Chapter 9: Global Inequalities and Poverty What is the scale of global economic What is the scale of global economic

inequality?inequality? What is the extent of poverty across the What is the extent of poverty across the

globe?globe? How can we explain the existence of global How can we explain the existence of global

economic inequality? economic inequality? modernization theory, dependency theory, modernization theory, dependency theory,

world systems perspectiveworld systems perspective

THE SCALE OF GLOBAL INEQUALITY

Some facts: Some facts: World population is more than 6 billionWorld population is more than 6 billion1.3 billion people live on less than one dollar 1.3 billion people live on less than one dollar

a day a day they are in absolute poverty they are in absolute poverty** richest 20 percent of world population ** richest 20 percent of world population

receives 80 percent of world incomereceives 80 percent of world income** poorest 20 percent of world population ** poorest 20 percent of world population

receives 1 percent of global income!!!receives 1 percent of global income!!!

Some terms:Some terms:GDP: gross domestic product: all the goods and GDP: gross domestic product: all the goods and

services produced on record in a country in a yearservices produced on record in a country in a yearGNP: Gross national product: all the goods and GNP: Gross national product: all the goods and

services produced in a country plus all foreign services produced in a country plus all foreign earnings in a given yearearnings in a given year

(income figures in your book are based on the UN’s (income figures in your book are based on the UN’s concept of “purchasing power parity.” PPP concept of “purchasing power parity.” PPP reflects the local purchasing power of each reflects the local purchasing power of each country’s currency.)country’s currency.)

High income countries

40 countries (Western Europe, USA, 40 countries (Western Europe, USA, Canada, Japan, Australia, New Zealand)Canada, Japan, Australia, New Zealand)

Per capita annual income: USD 9,360 and Per capita annual income: USD 9,360 and aboveabove

15 percent of world population (870 million 15 percent of world population (870 million people)people)

More than half the world’s total incomeMore than half the world’s total income

Middle Income Countries

About 90 countries fall in this category.About 90 countries fall in this category.One third of humanity lives in middle income countries. Latin One third of humanity lives in middle income countries. Latin

America, the Middle East, East Asia, West AfricaAmerica, the Middle East, East Asia, West AfricaPer capita annual income between USD 760 and 9,360. Half Per capita annual income between USD 760 and 9,360. Half

of the population lives in cities. They have moderate levels of the population lives in cities. They have moderate levels of industrialization.of industrialization.

Several distinct groups within this category:Several distinct groups within this category:*Newly Industrializing Countries (NICs): Brazil, Argentina, *Newly Industrializing Countries (NICs): Brazil, Argentina,

Mexico, South Korea, Taiwan.Mexico, South Korea, Taiwan.*Oil-producing nations of the Middle East*Oil-producing nations of the Middle East*former Soviet bloc countries*former Soviet bloc countries

Low income countries

Half of humanity lives in low income Half of humanity lives in low income countriescountries

About 60 countries, mostly in central and About 60 countries, mostly in central and eastern Africa and South Asiaeastern Africa and South Asia

Per capita annual income less than USD 760Per capita annual income less than USD 760 25 percent of the population lives in cities25 percent of the population lives in cities Little industrialization, mostly agriculturalLittle industrialization, mostly agricultural

The world according to incomes

Atlas of Global Inequalities

Go to Go to http://ucatlas.ucsc.edu/http://ucatlas.ucsc.edu/

for maps demonstrating global poverty for maps demonstrating global poverty according to various indicesaccording to various indices

THE EXTENT OF POVERTY GLOBALLY

Poverty exists in all countries of the world; Poverty exists in all countries of the world; but it is most severe in low and middle but it is most severe in low and middle income countriesincome countries

Poverty rates are highest in countries that Poverty rates are highest in countries that have weak economies, weak have weak economies, weak industrialization, and high rates of industrialization, and high rates of population growthpopulation growth

Relative poverty: a level of poverty in which a Relative poverty: a level of poverty in which a person lacks resources that other members of her person lacks resources that other members of her society has access to. society has access to.

