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What is global inequality?

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An unequal world makes ending poverty harder—and puts the chance at a good life out of reach for too many people.

Imagine lining up everyone on the planet by their wealth and status. On one end, a small group of individuals that have few, if any, barriers to living a full and healthy life. On the other, a larger group of people who find themselves excluded from the possibility to do the same.

Understanding global inequality starts with recognizing that not everyone enjoys the same rights, treatment, and opportunities. If you face generational poverty or gender discrimination, these barriers to equality can have profound implications for the kind of life you want to live.

At Oxfam, our mission is to fight global inequality to end poverty and injustice. So we’re going to explore global inequality, step by step: What is it; how is it measured (and do different ways of measuring it matter); and how we can reduce global inequality toward ending poverty and injustice.

So what is global inequality?

Global inequality is the unequal distribution of resources, opportunities, and power that shape well-being among the 8 billion individuals on our planet. Distinct from inequality within a country or between countries, global inequality is one way of understanding the different lived experiences of our fellow humans, no matter where they live.

Notably, global inequality is worse than inequality within countries. And economic inequality—the unequal distribution of income—is one strikingly visible dimension of global inequalities in well-being.

• In the early 1800s, individuals worldwide had more similar living standards, and differences in wealth and income were closer.
• Global inequality grew substantially after the Industrial Revolution, sparking rapid income growth in Western Europe, the US, Australia, Canada, and New Zealand as compared with incomes in other countries.
• Fast forward to today, the 10 richest men in the world own more than the bottom 3.1 billion people.

Economic inequality often interacts with other kinds of disadvantage that result from power imbalances in society worldwide. For example, the absence of women’s voices in decision-making spaces or a caste system that discriminates against sectors of society with lower status reflect cultural, political, and social inequalities that undermine people’s well-being.

• Nobel Prize-winning economist Amartya Sen calls the array of things that make up well-being “capabilities.”
• Capabilities are essential “freedoms” that make it possible to live a full and healthy life. They come from having adequate resources and the ability to use those resources with ease and purpose.

In other words: Global inequality stems not just from what people have and don’t have—but what they're able to do with what they have.

How is global inequality measured and does how you measure it matter?

Global inequality can be measured and understood in many ways. Some economic measures focus on the share of income that middle-income groups of people enjoy over time, while others look at the growing wealth among the richest in society.

• According to the World Bank, global inequality is on the rise for the first time in decades because the poorest 40 percent of the world lost twice as much income as the wealthiest 20 percent during the global pandemic. It's the largest increase since 1990.
• But Oxfam considers an alternative measurement: the ratio of income share held by the richest 5 percent as compared with the poorest 40 percent. This approach tries to better capture the extreme concentration of wealth and income.

This widening inequality is a major risk to human flourishing. Unequal treatment breeds distrust, and countries with high inequality grow more slowly—closing off opportunities for economic advancement. Measures that focus on extreme wealth and income also make it easier to see how structural policy choices widen gender and racial inequalities.

So what do we learn by taking a closer look at the growing gap between the rich and the poor?

• 252 men have more wealth than all 1 billion women and girls in Africa, Latin America, and the Caribbean, combined.
• In the US, 3.4 million Black Americans would be alive today if their life expectancy was the same as White people’s. Before COVID-19, that alarming number was already 2.1 million.
• Twenty of the richest billionaires are estimated, on average, to be emitting as much as 8,000 times more carbon than the billion poorest people—increasing the risk of climate-driven humanitarian crisis.

“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little,” said former US president Franklin Delano Roosevelt.

How can we reduce global inequality? What could it mean for ending poverty and injustice?

We all have a role to play in creating a more equal future, but governments and the private sector must be responsive to the perspectives and solutions of those most affected by poverty to reduce global inequality in two main areas.

• Corporate board rooms, international climate conferences, and national governments must be accountable to women, workers, and representatives of marginalized communities. When these groups gain power and political voice, they better influence these decision-making spaces, defining their own way out of poverty and tackling the factors that keep people poor.
• Through foreign aid that supports local people and institutions as well as financial commitments that help climate-vulnerable countries tackle the climate crisis, rich industrialized countries have a central role to play in making critical investments to reduce global inequality.
• By making billionaires and giant corporations pay their fair share of taxes, governments can direct more resources to strengthen health systems, lift children out of poverty, and grow more inclusive economies.

Where you’re born or live shouldn’t determine your future, but for too many people, inequality squanders human potential. We need to clearly see the fundamental unfairness and dangers of highly unequal societies, and we must take action to help more people enjoy the freedoms to live a full and healthy life.

While Oxfam has long focused on global inequality, inequality within the US remains a huge challenge. For workers in many states across the South, low wages, a lack of workplace protections, and prohibitions against organizing unions are worsening inequality.

But there’s hope for the future. For the last five years, Oxfam has produced the Best States to Work Index to track how states protect, support, and pay workers. Workers are demanding and winning change, organizing to form new unions, elect more helpful lawmakers, and press for changes in state laws.

Where does your state rank?

Find out in our 2022 Best and Worst States to Work in America rankings, as featured on Season 2, Episode 3 of "The Problem with Jon Stewart" on Apple TV+.

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Best and Worst States to Work in America

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Rising inequality affecting more than two-thirds of the globe, but it’s not inevitable: new UN report

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Inequality is growing for more than 70 per cent of the global population, exacerbating the risks of divisions and hampering economic and social development. But the rise is far from inevitable and can be tackled at a national and international level, says a flagship study released by the UN on Tuesday.

The World Social Report 2020, published by the UN Department of Economic and Social Affairs (DESA), shows that income inequality has increased in most developed countries, and some middle-income countries - including China, which has the world’s fastest growing economy.

The challenges are underscored by UN chief António Guterres in the foreword, in which he states that the world is confronting “the harsh realities of a deeply unequal global landscape”, in which economic woes, inequalities and job insecurity have led to mass protests in both developed and developing countries.

 “Income disparities and a lack of opportunities”, he writes, “are creating a vicious cycle of inequality, frustration and discontent across generations.”

‘The one per cent’ winners take (almost) all

The study shows that the richest one per cent of the population are the big winners in the changing global economy, increasing their share of income between 1990 and 2015, while at the other end of the scale, the bottom 40 per cent earned less than a quarter of income in all countries surveyed.

One of the consequences of inequality within societies, notes the report, is slower economic growth. In unequal societies, with wide disparities in areas such as health care and education, people are more likely to remain trapped in poverty, across several generations.

Between countries, the difference in average incomes is reducing, with China and other Asian nations driving growth in the global economy. Nevertheless, there are still stark differences between the richest and poorest countries and regions: the average income in North America, for example, is 16 times higher than that of people in Sub-Saharan Africa.

Four global forces affecting inequality

The report looks at the impact that four powerful global forces, or megatrends, are having on inequality around the world: technological innovation, climate change, urbanization and international migration.

Whilst technological innovation can support economic growth, offering new possibilities in fields such as health care, education, communication and productivity, there is also evidence to show that it can lead to increased wage inequality, and displace workers.

Rapid advances in areas such as biology and genetics, as well as robotics and artificial intelligence, are transforming societies at pace. New technology has the potential to eliminate entire categories of jobs but, equally, may generate entirely new jobs and innovations.

For now, however, highly skilled workers are reaping the benefits of the so-called “fourth industrial revolution”, whilst low-skilled and middle-skilled workers engaged in routine manual and cognitive tasks, are seeing their opportunities shrink.

Opportunities in a crisis

As the UN’s 2020 report on the global economy showed last Thursday, the climate crisis is having a negative impact on quality of life, and vulnerable populations are bearing the brunt of environmental degradation and extreme weather events. Climate change, according to the World Social Report, is making the world’s poorest countries even poorer, and could reverse progress made in reducing inequality among countries.

If action to tackle the climate crisis progresses as hoped, there will be job losses in carbon-intensive sectors, such as the coal industry, but the “greening” of the global economy could result in overall net employment gains, with the creation of many new jobs worldwide.

For the first time in history, more people live in urban than rural areas, a trend that is expected to continue over the coming years. Although cities drive economic growth, they are more unequal than rural areas, with the extremely wealthy living alongside the very poor.

The scale of inequality varies widely from city to city, even within a single country: as they grow and develop, some cities have become more unequal whilst, in others, inequality has declined.

Migration a ‘powerful symbol of global inequality’

The fourth megatrend, international migration, is described as both a “powerful symbol of global inequality”, and “a force for equality under the right conditions”.

Migration within countries, notes the report, tends to increase once countries begin to develop and industrialize, and more inhabitants of middle-income countries than low-income countries migrate abroad.

International migration is seen, generally, as benefiting both migrants, their countries of origin (as money is sent home) and their host countries.

In some cases, where migrants compete for low-skilled work, wages may be pushed down, increasing inequality but, if they offer skills that are in short supply, or take on work that others are not willing to do, they can have a positive effect on unemployment.

Harness the megatrends for a better world

Despite a clear widening of the gap between the haves and have-nots worldwide, the report points out that this situation can be reversed. Although the megatrends have the potential to continue divisions in society, they can also, as the Secretary-General says in his foreword, “be harnessed for a more equitable and sustainable world”. Both national governments and international organizations have a role to play in levelling the playing field and creating a fairer world for all.

Reducing inequality should, says the report, play a central role in policy-making. This means ensuring that the potential of new technology is used to reduce poverty and create jobs; that vulnerable people grow more resilient to the effects of climate change; cities are more inclusive; and migration takes place in a safe, orderly and regular manner.

Three strategies for making countries more egalitarian are suggested in the report: the promotion of equal access to opportunities (through, for example, universal access to education); fiscal policies that include measures for social policies, such as unemployment and disability benefits; and legislation that tackles prejudice and discrimination, whilst promoting greater participation of disadvantaged groups.

While action at a national level is crucial, the report declares that “concerted, coordinated and multilateral action” is needed to tackle major challenges affecting inequality within and among countries.

The report’s authors conclude that, given the importance of international cooperation, multilateral institutions such as the UN should be strengthened and action to create a fairer world must be urgently accelerated.

The UN’s 2030 Agenda for Sustainable Development , which provides the blueprint for a better future for people and the planet, recognizes that major challenges require internationally coordinated solutions, and contains concrete and specific targets to reduce inequality, based on income.

• World Social Report

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Chapter 10. Global Inequality

Learning objectives.

10.1. Global Stratification and Classification

• Describe global stratification
• Understand how different classification systems have developed
• Use terminology from Wallerstein’s world systems approach
• Explain the World Bank’s classification of economies

10.2. Global Wealth and Poverty

• Understand the differences between relative, absolute, and subjective poverty
• Describe the economic situation of some of the world’s most impoverished areas
• Explain the cyclical impact of the consequences of poverty

10.3. Theoretical Perspectives on Global Stratification

• Describe the modernization and dependency theory perspectives on global stratification

Introduction to Global Inequality

In 2000, the world entered a new millennium. In the spirit of a grand-scale New Year’s resolution, it was a time for lofty aspirations and dreams of changing the world. It was also the time of the Millennium Development Goals (MDGs), a series of ambitious goals set by UN member nations. The MDGs, as they became known, sought to provide a practical and specific plan for eradicating extreme poverty around the world. Nearly 200 countries signed on, and they worked to create a series of 21 targets with 60 indicators, with an ambitious goal of reaching them by 2015. The goals spanned eight categories:

• To eradicate extreme poverty and hunger
• To achieve universal primary education
• To promote gender equality and empower women
• To reduce child mortality
• To improve maternal health
• To combat HIV/AIDS, malaria, and other diseases
• To ensure environmental sustainability
• To develop a global partnership for development (United Nations 2010)

There’s no question that these were well-thought-out objectives to work toward. Many years later, what has happened? As of the 2010 Outcome Document, much progress has been made toward some MDGs, while others are still lagging far behind. Goals related to poverty, education, child mortality, and access to clean water have seen much progress. But these successes show a disparity: some nations have seen great strides made, while others have seen virtually no progress. Improvements have been erratic, with hunger and malnutrition increasing from 2007 through 2009, undoing earlier achievements. Employment has also been slow to progress, as has a reduction in HIV infection rates, which have continued to outpace the number of people getting treatment. The mortality and health care rates for mothers and infants also show little advancement. Even in the areas that made gains, the successes are tenuous. And with the global recession having slowed both institutional and personal funding, the attainment of the goals is very much in question (United Nations 2010). As we consider the global effort to meet these ambitious goals, we can think about how the world’s people have ended up in such disparate circumstances. How did wealth become concentrated in some nations? What motivates companies to globalize? Is it fair for powerful countries to make rules that make it difficult for less-powerful nations to compete on the global scene? How can we address the needs of the world’s population?

10.1. Global Stratification and Classification

Just as North America’s wealth is increasingly concentrated among its richest citizens while the middle class slowly disappears, global inequality involves the concentration of resources in certain nations, significantly affecting the opportunities of individuals in poorer and less powerful countries. But before we delve into the complexities of global inequality, let us consider how the three major sociological perspectives might contribute to our understanding of it.

The functionalist perspective is a macroanalytical view that focuses on the way that all aspects of society are integral to the continued health and viability of the whole. A functionalist might focus on why we have global inequality and what social purposes it serves. This view might assert, for example, that we have global inequality because some nations are better than others at adapting to new technologies and profiting from a globalized economy, and that when core nation companies locate in peripheral nations, they expand the local economy and benefit the workers. Many models of modernization and development are functionalist, suggesting that societies with modern cultural values and beliefs are able to achieve economic development while traditional cultural values and beliefs hinder development. Cultures are either functional or dysfunctional for the economic development of societies.

Critical sociology focuses on the creation and reproduction of inequality. A critical sociologist would likely address the systematic inequality created when core nations exploit the resources of peripheral nations. For example, how many Canadian companies move operations offshore to take advantage of overseas workers who lack the constitutional protection and guaranteed minimum wages that exist in Canada? Doing so allows them to maximize profits, but at what cost?

The symbolic interaction perspective studies the day-to-day impact of global inequality, the meanings individuals attach to global stratification, and the subjective nature of poverty. Someone applying this view to global inequality might focus on understanding the difference between what someone living in a core nation defines as poverty (relative poverty, defined as being unable to live the lifestyle of the average person in your country) and what someone living in a peripheral nation defines as poverty (absolute poverty, defined as being barely able, or unable, to afford basic necessities, such as food).

Global Stratification

While stratification in Canada refers to the unequal distribution of resources among individuals, global stratification refers to this unequal distribution among nations. There are two dimensions to this stratification: gaps between nations and gaps within nations. When it comes to global inequality, both economic inequality and social inequality may concentrate the burden of poverty among certain segments of the Earth’s population (Myrdal 1970). As the table below illustrates, people’s life expectancy depends heavily on where they happen to be born.

Most of us are accustomed to thinking of global stratification as economic inequality. For example, we can compare China’s average worker’s wage to Canada’s average wage. Social inequality, however, is just as harmful as economic discrepancies. Prejudice and discrimination—whether against a certain race, ethnicity, religion, or the like—can create and aggravate conditions of economic equality, both within and between nations. Think about the inequity that existed for decades within the nation of South Africa. Apartheid, one of the most extreme cases of institutionalized and legal racism, created a social inequality that earned it the world’s condemnation. When looking at inequity between nations, think also about the disregard of the crisis in Darfur by most Western nations. Since few citizens of Western nations identified with the impoverished, non-white victims of the genocide, there has been little push to provide aid.

Gender inequity is another global concern. Consider the controversy surrounding female genital mutilation. Nations that practise this female circumcision procedure defend it as a longstanding cultural tradition in certain tribes and argue that the West should not interfere. Western nations, however, decry the practice and are working to stop it.

Inequalities based on sexual orientation and gender identity exist around the globe. According to Amnesty International, a number of types of crimes are committed against individuals who do not conform to traditional gender roles or sexual orientations (however those are culturally defined). From culturally sanctioned rape to state-sanctioned executions, the abuses are serious. These legalized and culturally accepted forms of prejudice and discrimination exist everywhere—from the United States to Somalia to Tibet—restricting the freedom of individuals and often putting their lives at risk (Amnesty International 2012).

Global Classification

A major concern when discussing global inequality is how to avoid an ethnocentric bias implying that less developed nations want to be like those who have attained postindustrial global power. Terms such as “developing” (nonindustrialized) and “developed” (industrialized) imply that nonindustrialized countries are somehow inferior, and must improve to participate successfully in the global economy, a label indicating that all aspects of the economy cross national borders. We must take care in how we delineate different countries. Over time, terminology has shifted to make way for a more inclusive view of the world.

Cold War Terminology

Cold War terminology was developed during the Cold War era (1945–1980) when the world was divided between capitalist and communist economic systems (and their respective geopolitical aspirations). Familiar and still used by many, it involves classifying countries into first world, second world, and third world nations based on respective economic development and standards of living. When this nomenclature was developed, capitalistic democracies such as the United States, Canada, and Japan were considered part of the first world . The poorest, most undeveloped countries were referred to as the third world and included most of sub-Saharan Africa, Latin America, and Asia. The second world  was the socialist world or Soviet bloc: industrially developed but organized according to a state socialist or communist model of political economy. Later, sociologist Manual Castells (1998) added the term fourth world to refer to stigmatized minority groups that were denied a political voice all over the globe (indigenous minority populations, prisoners, and the homeless, for example).

