Introduction
Globalization is the process through which services, capital, and even goods are freely moved across the borders (Alderson and Nielsen 1244-1245). Through globalization, western markets have spread all over the globe. Internationalization helps in integrating markets, technologies, and countries in a way that enables people and even companies to economically reach other areas around the world faster (Rueda and Pontusson 353-356). In recent times, there have been increase studies on the subject internationalization and the resultant income inequality. This paper highlights the link between globalization and income inequality.
Globalization and income inequality
Globalization has increased competitiveness. There are thousands of people in less developed countries that are willing and ready to earn less as compared to what workers in developed countries are to be paid for their services (Mahutga 1865). This has resulted in numerous cases of job loses in developed countries as people from the developing world have moved to developed countries in search of jobs in the manufacturing sector. This depresses the earnings of the remaining workers who must as well compete with the displaced employees.
Income inequality and poverty
Poverty simply means being in a state of inability to afford basic human needs (Mahutga 1865). Some of this basic needs include education, health care, food, and even shelter. Poverty relates to income inequality in different ways (Dicken 480-500). For instance, there is a huge gap or difference in inequality between the poor and the rich, especially in developing countries.
The trends
Since the 1940s, income inequality in the United States has been high. However, it has grown out of control or up to its highest at the turn of the 21st century (Mahutga 1865). Specifically, at the turn of the 21st century, almost all the rich people received close to five times more income as compared to the earnings of the majority of the poor households. This was almost three times up from what was recorded in the 1980s (Dicken 483-494). It is also estimated that in the 1980s, the Unite States recorded a seventy percent growth in income that appeared in pocket of the rich who at that time was just one percent of the entire population. This inequality has increased in the past two decades. For instance, in terms of wealth, in the mid 1990s, one percent of people of the United States was rich (Mahutga 1865). The interesting thing is that these households owned over forty percent of capital market stocks, over forty percent of private and government bonds, and over forty percent of all the real estate assets.
Within and between-country income inequality
Within-country income inequality simply refers to the inequality existing within each country (Mahutga 1865). Individuals within each state have differing levels of income. Income inequality between countries implies the differences in income between different countries. Income inequalities between people living within each country affect the inequality levels globally (Alderson and Nielsen1244). For instance, if income inequalities increase, it leads to a difficulty in the decline of income inequalities, specifically, that identified between national populations. On the other hand, income inequalities between people from different nations have some effect on the global income distribution as compared to the disparities or differences identified within such nations (Alderson and Nielsen1245). Within any country, income inequality is less than global inequalities are. This is based on the fact that some countries have higher levels of inequality than others have.
The trend of within-country income inequality since the 1960s
Income inequality within rich countries is analyzed in three phases (Mahutga 1865). The first phase is the postwar boom, which ranges from the late 1940s to the early 1970s. The stagnation phase, on the other hand, ranges from the early 1970s to the early 1980s. And finally, the new age ranges from the early 1980s to the mid 2000s (Alderson and Nielsen 1245). In the postwar period leading up to the 1960s, many rich countries recorded high growth in income. In the US,. for instance, wages for workers in the manufacturing sector rose by about eighty percent (Rueda and Pontusson 353). At the same time, the income of the richest people in the United States increased by about forty percent.
During the stagnation period leading up to the early 1980s, all the groups both the middle class and the rich lost their earnings (Mahutga 1870-1873). That is why, the wages for workers in the manufacturing sector dropped by about three percent and the earnings of the rich dropped by about four percent (Rueda and Pontusson 353-357). In the new era leading up to the early 2000s, whilst earnings in groups, such as middle class, stagnated, they increased in the richest category. Specifically, in the United States between the early 1980s and the mid 2000s, in the riches group, the income rose by about 200 percent. In other words, the income inequality within rich countries grew in the 1980s, the 1990s, as well as the early 2000s, but slightly dropped around 2007.
Globalization contributed to this trend
Globalization contributed to this trend in that these countries for the last forty years or so adopted trade liberalization (Rueda and Pontusson 353). This aspect opened these states to exposure to global markets. Therefore, trade liberalization was highly adopted in most of these countries, particularly, in the 1980s and 1990s, and represented an important part of their internationalization. During this time, globalization led to reduced trade barriers (Mahutga 1865). Therefore, this aspect has been explored to give the relationship between the changes in income inequality between the rich and the middle class.
However, in the late 1990s, globalization brought in other aspects other than trade liberalization or trade openness (Mahutga 1865). The economic landscape during this time changed a lot and was linked to factors, such as increased flows in capital, enhanced foreign direct investment, exposure to fluctuations or changes in the rate of exchange that negatively impact exports and immigration aspects, which puts pressure on local resources, just to mention a few (Alderson and Nielsen 1251). These factors increasingly became significant in determining how these countries fit or integrate in the global market.
The trend in global income inequality since the 1960s
The trend in global income inequality since the 1960s to the mid 2000s is in line with the above three concepts (Mahutga 1865). The differences in the three trends imply the role of globalization in the rate of global development and the level of global income inequality (Alderson and Nielsen 1260). Specifically, in the global south, globalization led to the creation or development of the concept of financial globalization. Financial liberalization in countries, such as China, India and other from Africa, helped in raising the growth of inequality through a number of ways. Through liberalization of the financial markets in some of these countries, such economic aspects enhanced home savings and easy adoption of modern of technology from the global north to the global south (Mahutga 1865). Inequality increased as it only favored the rich and the middle class in these countries.
Indirect channels in this case comprised of improvements in institutional and macroeconomic policies, all brought about due to internationalization. Some of these policies included free trade; export oriented industrialization and privatization (Mahutga 1865). In short, in the global south, the inequality changed in a similar way as that in the global north. Partly because liberalization opened up global markets, all the countries were affected by similar international changes in market forces.
Works Cited
Alderson, Arthur and Francoise Nielsen. “Globalization and the Great U-Turn: Income Inequality Trends in 16 OECD Countries.” AJS 107.5 (2002): 1244-99. Print.
Dicken, Peter. Global shift : Mapping The Changing Contours of the World Economy. London, UK: Sage Publishers, 2007. Print.
Mahutga, Matthew. ” The Persistence of Structural Inequality? A network Analysis of International Trade 1965-2000.” Social Forces 84.4 (2006): 1863-1889.Print.
Rueda, David and Jonas Pontusson. “Wage Inequality and Varieties Of Capitalism.” World Politics 52.1 (2000): 350–83.Print.