Absolute poverty: less than 1 $ per capita income Absolute poverty: less than 1 $ per capita income per day per day

This is a life-threatening level of poverty, a situation This is a life-threatening level of poverty, a situation in which a person faces the prospect of hunger and in which a person faces the prospect of hunger and disease on a daily basisdisease on a daily basis

Amartya Sen’s definition of poverty: it should be Amartya Sen’s definition of poverty: it should be seen as a “deprivation of basic capabilities rather seen as a “deprivation of basic capabilities rather than merely a lowness of incomes”than merely a lowness of incomes”

The Human Development Index (HDI) makes more The Human Development Index (HDI) makes more sense according to this definitionsense according to this definition

HDI measures a combination of life expectancy, per HDI measures a combination of life expectancy, per capita income, and education (number of years of capita income, and education (number of years of schooling and adult literacy)schooling and adult literacy)

(see chapter 4)(see chapter 4)

Some facts on absolute poverty

20 percent of world population (1.3 billion) is in 20 percent of world population (1.3 billion) is in absolute poverty. They are seriously absolute poverty. They are seriously malnourished.malnourished.

Among these, 800 million are at risk of their lives.Among these, 800 million are at risk of their lives.Each year, 15 million people die of starvation.Each year, 15 million people die of starvation. Sub-Saharan Africa is hardest hit by absolute Sub-Saharan Africa is hardest hit by absolute

poverty.poverty.In Turkey, about 1.3 million people live with about a In Turkey, about 1.3 million people live with about a

dollar a day. (dollar a day. ( absolute poverty) absolute poverty)

Groups most affected by poverty

WomenWomen ChildrenChildren Refugees and displaced people (Refugees and displaced people ( people people

affected by wars and disasters)affected by wars and disasters)

“Feminization of poverty”

In all countries, women are overrepresented among the poor. In all countries, women are overrepresented among the poor. 500 million of the world’s poorest 800 million are women. Why?500 million of the world’s poorest 800 million are women. Why?-- women are paid less than men in many wage-paying jobs-- women are paid less than men in many wage-paying jobs-- they have less education than men (in the poorer countries)-- they have less education than men (in the poorer countries)-- less educated women have more children-- less educated women have more children-- the burden of child-rearing falls on women-- the burden of child-rearing falls on women-- men own most income-generating property and real estate in middle -- men own most income-generating property and real estate in middle

and low-income countries (such as farms, farm animals, tractors, and low-income countries (such as farms, farm animals, tractors, homes, etc.)homes, etc.)

-- When poverty hits a family, men might leave women. -- When poverty hits a family, men might leave women. children and children and women are left to fend for themselveswomen are left to fend for themselves

-- In a poor community, poor women might be unable to get support from -- In a poor community, poor women might be unable to get support from family and friendsfamily and friends

Children and poverty

Poverty forces children to work or to desert their Poverty forces children to work or to desert their familiesfamilies

ResultsResults

-- children working on the streets-- children working on the streets

-- street children (living on the streets)-- street children (living on the streets)

-- exploitation of child labor-- exploitation of child labor

-- sexual exploitation-- sexual exploitation

-- criminal activities such as drug abuse and theft-- criminal activities such as drug abuse and theft

Child labor in Turkey

Several categories of child labor existSeveral categories of child labor exist

-- children working on the streets (garbage collection, sale of -- children working on the streets (garbage collection, sale of food, tissue paper, flowers, etc.) (younger children)food, tissue paper, flowers, etc.) (younger children)

-- children working in sweatshop production (textile, -- children working in sweatshop production (textile, garments, leather, auto repair, etc.) (“older” children, but garments, leather, auto repair, etc.) (“older” children, but still working illegally)still working illegally)

-- children living on the streets -- children living on the streets

Several studies show that this is not a large group, although it Several studies show that this is not a large group, although it attracts more public attention (such as “tinerci” kids, attracts more public attention (such as “tinerci” kids, beggars, etc.)beggars, etc.)

Displaced people

Every year, millions of people are displaced from Every year, millions of people are displaced from their homes and lands because of armed conflicts and their homes and lands because of armed conflicts and wars, natural disasters and “development projects”wars, natural disasters and “development projects”

Refugees: are the people who flee their own country Refugees: are the people who flee their own country and cross international borders to avoid war or and cross international borders to avoid war or political/economic oppression.political/economic oppression.