Also during the Cold War, global inequality was described in terms of economic development. Along with developing and developed nations, the terms “less-developed nation” and “underdeveloped nation” were used. Modernization theory suggested that societies moved through natural stages of development as they progressed toward becoming developed societies (i.e., stable, democratic, market oriented, and capitalist). The economist Walt Rustow (1960) provided a very influential schema of development when he described the linear sequence of developmental stages: traditional society (agrarian based with low productivity); pre-take off society (state formation and shift to industrial production, expansion of markets, and generation of surplus); take-off (rapid self-sustained economic growth and reinvestment of capital in the economy); maturity (a modern industrialized economy, highly capitalized and technologically advanced); the age of high mass-consumption (shift from basic goods to “durable” goods (TVs, cars, refrigerators, etc.), and luxury goods, general prosperity, egalitarianism).  Like most versions of modernization theory, Rustow’s schema describes a linear process of development culminating in the formation of democratic, capitalist societies. It was clearly in line with Cold War ideology, but it also echoed widely held beliefs about the idea of social progress as an evolutionary process.

However, as “natural” as these stages of development were taken to be, they required creation, securing, protection, and support. This was the era when the idea of geopolitical noblesse oblige (first-world responsibility) took root, suggesting that the so-called developed nations should provide foreign aid to the less-developed and underdeveloped nations in order to raise their standard of living.

Immanuel Wallerstein: World Systems Approach

Wallerstein’s (1979) world systems approach uses an economic and political basis to understand global inequality. Development and underdevelopment were not stages in a natural process of gradual modernization, but the product of power relations and colonialism. He conceived the global economy as a complex historical system supporting an economic hierarchy that placed some nations in positions of power with numerous resources and other nations in a state of economic subordination. Those that were in a state of subordination faced significant obstacles to mobilization.

Core nations are dominant capitalist countries, highly industrialized, technological, and urbanized. For example, Wallerstein contends that the United States is an economic powerhouse that can support or deny support to important economic legislation with far-reaching implications, thus exerting control over every aspect of the global economy and exploiting both semi-peripheral and peripheral nations. The free trade agreements such as the North American Free Trade Agreement (NAFTA) are examples of how a core nation can leverage its power to gain the most advantageous position in the matter of global trade.

Peripheral nations have very little industrialization; what they do have often represents the outdated castoffs of core nations, the factories and means of production owned by core nations, or the resources exploited by core nations. They typically have unstable government and inadequate social programs, and they are economically dependent on core nations for jobs and aid. There are abundant examples of countries in this category. Check the label of your jeans or sweatshirt and see where it was made. Chances are it was a peripheral nation such as Guatemala, Bangladesh, Malaysia, or Colombia. You can be sure the workers in these factories, which are owned or leased by global core nation companies, are not enjoying the same privileges and rights as Canadian workers.

Semi-peripheral nations are in-between nations, not powerful enough to dictate policy but nevertheless acting as a major source for raw material. They are an expanding middle-class marketplace for core nations, while also exploiting peripheral nations. Mexico is an example, providing abundant cheap agricultural labour to the United States and Canada, and supplying goods to the North American  market at a rate dictated by U.S. and Canadian consumers without the constitutional protections offered to U.S. or Canadian workers.

World Bank Economic Classification by Income

While there is often criticism of the World Bank, both for its policies and its method of calculating data, it is still a common source for global economic data. When using the World Bank categorization to classify economies, the measure of GNI, or gross national income, provides a picture of the overall economic health of a nation. Gross national income equals all goods and services plus net income earned outside the country by nationals and corporations headquartered in the country doing business out of the country, measured in U.S. dollars. In other words, the GNI of a country includes not only the value of goods and services inside the country, but also the value of income earned outside the country if it is earned by foreign nationals or  foreign businesses. That means that multinational corporations that might earn billions in offices and factories around the globe are considered part of a core nation’s GNI if they have headquarters in the core nations. Along with tracking the economy, the World Bank tracks demographics and environmental health to provide a complete picture of whether a nation is high income, middle income, or low income.

High-Income Nations

The World Bank defines high-income nations as having a GNI of at least $12,276 per capita. It separates out the OECD (Organisation for Economic and Co-operative Development) countries, a group of 34 nations whose governments work together to promote economic growth and sustainability. According to the Work Bank (2011), in 2010, the average GNI of a high-income nation belonging to the OECD was $40,136 per capita; on average, 77 percent of the population in these nations was urban. Some of these countries include Canada, the United States, Germany, and the United Kingdom (World Bank 2011). In 2010, the average GNI of a high-income nation that did not belong to the OECD was $23,839 per capita and 83 percent was urban. Examples of these countries include Saudi Arabia and Qatar (World Bank 2011).

There are two major issues facing high-income countries: capital flight and deindustrialization. Capital flight refers to the movement (flight) of capital from one nation to another, as when General Motors, Ford, and Chrysler close Canadian factories in Ontario and open factories in Mexico. Deindustrialization , a related issue, occurs as a consequence of capital flight, as no new companies open to replace jobs lost to foreign nations. As expected, global companies move their industrial processes to the places where they can get the most production with the least cost, including the costs for building infrastructure, training workers, shipping goods, and, of course, paying employee wages. This means that as emerging economies create their own industrial zones, global companies see the opportunity for existing infrastructure and much lower costs. Those opportunities lead to businesses closing the factories that provide jobs to the middle-class within core nations and moving their industrial production to peripheral and semi-peripheral nations.

Making Connections: the Big Picture

Capital flight, outsourcing, and jobs in canada.

As mentioned above, capital flight describes jobs and infrastructure moving from one nation to another. Look at the manufacturing industries in Ontario. Ontario has been the traditional centre of manufacturing in Canada since the 19th century. At the turn of the 21st century, 18 percent of Ontario’s labour market was made up of manufacturing jobs in industries like automobile manufacturing, food processing, and steel production. At the end of 2013, only 11 percent of the labour force worked in manufacturing. Between 2000 and 2013, 290,000 manufacturing jobs were lost (Tiessen 2014). Often the culprit is portrayed as the high value of the Canadian dollar compared to the American dollar. Because of the high value of Canada’s oil exports, international investors have driven up the value of the Canadian dollar in a process referred to as Dutch disease, the relationship between an increase in the development of natural resources and a decline in manufacturing. Canadian-manufactured products are too expensive as a result. However, this is just another way of describing the general process of capital flight to locations that have cheaper manufacturing costs and cheaper labour. Since the introduction of the North American free trade agreements (the Free Trade Agreement (FTA) in 1988 and the North American Free Trade Agreement (NAFTA) in 1994), the ending of the tariff system that protected branch plant manufacturing in Canada has enabled U.S. companies to shift production to low-wage regions south of the border and in Mexico.

Capital flight also occurs when services (as opposed to manufacturing) are relocated. Chances are if you have called the tech support line for your cell phone or internet provider, you have spoken to someone halfway across the globe. This professional might tell you her name is Susan or Joan, but her accent makes it clear that her real name might be Parvati or Indira. It might be the middle of the night in that country, yet these service providers pick up the line saying, “good morning,” as though they are in the next town over. They know everything about your phone or your modem, often using a remote server to log in to your home computer to accomplish what is needed. These are the workers of the 21st century. They are not on factory floors or in traditional sweatshops; they are educated, speak at least two languages, and usually have significant technology skills. They are skilled workers, but they are paid a fraction of what similar workers are paid in Canada. For Canadian and multinational companies, the equation makes sense. India and other semi-peripheral countries have emerging infrastructures and education systems to fill their needs, without core nation costs.

As services are relocated, so are jobs. In Canada, unemployment is high. Many university-educated people are unable to find work, and those with only a high school diploma are in even worse shape. We have, as a country, outsourced ourselves out of jobs, and not just menial jobs, but white-collar work as well. But before we complain too bitterly, we must look at the culture of consumerism that Canadians embrace. A flat screen television that might have cost $1,000 a few years ago is now $350. That cost saving has to come from somewhere. When Canadians seek the lowest possible price, shop at big box stores for the biggest discount they can get, and generally ignore other factors in exchange for low cost, they are building the market for outsourcing. And as the demand is built, the market will ensure it is met, even at the expense of the people who wanted that television in the first place.

Middle-Income Nations

The World Bank defines lower middle income countries as having a GNI that ranges from $1,006 to $3,975 per capita and upper middle income countries as having a GNI ranging from $3,976 to $12,275 per capita. In 2010, the average GNI of an upper middle income nation was $5,886 per capita with a population that was 57 percent urban. Brazil, Thailand, China, and Namibia are examples of middle-income nations (World Bank 2011).

Perhaps the most pressing issue for middle-income nations is the problem of debt accumulation. As the name suggests, debt accumulation is the buildup of external debt, when countries borrow money from other nations to fund their expansion or growth goals. As the uncertainties of the global economy make repaying these debts, or even paying the interest on them, more challenging, nations can find themselves in trouble. Once global markets have reduced the value of a country’s goods, it can be very difficult to manage the debt burden. Such issues have plagued middle-income countries in Latin America and the Caribbean, as well as East Asian and Pacific nations (Dogruel and Dogruel 2007). By way of example, even in the European Union, which is composed of more core nations than semi-peripheral nations, the semi-peripheral nations of Italy, Portugal, and Greece face increasing debt burdens. The economic downturns in these countries are threatening the economy of the entire European Union.

Low-Income Nations

The World Bank defines low-income countries as nations having a GNI of $1,005 per capita or less in 2010. In 2010, the average GNI of a low-income nation was $528 and the average population was 796,261,360, with 28 percent located in urban areas. For example, Myanmar, Ethiopia, and Somalia are considered low-income countries. Low-income economies are primarily found in Asia and Africa, where most of the world’s population lives (World Bank 2011). There are two major challenges that these countries face: women are disproportionately affected by poverty (in a trend toward a global feminization of poverty) and much of the population lives in absolute poverty. In some ways, the term global feminization of poverty says it all: around the world, women are bearing a disproportionate percentage of the burden of poverty. This means more women live in poor conditions, receive inadequate health care, bear the brunt of malnutrition and inadequate drinking water, and so on. Throughout the 1990s, data indicated that while overall poverty rates were rising, especially in peripheral nations, the rates of impoverishment increased nearly 20 percent more for women than for men (Mogadham 2005). Why is this happening? While there are myriad variables affecting women’s poverty, research specializing in this issue identifies three causes:

• The expansion of female-headed households
• The persistence and consequences of intra-household inequalities and biases against women
• The implementation of neoliberal economic policies around the world (Mogadham 2005)

In short, this means that within an impoverished household, women are more likely to go hungry than men; in agricultural aid programs, women are less likely to receive help than men; and often, women are left taking care of families with no male counterpart.

10.2. Global Wealth and Poverty

What does it mean to be poor? Does it mean being a single mother with two kids in Toronto, waiting for her next paycheque before she can buy groceries? Does it mean living with almost no furniture in your apartment because your income does not allow for extras like beds or chairs? Or does it mean the distended bellies of the chronically malnourished throughout the peripheral nations of sub-Saharan Africa and South Asia? Poverty has a thousand faces and a thousand gradations; there is no single definition that pulls together every part of the spectrum. You might feel you are poor if you can’t afford cable television or your own car. Every time you see a fellow student with a new laptop and smartphone you might feel that you, with your ten-year-old desktop computer, are barely keeping up. However, someone else might look at the clothes you wear and the calories you consume and consider you rich.

Types of Poverty

Social scientists define global poverty in different ways, taking into account the complexities and the issues of relativism described above. Relative poverty is a state of living where people can afford necessities but are unable to meet their society’s average standard of living. They are unable to participate in society in a meaningful way. People often disparage “keeping up with the Joneses”—the idea that you must keep up with the neighbours’ standard of living to not feel deprived. But it is true that you might feel “poor” if you are living without a car to drive to and from work, without any money for a safety net should a family member fall ill, and without any “extras” beyond just making ends meet. Contrary to relative poverty, people who live in absolute poverty lack even the basic necessities, which typically include adequate food, clean water, safe housing, and access to health care. Absolute poverty is defined by the World Bank (2011) as when someone lives on less than a dollar a day. A shocking number of people—88 million—live in absolute poverty, and close to 3 billion people live on less than $2.50 a day (Shah 2011). If you were forced to live on $2.50 a day, how would you do it? What would you deem worthy of spending money on, and what could you do without? How would you manage the necessities—and how would you make up the gap between what you need to live and what you can afford?

Subjective poverty describes poverty that is composed of many dimensions; it is subjectively present when your actual income does not meet your expectations and perceptions. With the concept of subjective poverty, the poor themselves have a greater say in recognizing when it is present. In short, subjective poverty has more to do with how a person or a family defines themselves. This means that a family subsisting on a few dollars a day in Nepal might think of themselves as doing well, within their perception of normal. However, a Westerner travelling to Nepal might visit the same family and see extreme need.

Making Connections: the Big Pictures

The underground economy around the world.

What do the driver of an unlicensed speedy cab in St. Catharines, a piecework seamstress working from her home in Mumbai, and a street tortilla vendor in Mexico City have in common? They are all members of the underground economy , a loosely defined unregulated market unhindered by taxes, government permits, or human protections. Official statistics before the 2008 worldwide recession posit that the underground economy accounted for over 50 percent of non-agricultural work in Latin America; the figure went as high as 80 percent in parts of Asia and Africa (Chen 2001). A recent article in the Wall Street Journal discusses the challenges, parameters, and surprising benefits of this informal marketplace. The wages earned in most underground economy jobs, especially in peripheral nations, are a pittance—a few rupees for a handmade bracelet at a market, or maybe 250 rupees (around C$4.50) for a day’s worth of fruit and vegetable sales (Barta 2009). But these tiny sums mark the difference between survival and extinction for the world’s poor.

The underground economy has never been viewed very positively by global economists. After all, its members do not pay taxes, do not take out loans to grow their businesses, and rarely earn enough to put money back into the economy in the form of consumer spending. But according to the International Labour Organization (an agency of the United Nations), some 52 million people worldwide will lose their jobs due to the 2008 recession. And while those in core nations know that unemployment rates and limited government safety nets can be frightening, it is nothing compared to the loss of a job for those barely eking out an existence. Once that job disappears, the chance of staying afloat is very slim.

Within the context of this recession, some see the underground economy as a key player in keeping people alive. Indeed, an economist at the World Bank credits jobs created by the informal economy as a primary reason why peripheral nations are not in worse shape during this recession. Women in particular benefit from the informal sector. The majority of economically active women in peripheral nations are engaged in the informal sector, which is somewhat buffered from the economic downturn. The flip side, of course, is that it is equally buffered from the possibility of economic growth.

Even in Canada, the informal economy exists, although not on the same scale as in peripheral and semi-peripheral nations. It might include under-the-table nannies, gardeners, and housecleaners, as well as unlicensed street vendors and taxi drivers. There are also those who run informal businesses, like daycares or salons, from their houses. Analysts estimate that this type of of labour may make up 10 to 13.5 percent of the overall Canadian economy (Schneider and Enste 2000), a number that will likely grow as companies reduce head counts, leaving more workers to seek other options. In the end, the article suggests that, whether selling medicinal wines in Thailand or woven bracelets in India, the workers of the underground economy at least have what most people want most of all: a chance to stay afloat (Barta 2009).

Who Are the Impoverished?

Who are the impoverished? Who is living in absolute poverty? Most of us would guess correctly that the richest countries typically have the fewest people. Compare Canada, which possesses a relatively small slice of the population pie and owns a large slice of the wealth pie, with India. These disparities have the expected consequence. The poorest people in the world are women  in peripheral and semi-peripheral nations. For women, the rate of poverty is particularly exacerbated by the pressure on their time. In general, time is one of the few luxuries the very poor have, but study after study has shown that women in poverty, who are responsible for all family comforts as well as any earnings they can make, have less of it. The result is that while men and women may have the same rate of economic poverty, women are suffering more in terms of overall well-being ( Buvinić  1997). It is harder for females to get credit to expand businesses, to take the time to learn a new skill, or to spend extra hours improving their craft so as to be able to earn at a higher rate.

The majority of the poorest countries in the world are in Africa. That is not to say there is not diversity within the countries of that continent; countries like South Africa and Egypt have much lower rates of poverty than Angola and Ethiopia, for instance. Overall, African income levels have been dropping relative to the rest of the world, meaning that Africa as a whole is getting relatively poorer. Exacerbating the problem, 2011 saw a drought in northeast Africa that brought starvation to many in the region.

Why is Africa in such dire straits? Much of the continent’s poverty can be traced to the availability of land, especially arable land (land that can be farmed). Centuries of struggle over land ownership have meant that much useable land has been ruined or left unfarmed, while many countries with inadequate rainfall have never set up an infrastructure to irrigate. Many of Africa’s natural resources were long ago taken by colonial forces, leaving little agricultural and mineral wealth on the continent.

Further, African poverty is worsened by civil wars and inadequate governance that are the result of a continent re-imagined with artificial colonial borders and leaders. Consider the example of Rwanda. There, two ethnic groups cohabited with their own system of hierarchy and management until Belgians took control of the country in 1915 and rigidly confined members of the population into two unequal ethnic groups. While, historically, members of the Tutsi group held positions of power, the involvement of Belgians led to the Hutu’s seizing power during a 1960s revolt. This ultimately led to a repressive government and genocide against Tutsis that left hundreds of thousands of Rwandans dead or living in diaspora (U.S. Department of State 2011c). The painful rebirth of a self-ruled Africa has meant many countries bear ongoing scars as they try to see their way toward the future (World Poverty 2012a).

