Chapter 9: Global Inequalities

and Poverty
What is the scale of global economic
inequality?
What is the extent of poverty across the
globe?
How can we explain the existence of global
economic inequality?
modernization theory, dependency theory,
world systems perspective

THE SCALE OF GLOBAL

INEQUALITY
Some facts:
World population is more than 6 billion
1.3 billion people live on less than one dollar
a day they are in absolute poverty
** richest 20 percent of world population
receives 80 percent of world income
** poorest 20 percent of world population
receives 1 percent of global income!!!

Some terms:
GDP: gross domestic product: all the goods and
services produced on record in a country in a year
GNP: Gross national product: all the goods and
services produced in a country plus all foreign
earnings in a given year
(income figures in your book are based on the UNs
concept of purchasing power parity. PPP reflects
the local purchasing power of each countrys
currency.)

High income countries

40 countries (Western Europe, USA,
Canada, Japan, Australia, New Zealand)
Per capita annual income: USD 9,360 and
above
15 percent of world population (870 million
people)
More than half the worlds total income

Middle Income Countries

About 90 countries fall in this category.
One third of humanity lives in middle income countries. Latin
America, the Middle East, East Asia, West Africa
Per capita annual income between USD 760 and 9,360. Half of
the population lives in cities. They have moderate levels of
industrialization.
Several distinct groups within this category:
*Newly Industrializing Countries (NICs): Brazil, Argentina,
Mexico, South Korea, Taiwan.
*Oil-producing nations of the Middle East
*former Soviet bloc countries

Low income countries

Half of humanity lives in low income
countries
About 60 countries, mostly in central and
eastern Africa and South Asia
Per capita annual income less than USD 760
25 percent of the population lives in cities
Little industrialization, mostly agricultural

The world according to incomes

Atlas of Global Inequalities

Go to http://ucatlas.ucsc.edu/
for maps demonstrating global poverty
according to various indices

THE EXTENT OF POVERTY GLOBALLY

Poverty exists in all countries of the world;
but it is most severe in low and middle
income countries
Poverty rates are highest in countries that
have weak economies, weak
industrialization, and high rates of
population growth

Relative poverty: a level of poverty in which a

person lacks resources that other members of her
society has access to.
Absolute poverty: less than 1 $ per capita income
per day
This is a life-threatening level of poverty, a situation
in which a person faces the prospect of hunger and
disease on a daily basis

Amartya Sens definition of poverty: it should be

seen as a deprivation of basic capabilities rather
than merely a lowness of incomes
The Human Development Index (HDI) makes more
sense according to this definition
HDI measures a combination of life expectancy, per
capita income, and education (number of years of
schooling and adult literacy)
(see chapter 4)

Some facts on absolute poverty

20 percent of world population (1.3 billion) is in
absolute poverty. They are seriously
malnourished.
Among these, 800 million are at risk of their lives.
Each year, 15 million people die of starvation.
Sub-Saharan Africa is hardest hit by absolute
poverty.
In Turkey, about 1.3 million people live with about a
dollar a day. ( absolute poverty)

Groups most affected by poverty

Women
Children
Refugees and displaced people ( people
affected by wars and disasters)

Feminization of poverty
In all countries, women are overrepresented among the poor.
500 million of the worlds poorest 800 million are women. Why?
-- women are paid less than men in many wage-paying jobs
-- they have less education than men (in the poorer countries)
-- less educated women have more children
-- the burden of child-rearing falls on women
-- men own most income-generating property and real estate in middle and
low-income countries (such as farms, farm animals, tractors, homes, etc.)
-- When poverty hits a family, men might leave women. children and
women are left to fend for themselves
-- In a poor community, poor women might be unable to get support from
family and friends

Children and poverty

Poverty forces children to work or to desert their
families
Results
-- children working on the streets
-- street children (living on the streets)
-- exploitation of child labor
-- sexual exploitation
-- criminal activities such as drug abuse and theft

Child labor in Turkey

Several categories of child labor exist
-- children working on the streets (garbage collection, sale of
food, tissue paper, flowers, etc.) (younger children)
-- children working in sweatshop production (textile,
garments, leather, auto repair, etc.) (older children, but
still working illegally)
-- children living on the streets
Several studies show that this is not a large group, although it
attracts more public attention (such as tinerci kids,
beggars, etc.)