Currently, there are more than 20 million refugees in Currently, there are more than 20 million refugees in the world.the world.

Examples of recent refugee flows: Afghanistan, Examples of recent refugee flows: Afghanistan, Rwanda, Bosnia, Kosovo, Iraqi KurdsRwanda, Bosnia, Kosovo, Iraqi Kurds

Refugees

Why might refugees be poor?Why might refugees be poor?

Because they leave everything behind. And often, they might Because they leave everything behind. And often, they might not get sufficient aid and basic services in the countries not get sufficient aid and basic services in the countries they arrive. Since, not all refugees are granted asylum.they arrive. Since, not all refugees are granted asylum.

Current international refugee regime was established in 1951 Current international refugee regime was established in 1951 in response to the population displacement after WWII.in response to the population displacement after WWII.

UNHCR was established. UNHCR was established.

The greatest refugee flow was between India and Pakistan in The greatest refugee flow was between India and Pakistan in the late 1940s after the Partition the late 1940s after the Partition more than 20 million more than 20 million people crossed borders, thousands died on the road.people crossed borders, thousands died on the road.

Internally displaced people

IDPs flee their homes because of wars, disasters IDPs flee their homes because of wars, disasters or development projects, or development projects, but unlike refugeesbut unlike refugees, do , do not cross international boundaries. not cross international boundaries.

Thus, they do not have the same rights as people Thus, they do not have the same rights as people who are recognized by the UNHCR as refugees.who are recognized by the UNHCR as refugees.

Today, there are nearly 20 million IDPs globally.Today, there are nearly 20 million IDPs globally. Do you know which country in Europe has one of Do you know which country in Europe has one of

the greatest numbers of IDPs right now?the greatest numbers of IDPs right now?

Turkey!Turkey!

An estimated 350,000 to 1 million people An estimated 350,000 to 1 million people (overwhelmingly Kurds) have been displaced (overwhelmingly Kurds) have been displaced since the late 1980s from their homes in the since the late 1980s from their homes in the Southeast. Southeast.

Why? Why? ““low intensity conflict”, fear of terror, village low intensity conflict”, fear of terror, village

evacuations, collapse of the regional pastoral evacuations, collapse of the regional pastoral economy and agriculture economy and agriculture

Why are IDPs poor? Why are IDPs poor?

They leave behind property and belongings. They leave behind property and belongings. They do not have skills required for finding They do not have skills required for finding jobs in their new environment.jobs in their new environment.

HOW CAN POVERTY BE EXPLAINED?

1)1) Technology: most poor nations are still agricultural; they don’t have Technology: most poor nations are still agricultural; they don’t have much industrymuch industry

But does this explain poverty?But does this explain poverty?2)2) Population growth: the poorest nations have the highest population Population growth: the poorest nations have the highest population

growth ratesgrowth ratesBut what’s the correlation between poverty and high birth rates?But what’s the correlation between poverty and high birth rates?3)3) Cultural patternsCultural patternsSome poor nations are more “traditional”. But what does this mean?Some poor nations are more “traditional”. But what does this mean?4)4) Social stratification: income distribution in poor countries is very Social stratification: income distribution in poor countries is very

uneven. That is correct, but it is also uneven in some wealthy uneven. That is correct, but it is also uneven in some wealthy nations. nations.

5)5) Gender inequality: women are more subordinated in some poor Gender inequality: women are more subordinated in some poor countries than in rich ones. countries than in rich ones.

6)6) Global power relationships: historically, wealth Global power relationships: historically, wealth flowed from poor to rich nationsflowed from poor to rich nations

Colonialism: political domination and economic Colonialism: political domination and economic exploitation of some countries by othersexploitation of some countries by others

Neo-colonialism: economic exploitation of some Neo-colonialism: economic exploitation of some nations by multinational corporations and nations by multinational corporations and wealthy countries, but without political wealthy countries, but without political dominationdomination

Three theories on global inequality and “development” Modernization theory (W.W. Rostow)Modernization theory (W.W. Rostow) Dependency theory (A.G. Frank)Dependency theory (A.G. Frank) World systems approach (I. Wallerstein)World systems approach (I. Wallerstein)

Modernization theory

It is a theory of social and economic development It is a theory of social and economic development which explains global inequality between which explains global inequality between countries in terms of different levels of countries in terms of different levels of technological development technological development

Traditional societies are “backward,” Traditional societies are “backward,” “underdeveloped,” and poorer.“underdeveloped,” and poorer.

