, 2010).
By contrast, globalists highly critical of neoliberal orthodoxy argue that it produces a
distorted picture of the global human condition and that poverty and inequality are expected to
be worsening, not reducing, due to the uneven processes of globalization. This issue matter
since “it reinforces patterns of global exclusion and disempowerment, while also making
globalization ethically, if not politically, unsustainable” (Held and McGrew, 2002:81). World
Bank data shows that exports of manufactured goods rose from 25 per cent of poor country
exports in 1980 to 80 per cent in 1998. This integration was concentrated in 24 developing

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countries, which doubled the ratio of trade to national income and their trade per capita
incomes increased by an average 5 per cent a year. However, in Africa, the ratio of trade to
national output fell and income per head shrank. Actually, more than half of the foreign
investment inflows to developing economies are concentrated in just five countries (Thompson,
2007:189).
The Washington Consensus has been much criticized too by both the anti-globalization
movement and insiders such as George Soros (2005) and Joseph Stiglitz (2003), both cited
by Martell (2010). Effects of neoliberal policies in developing countries like higher
unemployment, poorer public services and a higher cost of living have caused unrest and
protests. For many critics, such policies are imperialistic, using money to forced developing
countries to favor rich donors. “They benefit the rich countries, giving them access to previously
protected markets of poorer countries” (Martell, 2010:163). Also, opening the businesses of
poor countries to competition from such largely advantaged states, with reduced assistance
from home, is as likely to damage as benefit them to make them more dynamic and
competitive. They can actually make poverty and inequality worse.
Other critics like Wilkinson and Pickett (2009), cited by Luke Martell (2010), are against
some inequalities, those that are based “on unjust factors such as luck, inheritance or
exploitation rather real talent or talent, for example. To those authors, these inequalities can
undermine democracy.
THE FRAGMENTATION OF THE WORLD
The world is no longer divided as it once was on geographic lines. Hoogvelt (2001, in Held and
McGrew 2002), say that “this architecture, which divides humanity into elites, the bourgeoise,
the marginalized, and the impoverished, cuts across territorial and cultural boundaries,
rearranging the world into the winners and the losers of globalization. Castells (1998), also
cited by David Held and Anthony McGrew, say that this fragmentation of the world can cause
an increase on the number of failed states, transnational terrorism, the rise of
fundamentalisms, transnational organized crime and ethnic/religious conflicts.
According to Robert H. Wade (2007), alternative hypotheses to the liberal view are
given much less attention, but it is important to notice that success in reduction of poverty is
not only a result of opening the market to global economy. Giving the example of China, the
author says that the country’s big falls in poverty had little to do with China’s integration into
the world economy, and occurred instead in response to the decollectivization of agriculture in
the 1980s and again in response to the increase in government procurement prices for
foodgrains in 1990s (although he notes that the fast growth also had to do with rapid trade
expansion. Wade then defends that if not all success derives from complete openness to free
markets, then we should not trust the liberal agenda as a powerful engine of growth.

6. 6
The success or failure of a country in economic growth depends on local and global
factors. The rules from global institutions “have a direct influence on the opportunities of poor
countries and of those of their firms and citizens”, and also an indirect impact on important
national factors like national institutional rules and on government policies (Pogge, 2007). The
direct influence is made, for example, by World Trade Organization (WTO). The international
trade rules permit affluent countries to protect their markets through tariffs, quotas, anti-
dumping duties, export credits, and subsidies to domestic producers. These barriers can
greatly restrict the export capabilities of many poor countries. The indirect influence is shown,
for instance, by the international resource and borrowing privileges. “Under the existing global
rules, any person or group possessing effective power in a country is internationally recognized
as entitled to sell their country’s resources and to borrow abroad, all in name of the country’s
people” (Pogge, 2007:136).
Thomas Pogge (2007) characterized the global situation today as one of “radical
inequality”, because of these conditions: the worse-off are very badly off in absolute terms and
relative terms (as we’ve seen before), it’s almost impossible for them to improve their situation
without help, those in the top don’t have any vivid idea of what is like to live in that way,
inequality is pervasive in the way that affects many things, from quality of life, to climate change
and, most importantly, this is all avoidable. The richest people on Earth can help the
circumstances of the poorest without getting themselves badly.
Milanovic plotted percentage gain in income against the original income to see which
income groups gained the most from globalization processes in the last few decades. He
concluded that the clear winners were most of the emerging Asian economies (China, India,
Thailand, Vietnam and Indonesia). But it is important to see that this people, although they
benefited the most, they are still very poor compared to the richest countries. Milanovic calls
these groups the “emerging global middle class”. While these were the clear winners of
globalization, the people that belong to the lower halves of rich countries only had a little
amount of cumulative growth. This is the “lower middle class of the rich world and they are the
“losers” of globalization (2016:20). This is possible due to the huge gaps between the income
per capita by the richest, the median and the poor.
David Held and Anthony McGrew (2002) say that not all voices attribute inequality to
the globalization. In fact, due to the division of developing and developed countries, those who
adopt a Marxist account, tend to say that inequality is a result of the imperialism. However
other sceptics highlight the importance of national governance strategies, as seen in East Asia
and Latin America, which rose within a globalized world.

7. 7
CONCLUSIONS
To Castells (1998), the globalization of poverty threatens not only to erode human
security, but also to undermine the globalization project itself. The polarizing zones of affluence
and poverty, generates a deepening fragmentation of world order which finds expression in,
among other things, increased numbers of failed states, transnational terrorism, the rise of
fundamentalisms, transnational organized crime and ethnic/religious conflicts (cited in Held
and McGrew, 2002). To address inequality “we have to rein the excesses in the top, strengthen
the middle, and help those in the bottom” (Stiglitz, 2013:36).
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Explanations (2007): 26-49.
Pogge, Thomas W. (2007). “Why Inequality Matters”. Global Inequality: Patterns and
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