While the majority of the world’s poorest countries are in Africa, the majority of the world’s poorest people are in Asia. As in Africa, Asia finds itself with disparity in the distribution of poverty, with Japan and South Korea holding much more wealth than India and Cambodia. In fact, most poverty is concentrated in South Asia. One of the most pressing causes of poverty in Asia is simply the pressure that the size of the population puts on its resources. In fact, many believe that China’s success in recent times has much to do with its draconian population control rules. According to the U.S. State Department, China’s market-oriented reforms have contributed to its significant reduction of poverty and the speed at which it has experienced an increase in income levels (U.S. Department of State 2011b). However, every part of Asia has felt the global recession, from the poorest countries whose aid packages were hit, to the more industrialized ones whose own industries slowed down. These factors make the poverty on the ground unlikely to improve any time soon (World Poverty 2012b).

Latin America

Poverty rates in some Latin American countries like Mexico have improved recently, in part due to investment in education. But other countries like Paraguay and Peru continue to struggle. Although there is a large amount of foreign investment in this part of the world, it tends to be higher-risk speculative investment (rather than the more stable long-term investment Europe often makes in Africa and Asia). The volatility of these investments means that the region has been unable to leverage them, especially when mixed with high interest rates for aid loans. Further, internal political struggles, illegal drug trafficking, and corrupt governments have added to the pressure (World Poverty 2012c).

Argentina is one nation that suffered from increasing debt load in the early 2000s, as the country tried to fight hyperinflation by fixing the peso to the U.S. dollar. The move hurt the nation’s ability to be competitive in the world market and ultimately created chronic deficits that could only be financed by massive borrowing from other countries and markets. By 2001, so much money was leaving the country that there was a financial panic, leading to riots and ultimately, the resignation of the president (U.S. Department of State 2011a).

Making Connections: Sociology in the Real World

The true cost of a t-shirt.

Most of us do not pay too much attention to where our favourite products are made. And certainly when you are shopping for a cheap T-shirt, you probably do not turn over the label, check who produced the item, and then research whether or not the company has fair labour practices. In fact it can be very difficult to discover where exactly the items we use everyday have come from. Nevertheless, the purchase of a T-shirt involves us in a series of social relationships that ties us to the lives and working conditions of people around the world.

On April 24, 2013, the Rana Plaza building in Dhaka, Bangladesh, collapsed killing 1,129 garment workers. The building, like 90 percent of Dhaka’s 4,000 garment factories, was structurally unsound. Garment workers in Bangladesh work under unsafe conditions for as little as $38 a month so that North American consumers can purchase T-shirts in the fashionable colours of the season for as little as $5. The workers at Rana Plaza were in fact making clothes for the Joe Fresh label—the signature popular Loblaw brand—when the building collapsed. Having been put on the defensive for their overseas sweatshop practices, companies like Loblaw have pledged to improve working conditions in their suppliers’ factories, but compliance has proven difficult to ensure because of the increasingly complex web of globalized production (MacKinnon and Strauss 2013).

At one time, the garment industry was important in Canada, centred on Spadina Avenue in Toronto and Chabanel Street in Montreal. But over the last two decades of globalization, Canadian consumers have become increasingly tied through popular retail chains to a complex network of outsourced garment production that stretches from China, through Southeast Asia, to Bangladesh and Sri Lanka. The early 1990s saw the economic opening of China when suddenly millions of workers were available to produce and manufacture consumer items for Westerners at a fraction of the cost of Western production. Manufacturing that used to take place in Canada moved overseas. Over the ensuing years, the Chinese began to outsource production to regions with even cheaper labour: Vietnam, Cambodia, Sri Lanka, and Bangladesh. The outsourcing was outsourced.  The result is that when a store like Loblaw places an order, it usually works through agents who in turn source and negotiate the price of materials and production from competing locales around the globe.

Most of the T-shirts that we wear in Canada today begin their life in the cotton fields of arid west China, which owe their scale and efficiency to the collectivization projects of centralized state socialism. However, as the cost of Chinese labour has incrementally increased since the 1990s, the Chinese have moved into the role of connecting Western retailers and designers with production centres elsewhere. In a global division of labour, if agents organize the sourcing, production chain and logistics, Western retailers can focus their skill and effort on retail marketing. It was in this context that Bangladesh went from having a few dozen garment factories to several thousand. The garment industry now accounts for 80 percent of Bangladesh’s export earnings. Unfortunately, although there are legal safety regulations and inspections in Bangladesh, the rapid expansion of the industry has exceeded the ability of underfunded state agencies to enforce them.

The globalization of production makes it difficult to follow the links between the purchasing of a T-shirt in a Canadian store and the chain of agents, garment workers, shippers, and agricultural workers whose labour has gone into producing it and getting it to the store. Our lives are tied to this chain each time we wear a T-shirt, yet the history of its production and the lives it has touched are more or less invisible to us. It becomes even more difficult to do something about the working conditions of those global workers when even the retail stores are uncertain about where the shirts come form. There is no international agency that can enforce compliance with safety or working standards. Why do you think worker safety standards and factory building inspections have to be imposed by government regulations rather than being simply an integral part of the production process? Why does it seem normal that the issue of worker safety in garment factories is set up in this way? Why does this make it difficult to resolve or address the issue?

The fair trade movement has pushed back against the hyper-exploitation of global workers and forced stores like Loblaw to try to address the unsafe conditions in garment factories like Rana Plaza. Organizations like the Better Factories Cambodia program inspect garment production regularly in Cambodia, enabling stores like Mountain Equipment Co-op to purchase reports on the factory chains it relies on. After the Rana Plaza disaster, Loblaw signed an Accord of Fire and Building Safety in Bangladesh to try to ensure safety compliance of their suppliers. However the bigger problem seems to originate with our desire to be able to purchase a T-shirt for $5 in the first place.

Consequences of Poverty

Not surprisingly, the consequences of poverty are often also causes. The poor experience inadequate health care, limited education, and the inaccessibility of birth control. Those born into these conditions are incredibly challenged in their efforts to break out since these consequences of poverty are also causes of poverty, perpetuating a cycle of disadvantage.

According to sociologists Neckerman and Torche (2007) in their analysis of global inequality studies, the consequences of poverty are many. They have divided the consequences into three areas. The first, termed “the sedimentation of global inequality,” relates to the fact that once poverty becomes entrenched in an area, it is typically very difficult to reverse. As mentioned above, poverty exists in a cycle where the consequences and causes are intertwined. The second consequence of poverty is its effect on physical and mental health. Poor people face physical health challenges, including malnutrition and high infant mortality rates. Mental health is also detrimentally affected by the emotional stresses of poverty, with relative deprivation carrying the strongest effect. Again, as with the ongoing inequality, the effects of poverty on mental and physical health become more entrenched as time goes on. Neckerman and Torche’s third consequence of poverty is the prevalence of crime. Cross-nationally, crime rates are higher, particularly with violent crime, in countries with higher levels of income inequality (Fajnzylber, Lederman, and Loayza 2002).

While most of us are accustomed to thinking of slavery in terms of pre–Civil War America, modern-day slavery goes hand in hand with global inequality. In short, slavery refers to any time people are sold, treated as property, or forced to work for little or no pay. Just as in pre–Civil War America, these humans are at the mercy of their employers. Chattel slavery , the form of slavery practised in the pre–Civil War American South, is when one person owns another as property. Child slavery, which may include child prostitution, is a form of chattel slavery. Debt bondage , or bonded labour, involves the poor pledging themselves as servants in exchange for the cost of basic necessities like transportation, room, and board. In this scenario, people are paid less than they are charged for room and board. When travel is involved, people can arrive in debt for their travel expenses and be unable to work their way free, since their wages do not allow them to ever get ahead.

The global watchdog group Anti-Slavery International recognizes other forms of slavery: human trafficking (where people are moved away from their communities and forced to work against their will), child domestic work and child labour, and certain forms of servile marriage, in which women are little more than chattel slaves (Anti-Slavery International 2012).

10.3. Theoretical Perspectives on Global Stratification

As with any social issue, global or otherwise, there are a variety of theories that scholars develop to study the topic. The two most widely applied perspectives on global stratification are modernization theory and dependency theory.

Modernization Theory

According to modernization theory, low-income countries are affected by their lack of industrialization and can improve their global economic standing through:

• An adjustment of cultural values and attitudes to work
• Industrialization and other forms of economic growth (Armer and Katsillis 2010)

Critics point out the inherent ethnocentric bias of this theory. It supposes all countries have the same resources and are capable of following the same path. In addition, it assumes that the goal of all countries is to be as “developed” as possible (i.e., like the model of capitalist democracies provided by Canada or the United States). There is no room within this theory for the possibility that industrialization and technology are not the best goals.

There is, of course, some basis for this assumption. Data show that core nations tend to have lower maternal and child mortality rates, longer lifespans, and less absolute poverty. It is also true that in the poorest countries, millions of people die from the lack of clean drinking water and sanitation facilities, which are benefits most of us take for granted. At the same time, the issue is more complex than the numbers might suggest. Cultural equality, history, community, and local traditions are all at risk as modernization pushes into peripheral countries. The challenge, then, is to allow the benefits of modernization while maintaining a cultural sensitivity to what already exists.

Dependency Theory

Dependency theory was created in part as a response to the Western-centric mindset of modernization theory. It states that global inequality is primarily caused by core nations (or high-income nations) exploiting semi-peripheral and peripheral nations (or middle-income and low-income nations), creating a cycle of dependence (Hendricks 2010). In the period of colonialism, core or metropolis nations created the conditions for the underdevelopment of peripheral or hinterland nations through a metropolis-hinterland relationship . The resources of the hinterlands were shipped to the metropolises where they were converted into manufactured goods and shipped back for consumption in the hinterlands. The hinterlands were used as the source of cheap resources and were unable to develop competitive manufacturing sectors of their own.

Dependency theory states that as long as peripheral nations are dependent on core nations for economic stimulus and access to a larger piece of the global economy, they will never achieve stable and consistent economic growth. Further, the theory states that since core nations, as well as the World Bank, choose which countries to make loans to, and for what they will loan funds, they are creating highly segmented labour markets that are built to benefit the dominant market countries.

At first glance, it seems this theory ignores the formerly low-income nations that are now considered middle-income nations and are on their way to becoming high-income nations and major players in the global economy, such as China. But some dependency theorists would state that it is in the best interests of core nations to ensure the long-term usefulness of their peripheral and semi-peripheral partners. Following that theory, sociologists have found that entities are more likely to outsource a significant portion of a company’s work if they are the dominant player in the equation; in other words, companies want to see their partner countries healthy enough to provide work, but not so healthy as to establish a threat (Caniels, Roeleveld, and Roeleveld 2009).

Globalization Theory

Globalization theory approaches global inequality by focusing less on the relationship between dependent and core nations, and more on the international flows of capital investment and disinvestment in an increasingly integrated world market. Since the 1970s, capital accumulation has taken place less and less in the context of national economies. Rather, as we saw in the example of the garment industry, capital circulates on a global scale, leading to a global reordering of inequalities both between nations and within nations. The production, distribution, and consumption of goods and services are administratively and technologically integrated on a worldwide basis. Effectively, we no longer live and act in the self-enclosed spaces of national states.

The core components of the “globalization project” (McMichael 2012)—the project to transform the world into a single seamless market—are the imposition of open “free” markets across national borders, the deregulation of trade and investment, and the privatization of public goods and services. Development has been redefined from the model of nationally managed economic growth to “participation in the world market” according to the World Bank’s World Development Report 1980 (cited in McMichael 2012, pp. 112-113). The global economy as a whole, not  modernized national economies, emerges as the site of development. Within this model, the world and its resources are reorganized and managed on the basis of the free trade of goods and services and the free circulation of capital by democratically unaccountable political and economic elite organizations like the G7, the WTO (World Trade Organization), GATT (General Agreement on Trade and Tariffs), the World Bank and IMF (International Monetary Fund), and the  various international measures used to liberalize the global economy (the 1995 Agreement on Agriculture, Trade-Related Investment Measures (TRIMs), Trade-Related Intellectual Property Rights (TRIPs), and the General Agreement on Trade in Services (GATS)).

According to globalization theory, the outcome of the globalization project has been the redistribution of wealth and poverty on a global scale. Outsourcing shifts production to low-wage enclaves, displacement leads to higher unemployment rates in the traditionally wealthy global north, people migrate from rural to urban areas and “slum cities” and illegally from poor countries to rich countries, while large numbers of workers simply become redundant to global production  and turn to informal, casual labour. The anti-globalization movement has emerged as a counter-movement to define an alternative, non-corporate global project based on environmental sustainability, food sovereignty, labour rights, and democratic accountability.

Making Connections: Careers in Sociology

Factory girls.

We’ve examined functionalist and conflict theorist perspectives on global inequality, as well as modernization and dependency theories. How might a symbolic interactionist approach this topic?

The book Factory Girls: From Village to City in Changing China , by Leslie T. Chang, provides this opportunity. Chang follows two young women (Min and Chunming) who are employed at a handbag plant. They help manufacture coveted purses and bags for the global market. As part of the growing population of young people who are leaving behind the homesteads and farms of rural China, these female factory workers are ready to enter the urban fray and pursue an income much higher than they could have earned back home.

Although Chang’s study is based in a town many have never heard of (Dongguan), this city produces one-third of all shoes on the planet (Nike and Reebok are major manufacturers here) and 30 percent of the world’s computer disk drives, in addition to a wide range of apparel (Chang 2008).

But Chang’s focus is less centred on this global phenomenon on a large scale and more concerned with how it affects these two women. As a symbolic interactionist would do, Chang examines the daily lives and interactions of Min and Chunming—their workplace friendships, family relations, gadgets, and goods—in this evolving global space where young women can leave tradition behind and fashion their own futures.  What she discovers is that the women are definitely subject to conditions of hyper-exploitation, but are also disembedded from the rural, Confucian, traditional culture in a manner that provides them with unprecedented personal freedoms. They go from the traditional family affiliations and narrow options of the past to life in a “perpetual present.” Friendships are fleeting and fragile, forms of life are improvised and sketchy, and everything they do is marked by the goals of upward mobility, resolute individualism, and an obsession with prosperity. Life for the women factory workers in Dongguan is an adventure, compared to their fate in rural village life, but one characterized by gruelling work, insecurity, isolation, and loneliness.  Chang writes, “Dongguan was a place without memory.”

absolute poverty the state where one is barely able, or unable, to afford basic necessities

anti-globalization movement a global counter-movement based on principles of environmental sustainability, food sovereignty, labour rights, and democratic accountability that challenges the corporate model of globalization

capital flight the movement (flight) of capital from one nation to another, via jobs and resources

chattel slavery a form of slavery in which one person owns another

core nations dominant capitalist countries

debt accumulation the buildup of external debt, wherein countries borrow money from other nations to fund their expansion or growth goals

debt bondage when people pledge themselves as servants in exchange for money for passage, and are subsequently paid too little to regain their freedom

deindustrialization the loss of industrial production, usually to peripheral and semi-peripheral nations where the costs are lower

dependency theory theory stating that global inequity is due to the exploitation of peripheral and semi-peripheral nations by core nations

first world a term from the Cold War era that is used to describe industrialized capitalist democracies

fourth world a term that describes stigmatized minority groups who have no voice or representation on the world stage

global feminization a pattern that occurs when women bear a disproportionate percentage of the burden of poverty

global inequality the concentration of resources in core nations and in the hands of a wealthy minority

global stratification the unequal distribution of resources between countries

gross national income (GNI) the income of a nation calculated based on goods and services produced, plus income earned by citizens and corporations headquartered in that country

metropolis-hinterland relationship the relationship between nations when resources of the hinterlands are shipped to the metropolises where they are converted into manufactured goods and shipped back to the hinterlands for consumption

modernization theory a theory that low-income countries can improve their global economic standing by industrialization of infrastructure and a shift in cultural attitudes toward work

peripheral nations nations on the fringes of the global economy, dominated by core nations, with very little industrialization

relative poverty the state of poverty where one is unable to live the lifestyle of the average person in the country

second world a term from the Cold War era that describes nations with moderate economies and standards of living

semi-peripheral nations in-between nations, not powerful enough to dictate policy but acting as a major source of raw materials and providing an expanding middle-class marketplace

subjective poverty a state of poverty subjectively present when one’s actual income does not meet one’s expectations

third world a term from the Cold War era that refers to poor, nonindustrialized countries

underground economy an unregulated economy of labour and goods that operates outside of governance, regulatory systems, or human protections

Section Summary

10.1. Global Stratification and Classification Stratification refers to the gaps in resources both between nations and within nations. While economic equality is of great concern, so is social equality, like the discrimination stemming from race, ethnicity, gender, religion, and/or sexual orientation. While global inequality is nothing new, several factors, like the global marketplace and the pace of information sharing, make it more relevant than ever. Researchers try to understand global inequality by classifying it according to factors such as how industrialized a nation is, whether it serves as a means of production or as an owner, and what income it produces.