Displaced people
Every year, millions of people are displaced from
their homes and lands because of armed conflicts and
wars, natural disasters and development projects
Refugees: are the people who flee their own country
and cross international borders to avoid war or
political/economic oppression.
Currently, there are more than 20 million refugees in
the world.
Examples of recent refugee flows: Afghanistan,
Rwanda, Bosnia, Kosovo, Iraqi Kurds

Refugees
Why might refugees be poor?
Because they leave everything behind. And often, they might
not get sufficient aid and basic services in the countries
they arrive. Since, not all refugees are granted asylum.
Current international refugee regime was established in 1951
in response to the population displacement after WWII.
UNHCR was established.
The greatest refugee flow was between India and Pakistan in
the late 1940s after the Partition more than 20 million
people crossed borders, thousands died on the road.

Internally displaced people

IDPs flee their homes because of wars, disasters

or development projects, but unlike refugees, do
not cross international boundaries.
Thus, they do not have the same rights as people
who are recognized by the UNHCR as refugees.
Today, there are nearly 20 million IDPs globally.
Do you know which country in Europe has one of
the greatest numbers of IDPs right now?

Turkey!
An estimated 350,000 to 1 million people
(overwhelmingly Kurds) have been displaced
since the late 1980s from their homes in the
Southeast.
Why?
low intensity conflict, fear of terror, village
evacuations, collapse of the regional pastoral
economy and agriculture

Why are IDPs poor?

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

HOW CAN POVERTY BE

EXPLAINED?
Technology: most poor nations are still agricultural; they dont have
much industry
But does this explain poverty?
2)
Population growth: the poorest nations have the highest population
growth rates
But whats the correlation between poverty and high birth rates?
3)
Cultural patterns
Some poor nations are more traditional. But what does this mean?
4)
Social stratification: income distribution in poor countries is very
uneven. That is correct, but it is also uneven in some wealthy
nations.
5)
Gender inequality: women are more subordinated in some poor
countries than in rich ones.
1)

Global power relationships: historically, wealth

flowed from poor to rich nations
Colonialism: political domination and economic
exploitation of some countries by others
Neo-colonialism: economic exploitation of some
nations by multinational corporations and
wealthy countries, but without political
domination
6)

Three theories on global

inequality and development
Modernization theory (W.W. Rostow)
Dependency theory (A.G. Frank)
World systems approach (I. Wallerstein)

Modernization theory
It is a theory of social and economic development
which explains global inequality between
countries in terms of different levels of
technological development
Traditional societies are backward,
underdeveloped, and poorer.
Societies which embrace modernity and change
are wealthier and more developed

Modernization theory
Western Europe, and then North America
modernized and developed thanks to
the Industrial Revolution.
If traditional societies industrialize and
embrace modernize, they will also become
developed.
So, the path to modernization is open to all
who want it.

Rostows stage theory of modernization

W.W. Rostows book : The Stages of Economic
Growth. A Non-Communist Manifesto (1960)
All societies will eventually pass through the
following stages
1) Tradition
2) Preconditions for take-off
3) Take-off
4) Drive to technological maturity
5) High mass consumption

Rostows modernization theory

Each country reaches the take-off for

industrialization when a market economy emerges.
Britain reached that stage in 1800. Non-western
nations will reach that stage when their productive
investments grow. How? Through foreign aid and
technology transfer.
By the 1950s, the US reached the stage of high
mass consumption.