Societies which embrace modernity and change Societies which embrace modernity and change are wealthier and more developed are wealthier and more developed

Modernization theory

Western Europe, and then North America Western Europe, and then North America “modernized” and “developed” thanks to “modernized” and “developed” thanks to the Industrial Revolution. the Industrial Revolution.

If traditional societies industrialize and If traditional societies industrialize and embrace modernize, they will also become embrace modernize, they will also become developed. developed.

So, the path to modernization is open to all So, the path to modernization is open to all who want it.who want it.

Rostow’s stage theory of modernization

W.W. Rostow’s book : W.W. Rostow’s book : The Stages of Economic The Stages of Economic Growth. A Non-Communist ManifestoGrowth. A Non-Communist Manifesto (1960) (1960)

All societies will eventually pass through the All societies will eventually pass through the following stagesfollowing stages

1)1) TraditionTradition2)2) Preconditions for take-offPreconditions for take-off3)3) Take-offTake-off4)4) Drive to technological maturityDrive to technological maturity5)5) High mass consumptionHigh mass consumption

Rostow’s modernization theory

Each country reaches the “take-off” for Each country reaches the “take-off” for industrialization when a market economy emerges. industrialization when a market economy emerges. Britain reached that stage in 1800. Non-western Britain reached that stage in 1800. Non-western nations will reach that stage when their productive nations will reach that stage when their productive investments grow. How? Through foreign aid and investments grow. How? Through foreign aid and technology transfer.technology transfer.

By the 1950s, the US reached the stage of “high By the 1950s, the US reached the stage of “high mass consumption.”mass consumption.”

Modernization

Role of rich nations in the “modernization” of Role of rich nations in the “modernization” of the poorthe poor

-- foreign aid-- foreign aid

-- industrial technology transfer-- industrial technology transfer

-- transfer of food production technology -- transfer of food production technology the Green Revolutionthe Green Revolution

Criticism of Modernization Theory

1)1) Modernization theory is the ideological Modernization theory is the ideological justification of Western-led capitalismjustification of Western-led capitalism

2)2) Modernization theory does not take into Modernization theory does not take into account the colonial exploitation of the account the colonial exploitation of the non-Western world by Europenon-Western world by Europe

3)3) Wealthier nations are often the cause of Wealthier nations are often the cause of poverty, rather than being a solution for itpoverty, rather than being a solution for it

Cont’d

4)4) The wealth gap between the rich and the poor The wealth gap between the rich and the poor countries is not diminishing; in fact, it has countries is not diminishing; in fact, it has increased since the 1950sincreased since the 1950s

5)5) Industrialization does not guarantee an increase in Industrialization does not guarantee an increase in living standardsliving standards

6)6) Modernization theory looks for Modernization theory looks for internalinternal causes of causes of poverty; doesn’t consider any poverty; doesn’t consider any externalexternal factors factors

7)7) It holds the life style of Western countries as a It holds the life style of Western countries as a yardstick to judge the development of other yardstick to judge the development of other nations. Hence, it is ethnocentric.nations. Hence, it is ethnocentric.

Dependency theory

A model of economic and social development that A model of economic and social development that explains global inequality in terms of the historical explains global inequality in terms of the historical exploitation of poor societies by Western nations.exploitation of poor societies by Western nations.

Andre Gunder Frank: Andre Gunder Frank: The Development of The Development of UnderdevelopmentUnderdevelopment (1975) (1975)

He argued that colonial and post-colonial He argued that colonial and post-colonial exploitation by Western Europe and the USA exploitation by Western Europe and the USA caused the underdevelopment of non-Western caused the underdevelopment of non-Western societies, societies, ratherrather than their development than their development

Why?Why?

