Martin Wolf believes that inequality is falling because of globalization. The booming of the economies of some of the world’s most populated countries has resulted in the large rise in many people’s standard of living. In his “Incensed About Inequality,” Wolf uses statistical analysis to support his claim: “The incomes of poor developing countries, with more than half of the world’s population, grew substantially faster than those of the world’s richest countries”. He calls today’s phenomenon a “period of partial convergence”, where the rate of economic growth of countries, using gross domestic product (GDP) per heard, is greater for developing countries than for developed countries. The wealth gap is shrinking, Wolf continues, stating “rapid economic growth in poor countries with half the world’s population has powerful effects on the only sort of inequality which matters, that among individuals”. The weighting of GDP on population is a highly debated topic, and to see another point of view, read the blog above. Wolf, however, believes that the individuals of the world are overcoming inequality through choosing globalization: “they choose, however haltingly, the path of economic liberalization and international integration. This is the heart of the matter. All else is commentary”.
To evaluate his argument, Wolf uses the gini coefficient, a measure created by an Oxford-Rome University collaboration which weighs average income (at purchasing power parity) by population. The ratios between the gini coefficients of developing and developed countries are getting smaller, meaning that economic inequality is falling. Wolf weighs his gini coefficients by population because he believes “it is people who matter, not countries”. Individuals should be measured, as country inequality is an ineffective indicator. Wolf agrees: “global inequality among households, or individuals, peaked in the 1970s, whereupon it started to fall. This decline happened not because of greater equality within countries, but because of greater population-weighted equality among them”. Wolf, however, rightly admits that the unusually rapid growth of India and China in comparison to other countries’ growth could skew statistics which are population-based in favor of the falling inequality argument.
Wolf also has the World Bank on his side. He highlights three of the World Bank’s conclusions about inequality and globalization. First, the amount of people in extreme poverty (as defined by the world bank) has fallen, from 1.8 billion in 1987 to 1.17 billion in 1999, but with a noticeable maximum of 1.29 billion in 1990. Second, most people who live in extreme poverty live in East Asia, which is now experiencing the beginnings of economic growth. However, the third conclusion is more sobering: while the number of people in extreme poverty in south and East Asia, especially between 1990 and 1999, in Eastern Europe, Central Asia, and sub-Saharan Africa, the number increased steeply, from 217 million inn 1987 to 315 million in 1999.
Despite that statistic, Wolf still holds that inequality is falling. He points to other indicators which point toward the increase in standards of living and thus the falling of inequality. Life expectancy has been continually on the rise since 1970. Infant mortality rates have declined. Education (measured by literacy rates) has risen. Fertility rates have also declined – fertility rates are a well-known indicator of other standard of living factors. The number of people with chronic undernourishment (as defined by the United Nations) also fell substantially. Finally the percent of children aged 10 to 14 in the workforce has also fallen. All of these indicators are global trends which support Wolf’s thesis: world inequality is falling because of globalization.
To evaluate his argument, Wolf uses the gini coefficient, a measure created by an Oxford-Rome University collaboration which weighs average income (at purchasing power parity) by population. The ratios between the gini coefficients of developing and developed countries are getting smaller, meaning that economic inequality is falling. Wolf weighs his gini coefficients by population because he believes “it is people who matter, not countries”. Individuals should be measured, as country inequality is an ineffective indicator. Wolf agrees: “global inequality among households, or individuals, peaked in the 1970s, whereupon it started to fall. This decline happened not because of greater equality within countries, but because of greater population-weighted equality among them”. Wolf, however, rightly admits that the unusually rapid growth of India and China in comparison to other countries’ growth could skew statistics which are population-based in favor of the falling inequality argument.
Wolf also has the World Bank on his side. He highlights three of the World Bank’s conclusions about inequality and globalization. First, the amount of people in extreme poverty (as defined by the world bank) has fallen, from 1.8 billion in 1987 to 1.17 billion in 1999, but with a noticeable maximum of 1.29 billion in 1990. Second, most people who live in extreme poverty live in East Asia, which is now experiencing the beginnings of economic growth. However, the third conclusion is more sobering: while the number of people in extreme poverty in south and East Asia, especially between 1990 and 1999, in Eastern Europe, Central Asia, and sub-Saharan Africa, the number increased steeply, from 217 million inn 1987 to 315 million in 1999.
Despite that statistic, Wolf still holds that inequality is falling. He points to other indicators which point toward the increase in standards of living and thus the falling of inequality. Life expectancy has been continually on the rise since 1970. Infant mortality rates have declined. Education (measured by literacy rates) has risen. Fertility rates have also declined – fertility rates are a well-known indicator of other standard of living factors. The number of people with chronic undernourishment (as defined by the United Nations) also fell substantially. Finally the percent of children aged 10 to 14 in the workforce has also fallen. All of these indicators are global trends which support Wolf’s thesis: world inequality is falling because of globalization.
The chart below is an International Monetary Fund (IMF) study on global inequality from 1820 to 1992. Notice that, although the large trend of global inequality is on the rise, at about 1980 the slope begins to downturn.
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