Globalization and Inequality

The new wave of globalization which has significant implications for the economic well-being of individuals in all countries and regions and among all income groups has brought lots of hopes together with concerns. The hopes are related to the claims and advice which presents the globalization process as an open door to new opportunities and advantages which mostly relates to better access to the global economy in terms of financial facilities and expanded markets for developing nations in terms of improving their trade comparative advantages.

On the other side, the concerns reflect the danger of entering into a new phase where the speed of events and availability of opportunities together with free competition among unequal competitors can easily cause the widening of the gap between rich and poor thus further exacerbating the problem of inequality.

139 Bruhl and Rittberger, "From International to Global Governance: Actors, Collective Decision-Making, and the United Nations in the World of the Twenty First Century." p.15

140 Hart and Spero, "Globalization and Global Governance in the 21st Century."p.9

141 International Monetary Fund: Washington, "Reaping the Benefits of Financial Globalization,"

available at www.imf.org/external/np/res/docs/2007/0607.htm. (2007). Total cross-border financial assets have more than doubled, from 58 percent of global GDP in 1990 to 131 percent in 2004. IMF, "World Economic Oulook." p.33

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Despite the fact that this process of global liberalization brought certain positive outcomes in some parts of the world especially in some countries of Eastern Asia, the overall outcome has been viewed as a significant element in widening the gap between rich and poor and exacerbating inequality. In contrast to the tremendous results of free trade in increasing global wealth, the gap between the rich and poor on a global scale has been deepening and the increased wealth has not been justly distributed. The reports of international organizations show that the speed of difference between the incomes of the rich and poor has increased from 30 to 1 in 1960 to 74 to 1 in 1997.¹⁴² The statistics indicate that 13 percent of people in the world live in societies with a GDP per capita of more than USD 30,000 while the remaining 87 percent live in poor societies with an average per capita GDP of USD 1200.¹⁴³ The income gap between the fifth living in rich and fifth living in poor countries had increased from 30 to 1 in 1960 to 74 to 1 in 1997 which led to the belief that the western countries did not only fail to honor their negative duties of justice but also contributed to the creation of global poverty in an extreme sense.¹⁴⁴

The distributional impacts of the process of globalization have also been examined from both optimistic and non-optimistic points of view. The optimistic approach while recognizing the deepening of inequalities and the rise of inequalities following the globalization process, asserts that at the final stage the inequality would decline as the countries move forward towards industrialization.

This approach which had been developed even before the start of the new era of globalization and which has been followed and supported by a considerable number of researchers and academics, believes that despite the fact that globalization will widen the gap between low-income and high-income countries in the primary stages, finally the low-income groups will come out as winners from globalization in absolute terms and overall the globalization process will

142 UNDP, "United Nations Development Programme: Human Development Report 1999," Oxford University Press (1999). p.3

143 Pogge, "Rawls on International Justice.", p.251

144 Flikschuh, "The Limits of Liberal Cosmopolitanism." p.186

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automatically act as a reducing-inequality element.¹⁴⁵ However, the opposite approach rebuts the optimistic view arguing that although globalization would increase the overall incomes on a global scale, the advantages and wealth created as a result of this process are not shared equally among the individuals in different countries and the mere globalization of economies, unless balanced by a new element would not result automatically in optimum results.¹⁴⁶

The globalization process moved the members of the new globalized world into a new stage of competition which could speed up the development of wealthy and high-income countries while lowering the speed of development of low-income countries leading to a greater gap and more unjust outcomes than before. This income disparity and the widening gap between poor and riches not only results in social externalities but also limits the growth capacities of low income countries due to the fact that the opportunities created by globalization may not be fully exploited.¹⁴⁷ The unjust positions of the players of international economy not only reduce the development speed of the disadvantaged countries but also cost them more to the extent that their development becomes impossible. A report by ActionAid has revealed that hunger could be costing poor nations up to USD 450 billion a year which is more than ten times the amount needed to halve hunger by 2015 and meet Millennium Development Goal One.¹⁴⁸

This cost has hampered the economic performance of low-income countries keeping them at the lowest levels of life standards. The outcome has been the creation of a certain major class of countries named Least Developed Countries.

These countries which have been also called low-income countries or the Bottom Billion by some researchers,¹⁴⁹ are the members of the international community

145 Simon Kuznets, "Economic Growth and Income Inequality," American Economic Review 45(March 1955).

146 Justin Forsyth, "Growth and Poor, Letters to the Editor," The Economist June 10-17(2000). p.6

147 World Bank, "World Development Report 2006: Equity and Development," World Bank (Washington) (2006).

148 Action Aid, "Who's Really Fighting Hunger."

149 Paul Collier, "The Bottom Billion (Why the Poorest Countries Are Failing & What Can Be Done About It)," Oxford University Press (2007).

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which have been isolated from global economic development and international markets. The more the global economy improves, the less they gain and at the same time their growth is impacted negatively. This income gap results in a stronger bargaining position for the rich and powerful members of international society and a superiority which has enabled them to impose their wills and shape the international economic regime in favor of themselves through tailoring their own economic and trade relations in a mercantilist approach.

Even though it has had positive outcomes in certain countries and regions in the world, the globalization process in general is viewed as a factor of influence which has contributed to lowering the speed of growth in low-income countries.

Moreover, it resulted in the removal from the development process of more than a billion people of the world population putting them in a situation in which survival has become impossible without foreign aid. Therefore, the globalization process, in order to be sustainable needs to maintain broad support of the people around the world. Rising inequality would prevent globalization from going ahead and it would encourage nationalistic and protectionist approaches. While globalization has deepened the inequality in current international relations, it has also brought several opportunities and possibilities for the weaker members of the international society. Therefore a new element, i.e. the principle of justice, is required to shift the stream of international economic relations toward a more just distribution of wealth and shared advantages of the global economy.