When looking at the world’s poor, we first have to define the difference between relative poverty, absolute poverty, and subjective poverty. While those in relative poverty might not have enough to live at their country’s standard of living, those in absolute poverty do not have, or barely have, basic necessities such as food. Subjective poverty has more to do with one’s perception of one’s situation. North America and Europe are home to fewer of the world’s poor than Africa, which has highest number of poor countries, or Asia, which has the most people living in poverty. Poverty has numerous negative consequences, from increased crime rates to a detrimental impact on physical and mental health.

10.3. Theoretical Perspectives on Global Stratification Modernization theory, dependency theory, and globalization theory are three of the most common lenses sociologists use when looking at the issues of global inequality. Modernization theory posits that countries go through evolutionary stages and that industrialization and improved technology are the keys to forward movement. Dependency theory sees modernization theory as Eurocentric and patronizing. With this theory, global inequality is the result of core nations creating a cycle of dependence by exploiting resources and labour in peripheral and semi-peripheral countries. Globalization theory argues that the division between the wealthy and the poor is now organized in the context of a single, integrated global economy rather than between core and peripheral nations.

Section Quiz

10.1. Global Stratification and Classification 1. A sociologist who focuses on the way that multinational corporations headquartered in core nations exploit the local workers in their peripheral nation factories is using a _________ perspective to understand the global economy.

• Critical sociology
• Symbolic interactionist

2. A ____________ perspective theorist might find it particularly noteworthy that wealthy corporations improve the quality of life in peripheral nations by providing workers with jobs, pumping money into the local economy, and improving transportation infrastructure.

3. A sociologist working from a symbolic interaction perspective would ____________________________________.

• Study how inequality is created and reproduced
• Study how corporations can improve the lives of their low-income workersTtry to understand how companies provide an advantage to high-income nations compared to low-income nations
• Want to interview women working in factories to understand how they manage the expectations of their supervisors, make ends meet, and support their households on a day-to-day basis

4. France might be classified as which kind of nation?

• Semi-peripheral

5. In the past, Canada manufactured clothes. Many clothing corporations have shut down their Canadian factories and relocated to China. This is an example of ________________.

• Conflict theory
• Global inequality
• Capital flight

10.2. Global Wealth and Poverty 6. Slavery in the pre–Civil War American South most closely resembled ________________.

• Chattel slavery
• Debt bondage
• Relative poverty

7. Maya is a 12-year-old girl living in Thailand. She is homeless and often does not know where she will sleep or when she will eat. We might say that Maya lives in _________ poverty.

8. Mike, a college student, rents a studio apartment. He cannot afford a television and lives on cheap groceries like dried beans and ramen noodles. Since he does not have a regular job, he does not own a car. Mike is living in ___________________.

• Global poverty
• Absolute poverty
• Subjective poverty

9. Faith has a full-time job and two children. She has enough money for the basics and can pay her rent each month, but she feels that, with her education and experience, her income should be enough for her family to live much better than they do. Faith is experiencing _________________.

10. In a B.C. town, a mining company owns all the stores and most of the houses. It sells goods to the workers at inflated prices, offers house rentals for twice what a mortgage would be, and makes sure to always pay the workers less than they need to cover food and rent. Once the workers are in debt, they have no choice but to continue working for the company, since their skills will not transfer to a new position. This most closely resembles ______________.

• Child slavery
• Debt slavery
• Servile marriage

10.3. Theoretical Perspectives on Global Stratification 11. One flaw in dependency theory is the unwillingness to recognize ____________________________________.

• That previously low-income nations such as China have successfully developed their economies and can no longer be classified as dependent on core nations
• That previously high-income nations such as China have been economically overpowered by low-income nations entering the global marketplace
• That countries such as China are growing more dependent on core nations
• That countries such as China do not necessarily want to be more like core nations

12. One flaw in modernization theory is the unwillingness to recognize____________________________________.

• That semi-peripheral nations are incapable of industrializing
• That peripheral nations prevent semi-peripheral nations from entering the global market
• Its inherent ethnocentric bias
• The importance of semi-peripheral nations industrializing

13. If a sociologist says that nations evolve toward more advanced technology and more complex industry as their citizens learn cultural values that celebrate hard work and success, she is using _________________ theory to study the global economy.

• Modernization theory
• Dependency theory
• Globalization theory
• Evolutionary dependency theory

14. If a sociologist points out that corporate interests dominate the global economy, in part by creating global trade agreements and eliminating international tariffs that will inevitably favour the ability of capital to invest in low wage regions, he or she is a _______________________.

• Dependency theorist
• Globalization theorist
• Modernization theorist

15. Dependency theorists explain global inequality and global stratification by focusing on the way that ____________________________________.

• Core nations and peripheral nations exploit semi-peripheral nations
• Semi-peripheral nations exploit core nations
• Peripheral nations exploit core nations
• Core nations exploit peripheral nations

Short Answer

• Consider the matter of rock-bottom prices at Walmart. What would a functionalist think of Walmart’s model of squeezing vendors to get the absolute lowest prices so it can pass them along to core nation consumers?
• Why do you think some scholars find Cold War terminology (“first world” and so on) objectionable?
• Give an example of the feminization of poverty in core nations. How is it the same or different in peripheral nations?
• Pretend you are a sociologist studying global inequality by looking at child labour manufacturing Barbie dolls in China. What do you focus on? How will you find this information? What theoretical perspective might you use?
• Consider the concept of subjective poverty. Does it make sense that poverty is in the eye of the beholder? When you see a homeless person, is your reaction different if he or she is seemingly content rather than begging? Why?
• Think of people among your family, your friends, or your classmates who are relatively unequal in terms of wealth. What is their relationship like? What factors come into play?
• Go to your campus bookstore or visit its website. Find out who manufactures apparel and novelty items with your school’s insignias. In what countries are these produced? Does your school adhere to any principles of fare trade?
• There is much criticism that modernization theory is Eurocentric. Do you think dependency theory and globalization theory are also biased? Why or why not?
• Compare and contrast modernization theory, dependency theory, and globalization theory. Which do you think is more useful for explaining global inequality? Explain, using examples.

Further Research

10.1. Global Stratification and Classification To learn more about the United Nations Millennium Development Goals, go to: http://openstaxcollege.org/l/UN_development_goals

To learn more about the existence and impact of global poverty, peruse the data here: http://openstaxcollege.org/l/poverty_data

10.2. Global Wealth and Poverty Students often think that Canada is immune to the atrocity of human trafficking. Check out the following link to learn more about trafficking in Canada: http://www.publicsafety.gc.ca/cnt/rsrcs/pblctns/ntnl-ctn-pln-cmbt/index-eng.aspx ; http://www.canadianwomen.org/trafficking

10.3. Theoretical Perspectives on Global Stratification For more information about global affairs, check the Munk School of Global Affairs website  at http://munkschool.utoronto.ca/

Learn more about the anti-globalization movement from Naomi Klein’s website: http://www.naomiklein.org/main

10. Introduction to Global Inequality United Nations Development Programme. 2010. “Millennium Development Goals.” Retrieved December 29, 2011 ( http://www.undp.org/mdg/basics.shtml ).

10.1. Global Stratification and Classification Amnesty International. 2012. “Sexual Orientation and Gender Identity.” Retrieved January 3, 2012 ( http://www.amnesty.org/en/sexual-orientation-and-gender-identity ).

Castells, Manuel. 1998. End of Millennium. Malden, MA: Blackwell.

Central Intelligence Agency. 2012. “The World Factbook.” Retrieved January 5, 2012 ( https://www.cia.gov/library/publications/the-world-factbook/wfbExt/region_noa.html ).

Dogruel, Fatma and A.Suut Dogruel. 2007. “Foreign Debt Dynamics in Middle Income Countries.” Paper presented January 4, 2007 at Middle East Economic Association Meeting, Allied Social Science Associations, Chicago, IL.

Moghadam, Valentine M. 2005. “The Feminization of Poverty and Women’s Human Rights.” Gender Equality and Development Section UNESCO , July. Paris, France.

Myrdal, Gunnar. 1970. The Challenge of World Poverty: A World Anti-Poverty Program in Outline . New York: Pantheon.

Rustow, Walt. 1960. The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge: Cambridge University Press.

Tiessen, Kaylie. 2014. Seismic Sift: Ontario’s Changing Labour Market. Canadian Centre for Policy Alternatives. March. Retrieved April 9, 2014, from https://www.policyalternatives.ca/sites/default/files/uploads/publications/Ontario%20Office/2014/03/Seismic%20ShiftFINAL.pdf

Wallerstein, Immanuel. 1979. The Capitalist World Economy . Cambridge, England: Cambridge World Press.

World Bank. 2011. Poverty and Equity Data . Retrieved December 29, 2011 ( http://povertydata.worldbank.org/poverty/home ).

10.2. Global Wealth and Poverty Anti-Slavery International. 2012. “What Is Modern Slavery?” Retrieved January 1, 2012 ( http://www.antislavery.org/english/slavery_today/what_is_modern_slavery.aspx ).

Barta, Patrick. 2009. “The Rise of the Underground.” Wall Street Journal. March 14. Retrieved January 1, 2012 ( http://online.wsj.com/article/SB123698646833925567.html ).

Buvinić, M. 1997. “Women in Poverty: A New Global Underclass.” Foreign Policy , Fall (108):1–7.

Chen, Martha. 2001. “Women in the Informal Sector: A Global Picture, the Global Movement.” The SAIS Review 21:71–82.

Fajnzylber, Pablo, Daniel Lederman, and Norman Loayza. 2002. “Inequality and Violent Crime.” Journal of Law and Economics 45:1–40.

Mackinnon, Mark and Marina Strauss. 2013. “The True Cost of a T-Shirt [B1]”   Toronto Globe and Mail. October 12. Retrieved April 8, 2014, from   http://www.theglobeandmail.com/report-on-business/spinning-tragedy-the-true-cost-of-a-t-shirt/article14849193/

Neckerman, Kathryn and Florencia Torche. 2007. “Inequality: Causes and Consequences.” Annual Review of Sociology 33:335–357.

Schneider, F. and D.H. Enste. 2000. “Shadow economies: size, causes, and consequences.” Journal of Economic Literature. 38 (1):  77-114.

Shah, Anup. 2011. “Poverty around the World.” Global Issues . Retrieved January 17, 2012 ( http://www.globalissues.org/print/article/4 ).

U.S. Department of State. 2011a. “Background Note: Argentina.” Retrieved January 3, 2012 ( http://www.state.gov/r/pa/ei/bgn/26516.htm ).

U.S. Department of State. 2011b. “Background Note: China.” Retrieved January 3, 2012 ( http://www.state.gov/r/pa/ei/bgn/18902.htm#econ ).

U.S. Department of State. 2011c. “Background Note: Rwanda.” Retrieved January 3, 2012 ( http://www.state.gov/r/pa/ei/bgn/2861.htm#econ ).

USAS. 2009. “Mission, Vision and Organizing Philosophy.” August. Retrieved January 2, 2012 ( http://usas.org ).

World Bank. 2011. “Data.” Retrieved December 22, 2011 ( http://www.worldbank.org ).

World Poverty. 2012a. “Poverty in Africa, Famine and Disease.” Retrieved January 2, 2012 ( http://world-poverty.org/povertyinafrica.aspx ).

World Poverty. 2012b “Poverty in Asia, Caste and Progress.” Retrieved January 2, 2012 ( http://world-poverty.org/povertyinasia.aspx ).

World Poverty. 2012c. “Poverty in Latin America, Foreign Aid Debt Burdens.” Retrieved January 2, 2012 ( http://world-poverty.org/povertyinlatinamerica.aspx ).

10.3. Theoretical Perspectives on Global Stratification Armer, J. Michael and John Katsillis. 2010. “Modernization Theory.” Encyclopedia of Sociology , edited by E. F. Borgatta. Retrieved January 5, 2012 ( http://edu.learnsoc.org/Chapters/3%20theories%20of%20sociology/11%20modernization%20theory.htm ).

Caniels, Marjolein, C.J. Roeleveld, and Adriaan Roeleveld. 2009. “Power and Dependence Perspectives on Outsourcing Decisions.”  European Management Journal 27:402–417. Retrieved January 4, 2012 ( http://ou-nl.academia.edu/MarjoleinCaniels/Papers/645947/Power_and_dependence_perspectives_on_outsourcing_decisions ).

Chang, Leslie T. 2008. Factory Girls: From Village to City in Changing China . New York: Random House.

Hendricks, John. 2010. “Dependency Theory.” Encyclopedia of Sociology , edited by E.F. Borgatta. Retrieved January 5, 2012 ( http://edu.learnsoc.org/Chapters/3%20theories%20of%20sociology/5%20dependency%20theory.htm ).

McMichael, Philip. 2012. Development and Change. L.A.: Sage.

Solutions to Section Quiz

1. B  |  2. A  |  3. D  |  4. B  |  5. D  |  6. A  |  7. B  |  8. D  |  9. B  |  10. C  |  11. A  |  12. C  |  13. A  |  14. B  |  15. D

Image Attributions

Figure 10.2. Eve of Destruction by Rick Harris ( https://www.flickr.com/photos/37153080@N00/62624493/ ) use under CC BY SA 2.0 ( https://creativecommons.org/licenses/by-sa/2.0/ )

Introduction to Sociology - 1st Canadian Edition Copyright © 2014 by William Little and Ron McGivern is licensed under a Creative Commons Attribution 4.0 International License , except where otherwise noted.

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• > Journals
• > International Review of Social History
• > Volume 64 Issue 2
• > The Global History of Inequality

Article contents

Introduction, long-run trends in inequality, the causes of rising and declining inequality, the future and consequences of inequality, the global history of inequality, review products.

Published online by Cambridge University Press:  08 July 2019

Inequality has increased in most Western countries since the early 1980s. In a recent report, the international non-governmental organization Oxfam noted that the twenty-six richest people in the world own as much wealth as the poorest fifty per cent of the world's population. Discontent with the growing disparities in wealth and income has soared in recent years, especially in the wake of the 2007/2008 financial crisis and the “Great Recession” that followed. The Occupy movement protested against the greed of the “one per cent”, referring to the highly skewed income distribution in the US. Former US president Barack Obama proclaimed the growth of within-country economic inequality as “the defining challenge of our time”. Yet, he enacted few policies that reduced inequality during his two terms in office; the Gini coefficient in the US actually increased slightly between 2007 and 2016. His successor, whose election has often been explained as a consequence of these high levels of inequality, has slashed taxes for the wealthy, probably causing further rises in inequality in the future. In this essay, I will review two recent economic history books that examine the historical roots of within-country inequality on a global scale: Branko Milanovic's Global Inequality (2016) and Walter Scheidel's The Great Leveler (2017). Formerly a lead economist at the World Bank, Milanovic is a well-known scholar working in the field of economic inequality, while Scheidel has a background as a specialist in the economic, social, and demographic history of antiquity.

Inequality has increased in most Western countries since the early 1980s. In a recent report, the international non-governmental organization Oxfam noted that the twenty-six richest people in the world own as much wealth as the poorest fifty per cent of the world's population. Footnote 1 Discontent with the growing disparities in wealth and income has soared in recent years, especially in the wake of the 2007/2008 financial crisis and the “Great Recession” that followed. The Occupy movement protested against the greed of the “one per cent”, referring to the highly skewed income distribution in the US. Former US president Barack Obama proclaimed the growth of within-country economic inequality as “the defining challenge of our time”. Footnote 2 Yet, he enacted few policies that reduced inequality during his two terms in office; the Gini coefficient in the US actually increased slightly between 2007 and 2016. Footnote 3 His successor, whose election has often been explained as a consequence of these high levels of inequality, has slashed taxes for the wealthy, probably causing further rises in inequality in the future. In this essay, I will review two recent economic history books that examine the historical roots of within-country inequality on a global scale: Branko Milanovic's Global Inequality (2016) and Walter Scheidel's The Great Leveler (2017). Formerly a lead economist at the World Bank, Milanovic is a well-known scholar working in the field of economic inequality, while Scheidel has a background as a specialist in the economic, social, and demographic history of antiquity.

The classical economists Adam Smith and David Ricardo had been much concerned with inequality. Footnote 4 In the opening paragraphs to On the Principles of Political Economy and Taxation (1817), David Ricardo writes “[t]o determine the laws which regulate this distribution [between rent, profit and wages], is the principal problem in Political Economy”. Footnote 5 For much of the twentieth century, however, distribution had been of relatively minor importance in economics. As the Nobel-Prize-winning economist Robert Lucas wrote in 2003: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion most poisonous, is to focus on questions of distribution […] The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.” Footnote 6

Similarly, until the Great Recession (2007–2009), economic historians had devoted much attention to the question of what caused economic growth in the West, as well as the reverse question of what caused the lack of economic growth in other parts of the world. This has been the crucial issue in the debate on the “Great Divergence”, which has dominated economic historical research since the early 2000s. The research on long-term trends in within-country economic inequality has been limited. Footnote 7 Jan Luiten van Zanden noted in 1995 that the comparative study of early modern inequality in Western Europe was still “virgin territory”. Footnote 8 The study of economic inequality also remained largely absent from major social history outlets, such as the International Review of Social History and the Journal of Social History . In the Journal of Social History , of the 1,598 research articles published since 1967, only one (!) was specifically focused on economic inequality. Footnote 9 There were a few additional studies on earnings inequality between men and women, Footnote 10 and two studies (by the same author) focusing on racial inequality. Footnote 11 In the International Review of Social History , of the 3,135 articles published since 1935, only fourteen contain the word “inequality” (and two of those are book reviews). Footnote 12 Only three have inequality as a main theme of the article. Footnote 13 To an extent, this is the result of a different vocabulary in social history; all IRSH articles contain the word “class”, suggesting an interest in inequality between different groups.