Dependency theory

• Rich and poor nations are linked economically. Rich and poor nations are linked economically. “Modernization” of countries cannot be considered in “Modernization” of countries cannot be considered in isolation from each other.isolation from each other.

• During colonial period, European countries extracted raw During colonial period, European countries extracted raw materials, mineral and food from their colonies. materials, mineral and food from their colonies. this this enabled them to industrializeenabled them to industrialize

• Exploitation of their resources left colonized societies Exploitation of their resources left colonized societies poor. They were dependent on imports of industrial goods poor. They were dependent on imports of industrial goods from Europe. Most of the peasantry worked on farms or from Europe. Most of the peasantry worked on farms or mines from which products were exported to Europemines from which products were exported to Europe

Unequal exchange: the importation of Unequal exchange: the importation of manufactures from Europe and the manufactures from Europe and the exportation of raw materials and food to exportation of raw materials and food to Europe was detrimental for the economies Europe was detrimental for the economies of colonial and post-colonial nations. of colonial and post-colonial nations. WHY?WHY?

Manufactures are more expensive to buy than Manufactures are more expensive to buy than to sell raw materialsto sell raw materials

Did the end of colonization – Did the end of colonization – “decolonization” – bring an end to “decolonization” – bring an end to exploitation of the newly independent exploitation of the newly independent states?states?

No.No.

Political liberation has not translated into Political liberation has not translated into economic autonomy. economic autonomy.

Criticism of dependency theory

It only focuses on external factors of global It only focuses on external factors of global inequality. inequality.

It does not take into account that some segments It does not take into account that some segments of the population in a poor country also benefit of the population in a poor country also benefit from “dependent development” and from from “dependent development” and from exploiting poor members of their society.exploiting poor members of their society.

The rapid development of some countries such as The rapid development of some countries such as South Korea cast doubt on the thesis that “it is rich South Korea cast doubt on the thesis that “it is rich nations which make others poor.” nations which make others poor.”

World systems perspective

This perspective builds on the “dependency” approach. But it This perspective builds on the “dependency” approach. But it has a “world systemic” angle.has a “world systemic” angle.

Immanuel Wallerstein (1974): Immanuel Wallerstein (1974): The Modern World EconomyThe Modern World Economy

Wallerstein argues that capitalism is a “world economy.” Wallerstein argues that capitalism is a “world economy.”

The unit of analysis for studying the world economy is the The unit of analysis for studying the world economy is the “world” rather than individual nation-states (contra “world” rather than individual nation-states (contra modernization theory)modernization theory)

The capitalist world economy emerged in the 16The capitalist world economy emerged in the 16thth century in century in western Europe in the wake of the “discovery” of the western Europe in the wake of the “discovery” of the AmericasAmericas

World systems perspective

The capitalist world economy consists of a “core,” a “periphery,” and a The capitalist world economy consists of a “core,” a “periphery,” and a “semiperiphery.”“semiperiphery.”

Historically, the core was western Europe, which became industrialized Historically, the core was western Europe, which became industrialized by “extracting surplus” (funneling raw materials and precious metals) by “extracting surplus” (funneling raw materials and precious metals) from the “periphery.”from the “periphery.”

The semiperiphery stood in-between the core and the periphery in terms The semiperiphery stood in-between the core and the periphery in terms of incomes and levels of industrialization.of incomes and levels of industrialization.

In this world economy, the core exploited, or extracted surplus from the In this world economy, the core exploited, or extracted surplus from the periphery in terms of cheap labor, natural resources, raw materials and periphery in terms of cheap labor, natural resources, raw materials and as markets for European manufactures.as markets for European manufactures.

Example: In the 19Example: In the 19thth century, the Ottoman Empire was an exporter of century, the Ottoman Empire was an exporter of dried fruits and nuts to Europe and was dependent on imports of dried fruits and nuts to Europe and was dependent on imports of manufactures (“English cloth,” for example). It was heavily indebted manufactures (“English cloth,” for example). It was heavily indebted to European countries. to European countries.