This trend has radically reversed in the past decade. The most famous publication on inequality is, of course, Thomas Piketty's Capital in the Twenty-First Century , whose sales by 2016 had already exceeded 2.5 million, Footnote 14 making it one of the few academic books to feature on global bestseller lists. But Piketty's work does not stand alone. A great number of articles on inequality have appeared in social and economic history journals since the Great Recession. As a result of this work, we now have a lot of information about long-run trends in inequality in many countries of Western Europe from the early modern period onwards, as well as for countries in the Americas since the nineteenth century. Most recently, inequality estimates have been published on some African and Asian countries, though the evidence is less abundantly available. Milanovic and Scheidel have synthesized the findings of these studies in their books.

Economic inequality is generally measured by the so-called Gini coefficient, which is scaled from 0 to 1, with 0 reflecting perfect equality (with all people in a society having exactly the same amount of income/wealth) and 1 reflecting perfect inequality (one person has everything, the rest have nothing). Computing an accurate Gini coefficient for an entire country requires a lot of data as you need information on the total amount of income earned as well as information on the distribution of this income across all members of the society in question. Therefore, some scholars have limited their scope to assessing the share of total income accruing to the top 1–10 per cent, as this requires less data about the distribution of income among the lower, and often less well-documented classes of society. Another way of dealing with this issue is to estimate a Gini based on information on the incomes of several groups in society, for example using “social tables”. Footnote 15 Others have used proxies for the level of inequality, for example by looking at changes in the ratio of wages (reflecting the income of the lower classes) to rents (income of landholding classes) in a society.

There are various forms of economic inequality; there is inequality within countries, between countries, as well as between world citizens, which combines both. Milanovic's book looks at all three, while Scheidel focuses solely on inequality within countries/societies. In addition, there is the differentiation between income and wealth inequality. Whereas income is a flow, capital is a stock. Whereas Milanovic's book is concerned mainly with income inequality, Scheidel discusses both wealth and income inequality, even if greater emphasis is placed on the latter. Both books could have given more consideration to trends in wealth inequality as this indicator is generally more skewed than income inequality. In the present-day Netherlands, for example, post-tax income inequality is rather low (with a Gini coefficient of 0.29 in 2016), Footnote 16 whereas wealth inequality is very high (a Gini coefficient of 0.89 in 2016). Footnote 17 Furthermore, high wealth inequality tends to result in high income inequality as the income from capital tends to grow faster than income from labour (as Piketty has famously argued). Finally, income inequality can be measured before (market income) and after taxation and public transfers (disposable income). Substantial differences between these figures emerged, especially after the rise of the welfare states in the West.

While the timeframe of the two books is different, both studies find consecutive long-run cycles of increasing and declining inequality. Scheidel studies a much longer period – starting his discussion with pre-agrarian societies thousands of years bce . As one might expect for pre-historic times, the evidence on which this discussion is based is thin, yet the breadth of the material used and interpreted by Scheidel is huge. For example, he cites evidence from a Pleistocene burial site near Moscow with remains from about 30,000 to 34,000 years ago to show that even primordial hunter-gatherer groups were not entirely egalitarian, as some of the graves contained a much larger number of ivory beads and more prestigious items than others (Scheidel, p. 31). Inequality really took off with the rise of sedentary agricultural societies, when more complex social hierarchies were created. Early state formation allowed for the rise of a small ruling class, able to cream off much of the surplus created by the mass of cultivators. Evidence of rising inequality has, for example, been found from records on inheritance and dowries in ancient Mesopotamia for the period between roughly 1500 and 500 bce (Scheidel, p. 48), while archaeological evidence on house sizes showed that economic inequality peaked in the Roman Empire at the height of its power, in the first centuries of the Christian calendar, and declined after its fall.

Much of the evidence on medieval and early modern cycles of growing and declining inequality cited by both Milanovic and Scheidel stems from Europe. Inequality peaked just before the Black Death in 1347, when the dramatic loss of population pushed up incomes of workers across the globe. In the fifteenth century, inequality was once again on the rise as a result of population growth, which weakened the position of workers vis-à-vis landlords (Milanovic, pp. 60–63). Little is known about inequality trends in most other parts of the world in this period. Only for the Ottoman Empire is there data from probate inventories suggesting growing inequality between the early 1500s and the early 1800s (Scheidel, p. 102). The evidence on inequality becomes much more abundant for the nineteenth and the twentieth centuries. Data from the United States show continuously rising inequality from the late eighteenth century to the 1860s and a stabilization thereafter until the Great Depression. Subsequently, the Gini declined until its historical low point of 0.35 in 1979, after which it has steadily increased up until the present. Footnote 18 Similar long-run swings in rising nineteenth-century inequality, a decline during the period of the two world wars, and a rise from the late 1970s/early 1980s can be found throughout Western Europe. For some parts of South America estimates suggest that the overall income Gini increased from 1870 to 1920 (Scheidel, p. 109). For Chile, however, the evidence suggests declining inequality from the 1870s to around the turn of the twentieth century. It then increased until the 1930s, after which it again declined (Milanovic, pp. 82–85).

Whereas Scheidel has focused on amassing an assortment of evidence from very deep into the past, Footnote 19 Milanovic digs deeper into the development in (after-tax) income distribution of world citizens between 1988 and 2008. This development is shown in his now famous graph, which has become known as the “Elephant” due to its peculiar shape (resembling an elephant with a raised trunk) (Milanovic, p. 11). The figure shows that, in this period, real incomes increased most for those people around the median of the global income distribution. Most of these people with high income gains are part of the middle classes in emerging Asian economies such as China, India, and Indonesia, whose incomes increased by between fifty and eighty per cent. Other big gainers are those at the very top of the global income distribution (the infamous global top “one per cent” – mostly from the United States and Western Europe), whose (already high) incomes increased by some sixty-five per cent. The people who saw almost no increase in their incomes are the lower middle classes of the developed countries in Western Europe and North America. The poorest five per cent of the global population also saw only minor gains in their incomes over these twenty years.

Overall, it becomes clear that, across the world, countries experienced long cycles of rising and declining inequality. In the early modern and modern periods, these cycles took about fifty to a hundred years, but in earlier times they could have stretched longer (as shown, for instance, by Scheidel's evidence on the Roman Empire). These cycles do not occur simultaneously across the globe (see the evidence on Chile, which shows trends different to those for the US and Western Europe in the nineteenth and twentieth centuries). In general, for two “global” overviews, the works are disproportionally focused on the West (Europe and the Americas), while almost no reference is made to trends in within-country inequality in Africa and Asia. While this is, of course, the result of a lack of data, Milanovic and Scheidel do not reflect on how this could influence their results. Can the trends, as well as the explanations for those trends, really be extrapolated to African and Asian societies without any adjustments? This seems highly unlikely.

What drove these long-run trends in inequality? The Kuznets curve, which predicts that with rises in average levels of income the level of inequality will initially rise and then decline, was long accepted as a general pattern in the evolution of inequality. According to Nobel laureate Simon Kuznets, who gave his name to this particular inverted U-curve, inequality in societies initially rose with economic development as the early stages of industrialization increased the incomes of factory owners faster than those of their workers, while incomes in agriculture stagnated or declined. After a certain level of average income has been reached, inequality is then expected to decline as the growth of the service sector and the welfare state will allow for a broader distribution of the benefits of economic growth. Yet, the rises in inequality in the West since the 1980s were clearly at odds with this theory. In his famous recent book, Capital in the Twenty-First Century , Thomas Piketty presented an alternative theory, suggesting that peaceful capitalist economies have a general tendency to become more unequal over time, as the returns to capital are greater than the general rate of economic growth (and thus the returns to labour), captured in the now famous formula r   >   g . Decreases in inequality occurred only as a consequence of special events, most importantly the two world wars of the twentieth century.

Milanovic is unconvinced by Piketty's theory, as he suggests that there have also been periods of “declining inequality driven by economic forces under capitalism” (Milanovic, p. 49). Here, Scheidel and Milanovic are in disagreement, because whereas Scheidel believes inequality can be levelled only by large-scale violence and disaster, Milanovic points to both benign and malign forces of levelling. In terms of benign forces, Milanovic draws on the work of Kuznets – he also christened the observed long-run swings in inequality “Kuznets cycles” – by emphasizing the role of urbanization (diminishing rural/urban inequality), the rise of schooling (reducing educational inequality), and population ageing (which increased demand for social services and therefore required higher levels of taxation) (Milanovic, pp. 93–95). Rising taxation and government spending, not only on education, but also on healthcare and other public goods, reduced inequality in the twentieth century. In contrast, Scheidel completely discards the possibility of benign, or Kuznetsian, forces of levelling. According to him, peaceful economic reform, education, democratization, or redistributive fiscal and welfare policies can be of a large enough scale and scope to lead to durable decreases in inequality, without the pressure of wide-scale violence.

Regarding the malign forces causing equalization, Milanovic and Scheidel are in general agreement. Scheidel's work is devoted entirely to what he calls the “four horsemen” of levelling: mass-mobilization warfare, transformative revolution, state collapse, and lethal pandemics. Milanovic similarly emphasizes these forces of levelling. There is, however, an important difference in how these two authors treat these malign forces. Whereas Scheidel seems to view these levellers as largely exogenous shocks, Milanovic views them as endogenous. Scheidel does not discard the possibility that high and rising levels of inequality played a role in causing state collapse or transformative revolution, but he simply does not include such considerations in his analysis. He writes: “for the purposes of this study, I treat violent shocks as discrete phenomena that act on material inequality” (Scheidel, p. 11). This means he does not consider the context in which the levelling takes place, thereby omitting important information about the mechanisms involved. Milanovic suggests that the outbreak of World War I and the decline of inequality caused by that war are related to the high levels of inequality predating the war. High levels of inequality led to high savings among the elites and limited domestic demand from the lower classes. This caused the wealthy to look for profitable uses for their money outside of their own country. As in the late nineteenth and early twentieth century, this meant “being in physical control of a place, and making such investment profitable required that other possible competitors be excluded even at the cost of a war” (Milanovic, p. 95). By endogenizing wars and other violent shocks, Milanovic makes them part of his Kuznets cycles, in which periods of rising inequality are inevitably followed by a period of decline.

Scheidel and Milanovic pay relatively little attention to another development that took place at the same time as the great twentieth-century decline in inequality, namely the growing strength of the labour movement in the interwar and postwar period. A recent study has demonstrated a strong and significant negative relationship between the proportion of workers who joined a labour union and various measures of inequality for the US in the twentieth century. Footnote 20 Scheidel (pp. 164–169) and Milanovic (p. 98) link the increase in unionization in this period to the wars, but given that the same rise took place in non-belligerent countries such as Sweden, and given the slow decline after 1945, war is clearly not the only story here.

In general, Scheidel seems overly keen to link all levelling to violence, death, and destruction, and this sometimes leads him to attribute levelling to violence even when there was none. This is mostly the case when discussing the relationship between the two world wars and the decline in inequality. For example, Sweden and Switzerland, which were neutral during World War II, both saw declines in inequality during the first half of the twentieth century. Footnote 21 While Scheidel explains that both countries mobilized for war, he does not acknowledge the fact that violence, and huge losses of population, were not necessary for substantial levelling in these cases. Furthermore, he pays little attention to the fact that inequality in all Western countries continued to decline until well into the 1970s, long after the end of World War II. Conversely, Scheidel has suggested the Bolivian Revolution of 1952 as an example of violent revolution leading to greater levelling. Yet, he missed the research by Jonathan Kelley and Herbert Klein, which showed that the decreases in inequality in Bolivia were only temporary. Footnote 22 In fact, Kelley and Klein formulate a general theory about why inequality after revolutions is always likely to return to previous levels in the long run – a theory that seems highly relevant to his book, as one of the chapters deals entirely with the relationship between revolutions and inequality.

Scheidel's pessimistic conclusion stems, at least in part, from the lack of a formal research design, leaving ample room for cherry-picking the cases that lead to a certain conclusion. While Scheidel's main research question (“why did inequality fall?”) is open enough to allow for the study of peaceful levelling, his sub-questions seem to relate primarily to different types of disaster (his “four horsemen”). He does not provide a systemic analysis of a clearly specified and consistent set of cases, nor does he define what he considers a substantial enough decline in inequality to consider it a successful case of levelling. Thus, he writes some 230 pages dealing with a wide range of examples of how death and destruction have led to greater equality, while often not giving an indication of the degree of levelling that took place. Scheidel then devotes only about forty pages to discussing the possibilities of peaceful levelling. The substantially reduced quantity of materials considered for peaceful levelling means that several such cases are neglected. Scheidel does not discuss why the Gini went down considerably in Spain after 1953 (during a period of great economic growth). Nor does he discuss the decline in inequality in Chile from a Gini of 0.60 to 0.45 between 1870 and 1900, and that of a similar magnitude between 1930 and 1970 (data in Milanovic, p. 83). Furthermore, as he has not defined what can be considered significant levelling, Scheidel easily brushes aside as “unsubstantial” declines from 0.49 to 0.44 in the Gini for disposable income in fourteen Latin American countries between 2000 to 2010. The fact that he has entirely missed the possibilities of peaceful levelling is particularly odd because he is familiar with the work of Milanovic, and cites him affirmatively on several occasions, yet he does not engage at all with the arguments and evidence on peaceful levelling that Milanovic puts forward.

What caused the rise of inequality? Scheidel seems to be in general agreement with Piketty, as well as with Bas van Bavel, Footnote 23 and assumes that the natural tendency for inequality is to rise (in market economies). He agrees with Milanovic that technological progress, commercialization, and economic development are factors leading to rises in inequality. He adds to these the role of state formation and the exercise of power by predatory elites in causing rising inequality (especially in the early historical episodes) (Scheidel, p. 86). Milanovic adduces a number of different driving forces of inequality in his book. In the pre-industrial era, growing inequality was associated with urbanization and the creation of economic surplus, which increasingly ended up in the pockets of rent-seekers. With population growth, the tendency was for returns to labour to decline relative to returns to land and capital, further pushing up inequality. Following Kuznets, he emphasizes the role of structural change in the rise of inequality in the modern era. Capital and high-skilled-biased technological change pushed up inequality by causing the rewards to capital and skills to rise.

Both authors suggest that globalization has pushed up inequality. Globalization increases inequality by putting downward pressure on wages (due to competition from low-wage countries) and also by making it more difficult to tax capital, which further increases inequality. Now, while this may have been the case for some countries, it was probably not the case for all. Martin Ravallion, for example, has noted that for the developing world within-country inequality has remained largely flat since 2000, while inequality in Latin America has been falling since the 1990s. Footnote 24 In France, as a consequence of its high statutory minimum wage, globalization has not led to increases in inequality. Footnote 25 Writing about the wave of globalization during the belle époque , Peter Lindert and Jeffrey Williamson find that globalization has very different effects on within-country inequality in different countries, depending on local resource endowments. Footnote 26 From my own research (in progress) on globalization and inequality in Southeast Asia, it becomes clear that local land market institutions play an important role in distributing the gains from trade. Footnote 27

Milanovic views globalization as an unstoppable force of nature (a misconception he shares with many economists). Thus, he writes “‘Deglobalization’ with return to the ‘local’ is impossible because it would do away with the division of labor, a key factor of economic growth” (Milanovic, p. 192). While the division of labour is certainly important in the rise of economic growth, with the high current levels of globalization, there are serious diminishing marginal returns to this mechanism, while it comes at great distributional costs. Dani Rodrik calculated that with average tariffs as low as they are today (below five per cent) “a move to complete free trade would reshuffle more than $50 of income among different groups for each dollar of ‘net’ gain created”. Footnote 28 Rodrik makes the compelling argument that globalization has gone too far and suggests a number of measures to reduce globalization and its disruptive distributional impact. Rodrik's work on globalization, which should be well-known to everyone dealing with the topic, remains conspicuously absent from Milanovic's book.

On the basis of their assessment of trends in the past, both authors attempt some predictions about the future of inequality. Milanovic believes that the economic catch-up of Asia with the West will continue in the coming decades – thereby reducing global inequality among countries and among world citizens. Inequality within Western countries will continue to rise and previous remedies to reduce inequality have run their course. Education levels are already nearing their upper limits in developed countries and globalization makes taxation of the most important contributor to inequality – capital – extremely difficult. Inequality in China may soon start falling as a result of rising levels of education and the ageing of its population (and thus the demand for more social spending), unless this development is forcefully counteracted by a Chinese rent-seeking political elite. In the West, the most promising options to reduce inequality are policies that distribute endowments in capital and human capital more equally among the population (Milanovic, p. 220). However, Milanovic doubts not only whether even very drastic policies will be enough to change the tide, but also whether such policies are likely to be implemented. Here, he finds himself in agreement with Bas van Bavel, who, in The Invisible Hand , also argues that economic inequality leads to political inequality and notes that the beneficiaries from the economic system that gave rise to this inequality are unlikely to implement correction mechanisms. After a tipping point has been reached (as it has been in advanced capitalist societies), ever-growing political and economic inequality becomes inevitable. Footnote 29 Regrettably, no analyses of possible solutions to this problem are offered by either Milanovic or van Bavel.

After having discussed Scheidel's most important levelling forces – death and destruction – in the previous section, it will come as no surprise to discover that he turns out to be a prophet of doom. Globalization will continue to be a potent force increasing within-country inequality in the future. Technological change, now including the ability to alter genes and modify human bodies, “will open up new frontiers in the evolution of inequality” (Scheidel, p. 431), and there is nothing that can be done about it: “even a combination of several quite radical and historically unprecedented government interventions would reverse the effects of resurgent inequality only partially” (p. 435).

The data on within-country income inequality for the recent period that both authors present can also be interpreted rather differently. In my view, throughout the twentieth century, taxation has been an extremely potent force for decreasing inequality. In Germany, for example, while the Gini for market incomes increased from below 0.4 to over 0.5 between 1970 and 2010, the disposable income Gini consistently hovered around 0.3 during that same period. Milanovic shows disposable Ginis that seem to fluctuate around that level (or only slightly above it) also in Spain, Italy, and the Netherlands, while Scheidel (p. 425) shows that the Gini for disposable income was about 0.27 for Denmark, Finland, France, and Sweden in 2011. The ability of these states to keep the Ginis floating around that level in the face of powerful market forces pushing them up over the past thirty to forty years, and without large-scale death and destruction, should give cause for optimism. Neither of the authors presents evidence on wealth inequality, which is generally much higher than income inequality, and has been increasing in recent decades; this might have supported their pessimism better.

Relatively little attention is devoted in either book to the consequences of inequality. This is unfortunate, since it is not clear to everyone why we should care about inequality. In fact, many people think that inequality may actually be good (especially those leaning to the right of the political spectrum). It spurs economic growth by incentivizing hard work, creativity, and human capital formation. What we should care about instead is poverty (these people would argue). Some go even further and argue that we should not even care so much about poverty, as we are already so much richer today than we have been at any time in the past. As a result of huge leaps in technological progress and economic growth, a poor person in the West today has a higher level of material well-being than a medieval English king. Footnote 30

Milanovic does not discuss the relationship between economic inequality and other indicators of well-being at all, while Scheidel briefly cites some research on the relationship between inequality, happiness, economic mobility, and civil war and conflict in the present. It is regrettable that neither of them cites the recent book by Richard Wilkinson and Kate Pickett that shows a wealth of evidence about the correlation of high levels of inequality with higher infant mortality, obesity, mental illness, crime rates, and drug abuse, and lower life expectancy and decreased levels of trust. Footnote 31 Furthermore, neither Milanovic, nor Scheidel engages with the influential literature suggesting that high levels of political and economic inequality, resulting from colonial institutional legacies, have hindered long-run economic growth in developing countries. Footnote 32 In fact, whether inequality is always bad for economic development remains a contentious issue and seems to depend a lot on the kind of inequality (structural or market-based), as well as on the wider context. Footnote 33 Engaging with these discussions could have made more compelling the argument that it is important to study inequality. While studies of the causes of rises and declines in inequality have mushroomed in recent years, more future research should be devoted to studying the consequences of inequality in a variety of contexts. Footnote 34 Recent research dealing with the effects of economic inequality on the abilities of societies to cope with disasters shows the promise of such lines of research. Footnote 35

Milanovic does, however, discuss the crucial question of whether within-country income and wealth inequality threatens the sustainability of Western democracy at present. Footnote 36 As a result of increasing inequality, the relative size of the middle class is declining across the Western world, which is problematic as the middle classes are generally seen as the most important supporters of democracy. In the US, the greatest threat is posed by the development of a plutocracy. We can already observe the much greater political power held by the wealthy vis-à-vis the middle classes and the poor in the United States. Research has shown that US senators are “5 to 6 times more likely to respond to the interest of the rich than to the interest of the middle class” (Milanovic, p. 194). Furthermore, the high cost of running for political office in the US essentially means that everyone except for the very rich is excluded from political power. American plutocracy is unlikely to effectively address the growing problems of the middle and lower classes associated with globalization. While in Europe entry into politics is less influenced by money and multiparty systems are effective at blocking the path to plutocracy, it faces other problems, as the pressure of globalization (that is both trade and migration) pushes the resurgence of nationalism and populist politics. Footnote 37

Inequality is back on the public and academic agendas, with a multitude of interesting studies on inequality appearing over the past decade. These include Global Inequality and The Great Leveler , both important and well-written works. With grand temporal and geographic scope, both these books have uncovered long-run cycles of growing and declining inequality in different parts of the globe. In more recent times, these cycles typically lasted between about fifty to a hundred years, while in antiquity and medieval times they may have lasted longer. In terms of the forces driving these cycles, there is substantial agreement between the two authors. Rising inequality is caused by technological change, globalization, and economic development. Further back into the past, rising inequality was also associated with the process of state formation and the increasing ability of elites to extract rent from individuals. They also agree that violence, death, and destruction are powerful forces reducing inequality. However, whereas Milanovic also believes in peaceful forces that level, such as unskilled-biased technological change, education, urbanization, and rising social transfers, Scheidel discards that possibility entirely. In the absence of violent shocks, both consider it unlikely that within-country inequality will decline substantially in the near future. It remains to be seen to what extent the developments observed for the West actually apply to all non-Western societies.

As a result of the huge breadth of these books, they have sacrificed some depth. In their efforts to generalize global trends, they missed important variation between cases; globalization, for example, has had very different effects on inequality across the globe, depending on the local context. More research on the interaction between local conditions and the factor that is thought to push up inequality could have led to more useful insights into how to combat rising inequality. Furthermore, these generalizations also lead them to overly pessimistic conclusions. Scheidel's one-sided suggestions that only death and destruction lead to substantial levelling are untenable, considering the substantial evidence on peaceful decreases in inequality. Milanovic, on the other hand, needlessly speculates that the policies proposed to combat inequality are unlikely to be implemented. Even if this were to be correct, it is unclear in what ways such pessimistic speculations are helpful in combating the problem of high inequality. Furthermore, since the Western world currently still (largely) consists of (more or less) functioning democracies, these conjectures do not hint at a high appreciation of people's ability to assess their own interest and vote in favour of parties and policies that can steer the world back into the right direction. If global history is full of examples showing how death and destruction led to decreased inequality, it is also full of examples of workers organizing themselves and bargaining for better labouring conditions, and of people voting for politicians who implemented social policies leading to the rise of the modern welfare state.

I would like to thank Aad Blok, Pepijn Brandon, Ad Knotter, Marcel van der Linden, and Leo Lucassen for useful comments on an earlier version of this essay. I gratefully acknowledge financial support from the Dutch Organisation for Scientific Research for the project “Unfair Trade? Globalization, Institutions and Inequality in Southeast Asia, 1830–1940” (NWO Veni grant no. 275-53-016).

1. Oxfam International, “Public Good or Private Wealth?” (21 January 2019), available at: https://www.oxfam.org/en/research/public-good-or-private-wealth ; last accessed 25 February 2019.

2. Barack Obama, 4 December 2013, on income inequality in the US, available at: https://obamawhitehouse.archives.gov/the-press-office/2013/12/04/remarks-president-economic-mobility ; last accessed 25 May 2019; also cited by Scheidel, The Great Leveler , p. 2.

3. World Bank Data on GINI index, available at: https://data.worldbank.org/indicator/SI.POV.GINI?locations=US ; last accessed 25 May 2019.

4. For Smith, inequality was a force for both good and bad: “the disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments”. Smith , Adam , The Theory of Moral Sentiments ( New York , [1759] 2006 ), p. 58 Google Scholar .

5. Ricardo , David , On the Principles of Political Economy and Taxation ( London , [1817] 1911 ), p. 1 Google Scholar .

6. Robert E. Lucas, “The Industrial Revolution: Past and Future”, in The Region, 2003 Annual Report of the Federal Reserve Bank of Minneapolis , p. 20, available at: https://www.minneapolisfed.org/publications/the-region/the-industrial-revolution-past-and-future ; last accessed 25 May 2019. Italics in original.

7. See, for example, Soltow , L. , “ Long-Run Changes in British Income Inequality ”, Economic History Review , 21 : 1 ( 1968 ), pp. 17 – 29 CrossRef Google Scholar ; Lindert , P.H. and Williamson , J.G. , “ Revising England's Social Tables 1688–1812 ”, Explorations in Economic History , 19 ( 1982 ), pp. 385 – 408 CrossRef Google Scholar .

8. van Zanden , J.L. , “ Tracing the Beginning of the Kuznets Curve: Western Europe during the Early Modern Period ”, Economic History Review , 48 : 4 (1995), pp. 643 – 664 CrossRef Google Scholar .

9. Using “inequality” as a search term on the website of the journal ( https://academic.oup.com/jsh/ ) on 1 January 2019. This relates to papers that have inequality as their main subject. I have not noted the articles that mention the word “inequality” in passing. The one study specifically focused on economic inequality was Buettinger , Craig , “ Economic Inequality in Early Chicago, 1849–1850 ”, Journal of Social History , 11 : 3 ( 1978 ), pp. 413 – 418 CrossRef Google Scholar .

10. Katz , Michael B. , Stern , Mark J. , and Fader , Jamie J. , “ Women and the Paradox of Economic Inequality in the Twentieth Century ”, Journal of Social History , 39 : 1 ( 2005 ), pp. 65 – 88 CrossRef Google Scholar .

11. Andrews , George Reid , “ Racial Inequality in Brazil and the United States: A Statistical Comparison ”, Journal of Social History , 26 : 2 ( 1992 ), pp. 229 – 263 CrossRef Google Scholar ; idem , “Racial Inequality in Brazil and the United States, 1990–2010”, Journal of Social History , 47:4 (2014), pp. 829–854.

12. Searching “inequality” on the website https://www.cambridge.org/core/journals/international-review-of-social-history/ on 1 January 2019.

13. Klassen , John , “ The Disadvantaged and the Hussite Revolution ”, International Review of Social History , 35 : 2 ( 1990 ), pp. 249 – 272 CrossRef Google Scholar ; Schultz , Helga , “ Social Differences in Mortality in the Eighteenth Century: An Analysis of Berlin Church Registers ”, International Review of Social History , 36 : 2 ( 1991 ), pp. 232 – 248 CrossRef Google Scholar ; Nelson , Bruce , “ Working-Class Agency and Racial Inequality ”, International Review of Social History , 41 : 3 ( 1996 ), pp. 407 – 420 CrossRef Google Scholar .

14. See https://theconversation.com/is-pikettys-capital-in-the-twenty-first-century-really-the-most-unread-bestseller-67713 ; last accessed 25 May 2019. I was not able to obtain sales figures up to 2019.

15. See, inter alia , Milanovic , Branko , Lindert , Peter H. , and Williamson , Jeffrey G. , “ Pre-Industrial Inequality ”, The Economic Journal , 121 : 551 ( 2011 ), pp. 255 – 272 CrossRef Google Scholar .

16. Bos , Wim , van den Brakel , Marion , and Otten , Ferdy , Meten van inkomen en inkomensongelijkheid ( The Hague , 2018 ), p. 15 Google Scholar .

17. Ibid . See also van Bavel , Bas and Frankema , Ewout , “ Wealth Inequality in the Netherlands, c.1950–2015 ”, TSEG/Low Countries of Social and Economic History , 14 : 2 ( 2017 ), pp. 29 – 62 CrossRef Google Scholar .

18. Lindert , P.H. and Williamson , J.G. , Unequal Gains: American Growth and Inequality since 1700 ( Princeton, NJ , 2016 ) Google Scholar .

19. Due to The Great Leveler ’s extraordinary scope and breadth, this evidence was gathered from the secondary literature rather than from new research into primary sources. Some of the evidence on antiquity was based, however, on Scheidel's own earlier research.

20. Henry Farber et al ., “Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data”, available at: http://tuvalu.santafe.edu/~snaidu/papers/union_sub3.pdf ; last accessed 25 May 2019.

21. Although the evidence on Switzerland is limited and points to only limited levelling.

22. Kelley , J. and Klein , H. , Revolution and the Rebirth of Inequality: A Theory Applied to the National Revolution in Bolivia ( Berkeley, CA [etc.], 1981 ) CrossRef Google Scholar .

23. van Bavel , B. , The Invisible Hand? How Market Economies have Emerged and Declined since AD 500 ( Oxford [etc.], 2016 ) CrossRef Google Scholar .

24. Ravallion , M. , “ Inequality and Globalization: A Review Essay ”, Journal of Economic Literature , 56 : 2 ( 2018 ), pp. 620 – 642 CrossRef Google Scholar .

25. Bourguignon , F. , The Globalization of Inequality ( Princeton, NJ , 2015 ) Google Scholar .

26. Lindert , P.H. and Williamson , J.G. , “ Does Globalization Make the World More Unequal? ”, in Bordo , M.D. , Taylor , A.M. , and Williamson , J.G. (eds), Globalization in Historical Perspective ( Chicago, IL , 2003 ), pp. 227 – 275 CrossRef Google Scholar .

27. Pim de Zwart, “Globalization, Institutions and Inequality in West Sumatra and West Java, c. 1800–1940”, Paper presented at the XVIII WEHC in Boston, August 2018.

28. Rodrik , D. , The Globalization Paradox: Democracy and the Future of the World Economy ( New York [etc.], 2011 ), p. 57 Google Scholar .

29. Van Bavel, The Invisible Hand.

30. See also the discussion in DeLong , J. Bradford , Boushey , H. , and Steinbaum , M. , “ Capital in the Twenty-First Century, Three Years Later ”, in Boushey , H. , DeLong , J. Bradford , and Steinbaum , M. (eds), After Piketty: The Agenda for Economics and Inequality ( Cambridge, MA , 2017 ), pp. 1 – 26 Google Scholar . See also Pinker , Steven , Enlightenment Now ( New York , 2018 ) Google Scholar .

31. Wilkinson , R. and Pickett , K. , The Spirit Level: Why More Equal Societies Almost Always Do Better ( London , 2009 ) Google Scholar .

32. Seminal studies are Acemoglu , D. , Johnson , S. , and Robinson , J.A. , “ The Colonial Origins of Comparative Development ”, The American Economic Review , 91 : 5 ( 2001 ), pp. 1369 – 1401 CrossRef Google Scholar ; and Sokoloff , K.L. and Engerman , S.L. , “ History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World ”, Journal of Economic Perspectives , 14 : 3 ( 2000 ), pp. 217 – 232 CrossRef Google Scholar .

33. Easterly , W. , “ Inequality Does Cause Underdevelopment: Insights From a New Instrument ”, Journal of Development Economics , 84 : 2 ( 2007 ), pp. 755 – 776 CrossRef Google Scholar .

34. See also Zwart , P. de , “ The Future of Global Economic History: Regional Comparisons to Address Global Questions ”, TSEG/Low Countries Journal for Social and Economic History , 15 ( 2–3 ), pp. 129 – 142 CrossRef Google Scholar .

35. See, for example, Bavel , B. van , Curtis , D.R. , and Soens , T. , “ Economic Inequality and Institutional Adaptation in Response to Flood Hazards: A Historical Analysis ”, Ecology and Society , 23 : 4 ( 2018 ) Google Scholar .

36. The crisis of Western democracy, and the role played by growing economic inequality, is also the subject of the recent important book by Mounk , Yascha , The People vs. Democracy: Why our Freedom is in Danger and How to Save It ( Cambridge, MA , 2018 ) CrossRef Google Scholar .

37. See also Norris , P. and Inglehart , R. , Cultural Backlash: Trump, Brexit, and Authoritarian Populism ( Cambridge , 2019 ) CrossRef Google Scholar .

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• Volume 64, Issue 2
• Pim de Zwart (a1)
• DOI: https://doi.org/10.1017/S0020859019000385

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Inequality and Globalization: A Review Essay

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Here is an answer to the following question: "Evaluate the extent to which globalisation inevitably leads to a rise in income inequality in one or more countries of your choice."

Essay On Globalisation And Inequality (Download a pdf version of this essay)

Globalisation is a process through which countries, businesses and people become more inter-connected and inter-dependent via an increase in trade in goods and services, cross-border investment and labour migration from one nation to another. Income and wealth inequality can be measured in various ways including the Gini coefficient and the Palma Ratio. The latter is a good indicator of the depth of inequality since it tracks incomes flowing to the top ten percent of households and divides by the incomes for the bottom forty percent. In South Africa, that figure is 7.1 whereas for Germany the Palma Ratio is just over 3.

One way globalisation can increase inequality is through the effects of increasing specialisation and trade. A rise in trade-to-GDP ratios signifies an increase in the volume and value of trade between countries and regions. Although trade based on comparative advantage has the potential to stimulate economic growth and lift per capita incomes, it can also lead to a rise in relative poverty. For example, if a country can now import cheaper steel from elsewhere, then there will be a contraction in domestic supply and a fall in employment and real incomes in that industry. This can lead to higher rates of structural unemployment and a decline in real living standards. Real wages come under downward pressure and inequality can increase. We see this in regions of the UK for example where de-industrialisation has taken place leading to much higher rates of long-term unemployment and a worsening of economic and social deprivation. In the United States, the share of national income claimed by the top 1% of the population climbed from 11% in 1980 to 20% in 2014, compared to just 13% for the entire bottom half of the population. 