World systems perspective

What is the situation today? What is the situation today? In the postwar period, many countries in the In the postwar period, many countries in the

periphery have become relatively industrialized periphery have become relatively industrialized For example, Turkey is a relatively industrialized For example, Turkey is a relatively industrialized

nation today, the majority of whose exports are nation today, the majority of whose exports are manufactures (industrial goods)manufactures (industrial goods)

Does this mean that the core no longer extracts Does this mean that the core no longer extracts surplus from the periphery?surplus from the periphery?

Or, does it mean that peripheral countries have Or, does it mean that peripheral countries have entered the core?entered the core?

The answer to both questions is no.The answer to both questions is no.

1) Surplus extraction from the periphery to the core 1) Surplus extraction from the periphery to the core is still ongoing.is still ongoing.

2) Only a few countries have entered the 2) Only a few countries have entered the semiperiphery or the core (e.g. South Korea) in the semiperiphery or the core (e.g. South Korea) in the postwar period.postwar period.

Wallerstein calls this situation, “development by Wallerstein calls this situation, “development by invitation.”invitation.”

“Commodity chains”

1)1) Peripheral countries are usually specialized in low-Peripheral countries are usually specialized in low-profit and labor-intensive links in international profit and labor-intensive links in international commodity chains. Core countries are usually commodity chains. Core countries are usually specialized in high profit links of commodity chains.specialized in high profit links of commodity chains.

A commodity chain: a chain of activities from the A commodity chain: a chain of activities from the manufacturing to the distribution of a final product.manufacturing to the distribution of a final product.

Example: the apparel (ready-to-wear clothing) Example: the apparel (ready-to-wear clothing) commodity chain includes, cotton growing, textile commodity chain includes, cotton growing, textile mills, stitching of garments, design, marketing, mills, stitching of garments, design, marketing, distribution, retailingdistribution, retailing

Apparel commodity chain

Multinational companies are concentrated in the high profit Multinational companies are concentrated in the high profit end of the apparel commodity chains such as design, brand end of the apparel commodity chains such as design, brand names, high technology and marketingnames, high technology and marketing

Companies in countries such as Turkey and Mexico are Companies in countries such as Turkey and Mexico are concentrated in labor-intensive activities such as the concentrated in labor-intensive activities such as the stitching of garmentsstitching of garments

Example: when Levi’s manufactures jeans in Turkey and Example: when Levi’s manufactures jeans in Turkey and sells them in Europe, it retains a higher proportion of the sells them in Europe, it retains a higher proportion of the profits because of its world-popular brand name.profits because of its world-popular brand name.

What about Mavi jeans? What about Mavi jeans?

2) 2) The South Korean “miracle”The South Korean “miracle”

S. Korea was a special case for two reasons:S. Korea was a special case for two reasons:a)a) having geo-political importance for the U.S. and having geo-political importance for the U.S. and

therefore a “favored” economic relationship with therefore a “favored” economic relationship with itit

b)b) having an authoritarian state which prioritized having an authoritarian state which prioritized industrialization at the expense of workers’ industrialization at the expense of workers’ rights and democracy until the early 1990srights and democracy until the early 1990s

In a nutshell, according to the world systems In a nutshell, according to the world systems perspective, the capitalist world economy is perspective, the capitalist world economy is still a system with structural inequalities still a system with structural inequalities between richer and poorer countriesbetween richer and poorer countries

What is the role of multinational corporations and global What is the role of multinational corporations and global financial institutions in perpetuating global inequality?financial institutions in perpetuating global inequality?

Examples: the World Trade Organization and the IMF?Examples: the World Trade Organization and the IMF?WTO (established in 1995) ensures that international trade WTO (established in 1995) ensures that international trade

takes place in a “liberal” environment. But by doing so, it takes place in a “liberal” environment. But by doing so, it prevents poorer countries from protecting their agricultural prevents poorer countries from protecting their agricultural and manufacturing sectors.and manufacturing sectors.

IMF (established in 1945) extends “stabilization” loans to IMF (established in 1945) extends “stabilization” loans to countries, but in turn, it requires them to cut down on countries, but in turn, it requires them to cut down on social spending (education, healthcare, public sector jobs) social spending (education, healthcare, public sector jobs) and open up (liberalize) their economies.and open up (liberalize) their economies.