However, one could argue that the benefits of globalisation can be used to offset this. If trade generates faster GDP growth, then the government will see an increase in tax revenues which might then be used to fund capital investment in public goods and merit goods and services including finance for re-training programmes and improvements to infrastructure in economically-depressed areas. Much depends on whether a government has sufficient resources and political will to implement an active regional and industrial policy to improve employment prospects for those negatively affected by globalisation.

Globalisation might also increase inequality because it usually leads to higher profits for multinational corporations such as Apple, Google and Facebook which feed into generous pay-outs for senior executives and increasing dividends for shareholders. Multinationals matter - they generate 10 percent of the world’s annual GDP and more than 50 percent of the value of world trade. One of the hot political and economic issues of the age has been the ability of businesses operating in more than one country (a transitional company) to use shadow pricing and other forms of legal tax avoidance to reduce their liability to pay tax and thereby increase the return to those with an equity stake. Because of tax avoidance, national governments do not generate the revenues needed to pay for public services and welfare systems - both of which can have a progressive effect on the final distribution of income. The UK government has estimated that, in 2017, multinational businesses managed to avoid paying nearly £6 billion in tax revenues. Oxfam estimates that tax avoidance costs developing countries $170 billion a year whereas $100 billion could provide an education for 124 million children and pay for healthcare services that could prevent the deaths of at least six million children annually.

In evaluation, there are steps that governments can take to increase their tax take. This can range from introducing country-by-country financial reporting so that it becomes clearer where the profits are being made, to introducing restrictions on interest rates charges from one subsidiary of a TNC to another. There are also moves to reduce the amount of intra-company loans made by TNCs which can shift profits to countries with lower corporation tax. In the US, they have introduced a one-off tax on the off-shore cash held by US businesses after it was found that US companies had built up almost $2.6tn in untaxed cash held offshore. Developing countries can also improve their governance so that multi-nationals investing pay a proper rent for the ownership of land and are less vulnerable to corruption from elected officials.

A third way in which globalisation can create increased inequality is by increasing the demand for and returns to higher-skilled work and lowering the expected earnings of people in relatively low-skill and low-knowledge occupations. One of the driving forces of foreign direct investment is that resources tend to flow where the unit cost of production is lowest. This is the case with light manufacturing for example where a lot of investment is flowing to countries such as Vietnam, Bangladesh, Ethiopia and Indonesia. FDI creates more formal employment and incomes for people employed in these sectors but perhaps at the expense of similar workers in higher-income countries whose skills are no longer in such demand. They are therefore at greater risk of unemployment and persistent relative poverty; many have been pushed into poorly paid jobs in services linked to the Gig Economy. People affected often feel that they have been left behind by the forces of globalisation and their votes may have been a factor behind the Brexit outcome and the election of Trump who has adopted a “protectionist approach” to trade policy since becoming President.

That said, it could be argued that it is technological progress – which has raised demand for skilled workers relative to unskilled workers – rather than trade and globalisation which has had most impact on these workers. Often the people who lose jobs as a result of technology are not the ones who get the new ones and the result can be hysteresis in the labour market with deep pockets of long-term unemployment and hit relative poverty. Automation threatens many jobs - ranging from fork-lift drivers to workers in farming and production lines. The onus is on government to implement and fund the right supply-side policies designed to improve the human capital of people affected including lifting investment in human capital and entrepreneurship.

Final reasoned comment

In conclusion, it is not inevitable that globalisation increases inequality of income and wealth. We have seen big changes in the workforce and in earnings between different groups but in my view, these are not solely the consequence of globalisation. One paradox of globalisation is that it has probably reduced inequality between countries but increased it within nations. What matters is how governments respond to the challenge of improving access to knowledge and skills and in making sure that the benefits from cross-border trade and investment provide enough tax revenues to pay for high quality and affordable public services. In this way, more of the positives from globalisation can be turned into a ‘public good’ rather than a ‘public bad’.

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Global economic inequality: what matters most for your living conditions is not who you are, but where you are

How much does it matter to be born into a productive, industrialized economy.

This article was originally published over a year ago. The data shown and discussed in the text are not always the latest available estimates. For more up-to-date data, see our Data Explorers on Poverty and Inequality .

What is most important for how healthy, wealthy, and educated you are is not who you are, but where you are. Your knowledge and how hard you work matter too, but much less than the one factor that is entirely outside anyone’s control: whether you happen to be born into a productive, industrialized economy or not.

Global income inequality is vast. The chart shows this. As all data throughout this text, it accounts for the differences in the cost of living.

The vast majority of the world is very poor. The poorer half of the world, almost 4 billion people, live on less than $6.70 a day.

If you live on $30 a day, you are part of the richest 15% of the world ($30 a day roughly corresponds to the poverty lines set in high-income countries).

Inequality can be very high within countries. The US – a high-income country with very large inequality – is a prime example. But much of global inequality is inequality between countries. The small chart shows this by comparing the income distribution of the US with the distribution in Burundi.

Vast economic inequality means vast inequalities in living conditions

The large economic inequality is only one dimension of global inequality. There are many other aspects that people care about.

But because a high income is important for good living conditions, these other inequalities map onto the economic inequality. Those who live on higher incomes have advantages in many ways.

The chart shows what life is like on different income levels in 12 different dimensions.

On the horizontal axis in each panel, you see GDP per capita, measuring the average income in a country. Starting from the top left, these panels show that where incomes are higher, people live longer, children die less often, mothers die less often, doctors can focus on fewer patients, people have better access to clean drinking water and electricity, they can travel more, have more free time, have better access to education and better learning outcomes, and people are more satisfied with their lives.

The inequality in people’s living conditions mirrors the world’s economic inequality.

It is hard to overstate how very large these differences are. Life expectancy in the poorest countries is 30 years shorter than in the richest countries. I have also just written about the large global inequalities in learning outcomes along the economic dimension.

Where a person finds themselves in the unequal global income distribution is mostly determined by where they are

Seeing how much our living conditions depend on the productivity of the economy we live in should matter hugely for our self-understanding and our view of others. In a world of such vast inequalities between countries, it is not who a person is that determines whether they are well-off or poor, but where they are.

To see this, consider a world without any inequality between countries. If all countries were equally rich, where someone lives would not influence where someone ends up in the global income distribution.

In contrast, consider a situation of extreme inequality between countries, such as today’s inequality between a poor and rich country. 1 In this case, the home country of a person determines everything . The shown data for Ethiopia and Denmark makes this clear: the two distributions don't overlap. A person born in Denmark has almost certainly an income above the global average, and someone born in Ethiopia has almost certainly an income lower than that.

Beyond just two countries, how much does a person’s home country matter for where they are in today’s global income distribution?

Inequality researcher Branko Milanovic studied this question and found that the country where a person lives explains two-thirds of the variation of income differences between all people in the world. 2 Where a person lives is the most important factor of their income.

For a variety of reasons – from family ties to the political restrictions that impede migration – very few people move between countries. Most of the world population [ 97% ] lives in the country they were born in. And so, for most people, it is not only the country they live in that determines their income but also the country they were born in.

This is not to say that a person’s work ethic, talent, and skills do not matter for their income. They do. But it is to say that all these personal factors together matter much less than the factor that is entirely outside of a person’s control: whether they are born into a large, productive economy or not.

Where you live isn’t just more important than all your personal characteristics, it’s more important than everything else .

The importance of redistribution and economic growth for reducing global inequality and better living conditions

The data I discussed highlights three important facts about our world:

• The extent of global economic inequality is vast;
• Economic prosperity is immensely important for people’s living conditions;
• And where a person finds themselves in the unequal global income distribution is largely outside their control.

What can we take away from these three insights?

Redistribution

Redistribution through the state plays a large role in reducing inequality within countries and could also reduce global inequality. However, the reality is that, no matter in which rich country you pay your taxes, almost none of that goes to the world's poor people. 3 The redistribution governments do is not reaching the poorest people: it is domestic, not international redistribution.

If you want to reduce global inequality and support poorer people, you do, however, have this opportunity. You can donate some of your money.

You might be able to live on a little less, and this money could make a big difference to a poorer person.

The most direct way is to send some of your money to poor people; the non-profit organization GiveDirectly makes this possible. Or you can donate to an effective charity that supports the world’s poorest. In the footnote, you can find out how to find such a charity and how I donate. 4

Economic growth

Some suggest we can end poverty without additional growth by reducing global inequality. This is not the case. Reducing global inequality can achieve a lot, but it is important to be clear that redistribution alone would still mean that billions of people would live in very poor material conditions. The world is far too poor to end poverty without large growth.

To achieve a more equal world without poverty, the world needs very large economic growth. 5

We can see this when we look at our global history. Two centuries ago, the world was much more equal: Average income, measured with GDP per capita in the chart, was low everywhere, and most people were extremely poor .

Since then, some countries have achieved very large growth – Swedes are, for example, about 30 times richer than two centuries ago – while other economies hardly grew at all. This unequal development resulted in the extremely large global inequality of today.

The reality of today's global inequality is cruel. Those who are born into an economy that achieved large growth in the last two centuries grow up in much better living conditions than those who happen to be born into a poor economy. Economic growth for billions of people in poverty is what we need to end this injustice.

Those places that have achieved large growth show how much better the living conditions can be for all.

To take one concrete example, let’s consider maternal mortality. In high-income countries, where mothers can rely on well-equipped hospitals and support from doctors and midwives when complications occur, maternal deaths have become rare (the risk of death has declined 300-fold in the last generations). But in the rest of the world, it is still very common: every year, 295,000 mothers die just when they give life to their child.

What would the world look like if the risk of death for mothers was globally as low as in the world’s richest countries? The vast majority of mothers who die this year would survive. 6

We know that this is possible. This is what the historical perspective makes clear; all places with good living conditions today were extremely poor until just a few generations ago.

What we have seen in the data here is one of the most important insights of development economics: people live in poverty not because of who they are, but because of where they are. A person’s knowledge, skills, and how hard they work all matter for whether they are poor or not – but all these personal factors together matter less than the one factor that is entirely outside of a person’s control: whether they happen to be born into a large, productive economy or not.

What gives people the chance for a good life is when the entire society and economy around them changes for the better. This is what development and economic growth are about: transforming a place so that what was previously only attainable for a few comes into reach for all.

Continue reading on Our World in Data:

How much economic growth is necessary to reduce global poverty substantially?

Acknowledgments — I want to thank Joe Hasell and Toby Ord for their feedback on this article and visualizations.

I have written a detailed description of this chart and the shown data in my post on Global poverty in an unequal world .

Branko Milanovic (2015) – “Global Inequality of Opportunity: How Much of Our Income Is Determined By Where We Live?”, The Review of Economics and Statistics 97(2): 452-460. Online here: https://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00432#.VKCF2CcA

He wrote a summary on VoxEU https://voxeu.org/article/income-inequality-and-citizenship

See this map of Net ODA as a share of the donor country’s GNI. Few countries reach the goal of 0.7% of national income, meaning the share of taxes paid on ODA is extremely small. I think it should be higher, development aid is one way in which the populations of the richest countries can improve the situation in the world’s poorest places.

One of the most important things to know about charities is that their impact varies hugely – some are ineffective or even do more harm than good. In contrast, others can do extremely good work on a large problem in a very cost-effective way.

GiveWell is a research team that finds the charities that make the biggest difference per each dollar or euro you donate. On their site, you will find their recommended charities and very transparent and in-depth research on how they arrived at these recommendations.

Giving via GiveWell is one way to donate that I'd recommend.

The way that I donate is via Effective Altruism Funds . They also rely on Givewell's research, but they also focus on other areas. As a donor, you can set your priorities between these different areas, but beyond that, you trust the team of the Effective Altruism Funds to make decisions for you. This has the advantage that their team has more knowledge about the various effective charities than you, or I can possibly know, which gives them the chance to give to those charities that have the greatest potential and need at a particular time. I pay into the 'Fund' with a recurring transfer every month.

For evidence on this, see my post ‘How much economic growth is necessary to reduce global poverty substantially?’

In the world’s richest countries, the maternal mortality ratio (MMR) is more than 100-fold lower than the global average (211/2=105.5-fold).

In the world’s richest countries, the MMR per 100,000 live births is 2; worldwide, it is 211. [ Source ]

• Worldwide, 295,000 mothers die every year. [ Source ].
• This means (100,000/211)*295,000 =139,810,426 births yearly.
• If the global MMR were 2 rather than 211 per 100,000, then this would result in (139,810,426/100,000)*2=2,796 Deaths of mothers.
• [Or a more straightforward calculation of the same: 295,000/(211/2)=2,796]

Every year 295,000 mothers die in childbirth. If the risk of death for mothers were globally as low as in the world’s richest countries, 2,800 mothers would die. 292,200 mothers would not die.

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8.2A: Global Stratification and Inequality

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Stratification results in inequality when resources, opportunities, and privileges are distributed based on position in social hierarchy.

Learning Objectives

• Discuss the three dominant theories of global inequality
• Society is stratified into social classes based on an individual’s socioeconomic status, gender, and race.
• Stratification and inequality can be analyzed as micro-, meso-, and macro-level phenomena, as they are produced in small group interactions, through organizations and institutions, and through global economic structures.
• Sociologists use three primary theories to analyze macro-level stratification and inequality: development and modernization theory, dependency theory, and world systems theory.
• Macro-Level Stratification : The role of international economic systems in shaping individuals’ resources and opportunities by privileging certain social stratas.
• Global Stratification : The hierarchical arrangement of individuals and groups in societies around the world.
• Modernization Theory : Argues that poor nations remain poor because they hold onto traditional attitudes, beliefs, technologies, and institutions.

Global stratification refers to the hierarchical arrangement of individuals and groups in societies around the world.

Global inequality refers to the unequal distribution of resources among individuals and groups based on their position in the social hierarchy. Classic sociologist Max Weber analyzed three dimensions of stratification: class, status, and party. Modern sociologists, however, generally speak of stratification in terms of socioeconomic status (SES). A person’s SES is usually determined by their income, occupational prestige, wealth, and educational attainment, though other variables are sometimes considered.

Stratification and Inequality

Stratification refers to the range of social classes that result from variations in socioeconomic status. Significantly, because SES measures a range of variables, it does not merely measure economic inequality. For example, despite earning equal salaries, two persons may have differences in power, property, and prestige. These three indicators can indicate someone’s social position; however, they are not always consistent.

Inequality occurs when a person’s position in the social hierarchy is tied to different access to resources, and it largely depends on differences in wealth. For example, a wealthy person may receive higher quality medical care than a poor person, have greater access to nutritional foods, and be able to attend higher caliber schools. Material resources are not distributed equally to people of all economic statuses.

While stratification is most commonly associated with socioeconomic status, society is also stratified by statuses such as race and gender. Together with SES, these shape the unequal distribution of resources, opportunities, and privileges among individuals. For example, within a given social class, women are less likely to receive job promotions than men. Similarly, within American cities with heavily racially-segregated neighborhoods, racial minorities are less likely to have access to high quality schools than white people.

Perspectives Towards Stratification

Stratification is generally analyzed from three different perspectives: micro, meso, and macro. Micro-level analysis focuses on how prestige and personal influence create inequality through face-to-face and small group interactions. Meso-level analysis focuses on how connections to organizations and institutions produce inequality. Macro-level analysis considers the role of economic systems in shaping individuals’ resources and opportunities.

Macro-level analyses of stratification can include global analyses of how positions in the international economic system shape access to resources and opportunities. For example, the small African nation of Cape Verde is significantly indebted to European nations and the U.S., and the majority of its industry is controlled by foreign investors. As the nation’s economy has ceded control of once-public services, such as electricity, its citizens have lost jobs and the price of electricity has increased. Thus, the nation’s position in the world economy has resulted in poverty for many of its citizens.

A global structure, or a macro-level phenomenon, produces unequal distribution of resources for people living in various nations.

Theories of Macro-Level Inequality

There are three dominant theories that sociologists use to consider why inequality exists on a global scale.

Global Social Stratification : People in countries around the world experience different access to resources and opportunities and different standards of living, based on their position in the global hierarchy.

Firstly, some sociologists use a theory of development and modernization to argue that poor nations remain poor because they hold onto traditional attitudes and beliefs, technologies and institutions, such as traditional economic systems and forms of government. Modernists believe large economic growth is the key to reducing poverty in poor countries.

Secondly, dependency theory blames colonialism and neocolonialism (continuing economic dependence on former colonial countries) for global poverty. Countries have developed at an uneven rate because wealthy countries have exploited poor countries in the past and today through foreign debt and transnational corporations (TNCs). According to dependency theory, wealthy countries would not be as rich as they are today if they did not have these materials, and the key to reversing inequality is to relieve former colonies of their debts so that they can benefit from their own industry and resources.

Lastly, world systems theory suggests that all countries are divided into a three-tier hierarchy based on their relationship to the global economy, and that a country’s position in this hierarchy determines its own economic development.

According to world systems theory as articulated by sociologist Immanuel Wallerstein, core countries are at the top of the global hierarchy as they can extract material resources and labor from less developed countries. These core countries own most of the world’s capital and technology, and have great control over world trade and economic agreements. Semiperipheral countries generally provide labor and materials to core countries, which benefits core countries but also increases income within the semiperipheral country. Peripheral countries are generally indebted to wealthy nations, and their land and populations are often exploited for the gain of other countries.

Because of this hierarchy, individuals living in core countries generally have higher standards of living than those in semiperipheral or peripheral countries.

Industrialized Countries Industrialized countries have greater levels of wealth and economic development than less-industrialized countries. Learning Objectives Describe the characteristics of industrialized countries

• Industrialized countries are at the top of the global socioeconomic hierarchy, and their populations generally enjoy a high standard of living.
• Most commonly, the criteria used to evaluate a country’s level of development is its gross domestic product (GDP) per capita.
• One measure of a nation’s level of development is the Human Development Index (HDI), a statistical measure developed by the United Nations that gauges a country’s level of human development.
• Developed Country : A sovereign state with a highly developed economy relative to other nations.
• Industrialized Country : A sovereign state with a highly developed economy relative to other nations.
• Human Development Index (HDI) : A composite statistic used to rank countries by level of “human development,” taken as a synonym of the older term “standard of living. “
• gross domestic product : (GDP) The market value of all officially recognized final goods and services produced within a country in a year, or over a given period of time; often used as an indicator of a country’s material standard of living.

An industrialized country, also commonly referred to as a developed country, is a sovereign state with a highly developed economy relative to other nations. Most commonly, the criteria used to evaluate a country’s level of development is its gross domestic product (GDP) per capita. However, many other variables are frequently taken into account. Factors used to measure a country’s development can include: per capita income, level of industrialization, extent of infrastructure, life expectancy, literacy rate, and general standard of living. The criteria to use and the countries to classify as developed are contentious issues, as discussed below.

Characteristics of Industrialized Countries

In terms of global stratification, industrialized countries are at the top of the global hierarchy. Developed countries, which include such nations as the United States, France, and Japan, have higher GDPs, per-capita incomes, levels of industrialization, breadth of infrastructure, and general standards of living than less developed nations. Consequently, people living in developed countries have greater access to such resources as food, education, roads, and electricity than their counterparts in less developed nations.

Human Development Index

One measure of a nation’s level of development is the Human Development Index (HDI), a statistical measure developed by the United Nations that gauges a country’s level of development. Often, national income or gross domestic product (GDP) are used alone to measure how prosperous a nation’s economy is. HDI considers these factors, but also accounts for how income is invested in healthcare, education, and other infrastructure. Thus, HDI is often used to predict trends in a nation’s development.

The Human Development Index, along with the entire concept of “developing” and “developed” countries, has been criticized on a number of grounds. The term “developing” implies inferiority compared to a developed country, and it also assumes a desire to develop along the traditional Western model of economic development. Critics argue that this is a rather Western-centric perspective. Critics also argue that it does take into account any ecological considerations and focuses almost exclusively on national performance and ranking.

Inequality Within Countries is Falling: Underreporting-Robust Estimates of World Poverty, Inequality and the Global Distribution of Income

Household surveys suffer from persistent and growing underreporting. We propose a novel procedure to adjust reported survey incomes for underreporting by estimating a model of misreporting whose main parameter of interest is the elasticity of regional national accounts income to regional survey income, which is closely related to the elasticity of underreporting with respect to income. We find this elasticity to be substantial but roughly constant over time, implying a large but relatively constant correction to survey-derived inequality estimates. Underreporting of income by the bottom 50% of the world income distribution has become particularly important in recent decades. We reconfirm the findings of the literature that global poverty and inequality have declined dramatically between 1980 and 2019. Finally, we find that within-country inequality is falling on average, and has been largely constant since the 1990s.

We thank Ruchi Avtar and Marie Camara for outstanding research assistance. We thank Leonardo Gasparini and Leopoldo Tornarolli for sharing with us standardized regional survey data for multiple Latin American countries through SEDLAC. We thank Arvind Subramanian for guiding us to the "junked" report of the 2017 Indian NSS. We thank numerous staff members at the Luxembourg Income Study for help using their data. We thank Christoph Lakner for sharing with us code for using the Luxembourg Income Study data. The views expressed in this paper are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York, the Federal Reserve System, or the National Bureau of Economic Research. Any errors or omissions are our own.

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Global Inequality and Global Poverty

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The world is very unequal. This applies both to inequalities within countries and between countries. Global inequalities of income and wealth are on the increase, in most respects, while global poverty has been significantly reduced in recent years. However, global income inequality between countries has recently lessened. Improvements are also evident in global health and some aspects of gender inequality. Yet the topic is complex and uncertain. This is partly because inequality and poverty are not easy to measure. Inequality and poverty are also multidimensional involving political participation and cultural acceptance as well as income, health, and literacy. Explanations of inequality and poverty are similarly complex. Globalization, through concentrations of global economic power, is responsible for some inequality. Unregulated markets, however dynamic, do not distribute their benefits equally between individuals and between countries. Yet it is too simplistic to see free trade causing global inequality since free trade can, in some circumstances, lift incomes. More significant is deregulation which undermines social protection and allows massive tax avoidance. New global policies of taxation and more systematic public intervention in health and literacy are more relevant to inequality-reduction than economic protectionism.

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Holton, R. (2020). Global Inequality and Global Poverty. In: Rossi, I. (eds) Challenges of Globalization and Prospects for an Inter-civilizational World Order. Springer, Cham. https://doi.org/10.1007/978-3-030-44058-9_20

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Global Inequality Issues in Modern Society Essay

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Nowadays, not many people ponder about the might of some nations and why it so happens that while several countries are wealthy and the rest remains on the verge of poverty and famine. The answer to this question is simple and logical since it is an “ unbelievable strategic chess game, a racialist vision of the world deeply engraved in mind ” (Icarus Films, 2011, 2:05). Economic theorists contend that underdeveloped nations are still being taken advantage of by the richest nations and multinational corporations worldwide (Name of University, date). In the video Berlin 1885: The division of Africa , one might see how the leaders of the powerful nations decide upon the division of the continent, being “ engaged in a race for more territories ” (Icarus Films, 2011, 1:51). Thus, when it comes to the colonization, the Western countries were not generous and did not desire to have the land to simply guard the emerging countries.

The same idea is expressed in the video A brief history of European colonization in Africa . Colonialism marked the start of exploitation, and it can be characterized as a form of dominance. The aim was to control indigenous resources, authorities, workforce, and markets through the use of vast military might and other types of physical coercion, such as settlers with firearms, mass slaughter, and violence (Name of University, date). As it can be corroborated by the video, “ African colonization was motivated by the European hunger for African resources ” (DeeJayAllah, 2012, 0:7). In the end, it was the “ vilest scramble for loot that ever disfigured the history of human conscience ” (DeeJayAllah, 2012, 2:17). Thus, Western countries merely tried to impose their sociopolitical, economic, social, and cultural institutions on native communities and other established peoples.

Hence, global inequality can be characterized as the outcome of the wealthiest nations trying to become ever richer at the expense of emerging countries. It was evident during the times of colonization when foreign entities tried to impose their sociopolitical and economic institutions on the developing nations. However, during the mass division of African regions between Western countries, the aim was not to educate the population or make their lives better but simply to exploit the resources and human labor.

DeeJayAllah. (2012). A brief history of European colonization in Africa . YouTube.

Icarus Films. (2011). Berlin 1885: The division of Africa . YouTube.

[Name of University]. (date). Module 10.4: The global economy.

• The Balance of Global Forces and World Powers from 1885 to 1914
• Conceptual Metaphor: Life Is Like a Game of Chess
• Chess and Economics: Resemblance of Lessons Learned
• The Dangers of Speeding in Residential Areas
• Vulnerability: Positive and Negative Sides
• Elder Abuse Under Sociological Analysis
• Deviance and Social Control: Sociology of Deviant Behavior
• “Crystallization” of the Stereotypical Image of Italians as Mobsters in the US
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2023, May 30). Global Inequality Issues in Modern Society. https://ivypanda.com/essays/global-inequality-issues-in-modern-society/

"Global Inequality Issues in Modern Society." IvyPanda , 30 May 2023, ivypanda.com/essays/global-inequality-issues-in-modern-society/.

IvyPanda . (2023) 'Global Inequality Issues in Modern Society'. 30 May.

IvyPanda . 2023. "Global Inequality Issues in Modern Society." May 30, 2023. https://ivypanda.com/essays/global-inequality-issues-in-modern-society/.

1. IvyPanda . "Global Inequality Issues in Modern Society." May 30, 2023. https://ivypanda.com/essays/global-inequality-issues-in-modern-society/.

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IvyPanda . "Global Inequality Issues in Modern Society." May 30, 2023. https://ivypanda.com/essays/global-inequality-issues-in-modern-society/.

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In India, a powerful leader wins another term but sees his party’s majority vanish. In South Africa, the governing party is humbled by voters for the first time since the end of apartheid. In Britain, a populist insurgent barges into an election that is shaping up to be a crushing defeat for the long-ruling Conservatives.

If there is a common thread halfway through this global year of elections, it is a desire by voters to send a strong signal to the powers that be — if not quite a wholesale housecleaning, then a defiant shake-up of the status quo.

Even in Mexico, where Claudia Sheinbaum, a climate scientist and the handpicked successor of the president, Andrés Manuel López Obrador, was elected in a landslide last Sunday, voters were rewarding the forces that had uprooted the country’s entrenched establishment only six years earlier.

With a billion-plus people going to the polls in more than 60 countries, some analysts had feared that 2024 would pose a fateful test for democracy — one that it might fail. For years, populist and strongmen leaders have chipped away at democratic institutions, sowing doubts about the legitimacy of elections, while social media has swamped voters with disinformation and conspiracy theories.

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Goal 5: Achieve gender equality and empower all women and girls

Gender equality is not only a fundamental human right, but a necessary foundation for a peaceful, prosperous and sustainable world. There has been progress over the last decades, but the world is not on track to achieve gender equality by 2030.

Women and girls represent half of the world’s population and therefore also half of its potential. But gender inequality persists everywhere and stagnates social progress. On average, women in the labor market still earn 23 percent less than men globally and women spend about three times as many hours in unpaid domestic and care work as men.

Sexual violence and exploitation, the unequal division of unpaid care and domestic work, and discrimination in public office, all remain huge barriers. All these areas of inequality have been exacerbated by the COVID-19 pandemic: there has been a surge in reports of sexual violence, women have taken on more care work due to school closures, and 70% of health and social workers globally are women.

At the current rate, it will take an estimated 300 years to end child marriage, 286 years to close gaps in legal protection and remove discriminatory laws, 140 years for women to be represented equally in positions of power and leadership in the workplace, and 47 years to achieve equal representation in national parliaments.

Political leadership, investments and comprehensive policy reforms are needed to dismantle systemic barriers to achieving Goal 5 Gender equality is a cross-cutting objective and must be a key focus of national policies, budgets and institutions.

How much progress have we made?

International commitments to advance gender equality have brought about improvements in some areas: child marriage and female genital mutilation (FGM) have declined in recent years, and women’s representation in the political arena is higher than ever before. But the promise of a world in which every woman and girl enjoys full gender equality, and where all legal, social and economic barriers to their empowerment have been removed, remains unfulfilled. In fact, that goal is probably even more distant than before, since women and girls are being hit hard by the COVID-19 pandemic.

Are they any other gender-related challenges?

Yes. Worldwide, nearly half of married women lack decision-making power over their sexual and reproductive health and rights. 35 per cent of women between 15-49 years of age have experienced physical and/ or sexual intimate partner violence or non-partner sexual violence.1 in 3 girls aged 15-19 have experienced some form of female genital mutilation/cutting in the 30 countries in Africa and the Middle East, where the harmful practice is most common with a high risk of prolonged bleeding, infection (including HIV), childbirth complications, infertility and death.

This type of violence doesn’t just harm individual women and girls; it also undermines their overall quality of life and hinders their active involvement in society.

Why should gender equality matter to me?

Regardless of where you live in, gender equality is a fundamental human right. Advancing gender equality is critical to all areas of a healthy society, from reducing poverty to promoting the health, education, protection and the well-being of girls and boys.

What can we do?

If you are a girl, you can stay in school, help empower your female classmates to do the same and fight for your right to access sexual and reproductive health services. If you are a woman, you can address unconscious biases and implicit associations that form an unintended and often an invisible barrier to equal opportunity.

If you are a man or a boy, you can work alongside women and girls to achieve gender equality and embrace healthy, respectful relationships.

You can fund education campaigns to curb cultural practices like female genital mutilation and change harmful laws that limit the rights of women and girls and prevent them from achieving their full potential.

The Spotlight Initiative is an EU/UN partnership, and a global, multi-year initiative focused on eliminating all forms of violence against women and girls – the world’s largest targeted effort to end all forms of violence against women and girls.

Facts and figures

Goal 5 targets.

• With only seven years remaining, a mere 15.4 per cent of Goal 5 indicators with data are “on track”, 61.5 per cent are at a moderate distance and 23.1 per cent are far or very far off track from 2030 targets.
• In many areas, progress has been too slow. At the current rate, it will take an estimated 300 years to end child marriage, 286 years to close gaps in legal protection and remove discriminatory laws, 140 years for women to be represented equally in positions of power and leadership in the workplace, and 47 years to achieve equal representation in national parliaments.
• Political leadership, investments and comprehensive policy reforms are needed to dismantle systemic barriers to achieving Goal 5. Gender equality is a cross-cutting objective and must be a key focus of national policies, budgets and institutions.
• Around 2.4 billion women of working age are not afforded equal economic opportunity. Nearly 2.4 Billion Women Globally Don’t Have Same Economic Rights as Men  
• 178 countries maintain legal barriers that prevent women’s full economic participation. Nearly 2.4 Billion Women Globally Don’t Have Same Economic Rights as Men
• In 2019, one in five women, aged 20-24 years, were married before the age of 18. Girls | UN Special Representative of the Secretary-General on Violence Against Children

Source: The Sustainable Development Goals Report 2023

5.1 End all forms of discrimination against all women and girls everywhere

5.2 Eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking and sexual and other types of exploitation

5.3 Eliminate all harmful practices, such as child, early and forced marriage and female genital mutilation

5.4 Recognize and value unpaid care and domestic work through the provision of public services, infrastructure and social protection policies and the promotion of shared responsibility within the household and the family as nationally appropriate

5.5 Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decisionmaking in political, economic and public life

5.6 Ensure universal access to sexual and reproductive health and reproductive rights as agreed in accordance with the Programme of Action of the International Conference on Population and Development and the Beijing Platform for Action and the outcome documents of their review conferences

5.A  Undertake reforms to give women equal rights to economic resources, as well as access to ownership and control over land and other forms of property, financial services, inheritance and natural resources, in accordance with national laws

5.B Enhance the use of enabling technology, in particular information and communications technology, to promote the empowerment of women

5.C Adopt and strengthen sound policies and enforceable legislation for the promotion of gender equality and the empowerment of all women and girls at all levels

He for She campaign

United Secretary-General Campaign UNiTE to End Violence Against Women

Every Woman Every Child Initiative

Spotlight Initiative

United Nations Children’s Fund (UNICEF)

UN Population Fund: Gender equality

UN Population Fund: Female genital mutilation

UN Population Fund: Child marriage

UN Population Fund: Engaging men & boys

UN Population Fund: Gender-based violence

World Health Organization (WHO)

UN Office of the High Commissioner for Human Rights

UN High Commissioner for Refugees (UNHCR)

UN Education, Scientific and Cultural Organisation (UNESCO)

UN Department of Economic and Social Affairs, Gender Statistics

Fast Facts: Gender Equality

Infographic: Gender Equality

The Initiative is so named as it brings focused attention to this issue, moving it into the spotlight and placing it at the centre of efforts to achieve gender equality and women’s empowerment, in line with the 2030 Agenda for Sustainable Development.

An initial investment in the order of EUR 500 million will be made, with the EU as the main contributor. Other donors and partners will be invited to join the Initiative to broaden its reach and scope. The modality for the delivery will be a UN multi- stakeholder trust fund, administered by the Multi-Partner Trust Fund Office, with the support of core agencies UNDP, UNFPA and UN Women, and overseen by the Executive Office of the UN Secretary-General.

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The causal relationship between fintech, financial inclusion, and income inequality in african economies.

1. Introduction

2. literature review, 2.1. fintech and income inequality, 2.2. fintech and financial inclusion, 2.3. financial inclusion and income inequality, 3. data and methodology, 3.1. research data, 3.2. research model specification, 3.3. research method of data analysis, 4. results and discussion, 4.1. summary statistics, 4.2. pooled ols regression analysis, 4.3. structural equation model (sem) analysis, 5. conclusions, author contributions, data availability statement, conflicts of interest.

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Share and Cite

Girma, A.G.; Huseynov, F. The Causal Relationship between FinTech, Financial Inclusion, and Income Inequality in African Economies. J. Risk Financial Manag. 2024 , 17 , 2. https://doi.org/10.3390/jrfm17010002

Girma AG, Huseynov F. The Causal Relationship between FinTech, Financial Inclusion, and Income Inequality in African Economies. Journal of Risk and Financial Management . 2024; 17(1):2. https://doi.org/10.3390/jrfm17010002

Girma, Abebe Gule, and Fariz Huseynov. 2024. "The Causal Relationship between FinTech, Financial Inclusion, and Income Inequality in African Economies" Journal of Risk and Financial Management 17, no. 1: 2. https://doi.org/10.3390/jrfm17010002

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