Modernization
Role of rich nations in the modernization of
the poor
-- foreign aid
-- industrial technology transfer
-- transfer of food production technology
the Green Revolution

Criticism of Modernization Theory

1)
2)

3)

Modernization theory is the ideological

justification of Western-led capitalism
Modernization theory does not take into
account the colonial exploitation of the
non-Western world by Europe
Wealthier nations are often the cause of
poverty, rather than being a solution for it

Contd
4)

5)
6)
7)

The wealth gap between the rich and the poor

countries is not diminishing; in fact, it has
increased since the 1950s
Industrialization does not guarantee an increase in
living standards
Modernization theory looks for internal causes of
poverty; doesnt consider any external factors
It holds the life style of Western countries as a
yardstick to judge the development of other
nations. Hence, it is ethnocentric.

Dependency theory
A model of economic and social development that
explains global inequality in terms of the historical
exploitation of poor societies by Western nations.
Andre Gunder Frank: The Development of
Underdevelopment (1975)
He argued that colonial and post-colonial exploitation
by Western Europe and the USA caused the
underdevelopment of non-Western societies, rather
than their development
Why?

Dependency theory

Rich and poor nations are linked economically.

Modernization of countries cannot be considered in
isolation from each other.
During colonial period, European countries extracted raw
materials, mineral and food from their colonies. this
enabled them to industrialize
Exploitation of their resources left colonized societies
poor. They were dependent on imports of industrial goods
from Europe. Most of the peasantry worked on farms or
mines from which products were exported to Europe

Unequal exchange: the importation of

manufactures from Europe and the
exportation of raw materials and food to
Europe was detrimental for the economies
of colonial and post-colonial nations.
WHY?
Manufactures are more expensive to buy than
to sell raw materials

Did the end of colonization

decolonization bring an end to
exploitation of the newly independent
states?
No.
Political liberation has not translated into
economic autonomy.

Criticism of dependency theory

It only focuses on external factors of global

inequality.
It does not take into account that some segments of
the population in a poor country also benefit from
dependent development and from exploiting
poor members of their society.
The rapid development of some countries such as
South Korea cast doubt on the thesis that it is rich
nations which make others poor.

World systems perspective

This perspective builds on the dependency approach. But it
has a world systemic angle.
Immanuel Wallerstein (1974): The Modern World Economy
Wallerstein argues that capitalism is a world economy.
The unit of analysis for studying the world economy is the
world rather than individual nation-states (contra
modernization theory)
The capitalist world economy emerged in the 16th century in
western Europe in the wake of the discovery of the
Americas

World systems perspective

The capitalist world economy consists of a core, a periphery, and a
semiperiphery.
Historically, the core was western Europe, which became industrialized by
extracting surplus (funneling raw materials and precious metals) from
the periphery.
The semiperiphery stood in-between the core and the periphery in terms of
incomes and levels of industrialization.
In this world economy, the core exploited, or extracted surplus from the
periphery in terms of cheap labor, natural resources, raw materials and as
markets for European manufactures.
Example: In the 19th century, the Ottoman Empire was an exporter of dried
fruits and nuts to Europe and was dependent on imports of manufactures
(English cloth, for example). It was heavily indebted to European
countries.

World systems perspective

What is the situation today?
In the postwar period, many countries in the periphery
have become relatively industrialized
For example, Turkey is a relatively industrialized nation
today, the majority of whose exports are
manufactures (industrial goods)
Does this mean that the core no longer extracts surplus
from the periphery?
Or, does it mean that peripheral countries have entered
the core?

The answer to both questions is no.

1) Surplus extraction from the periphery to the core
is still ongoing.
2) Only a few countries have entered the
semiperiphery or the core (e.g. South Korea) in the
postwar period.
Wallerstein calls this situation, development by
invitation.

Commodity chains
Peripheral countries are usually specialized in lowprofit and labor-intensive links in international
commodity chains. Core countries are usually
specialized in high profit links of commodity chains.
A commodity chain: a chain of activities from the
manufacturing to the distribution of a final product.
Example: the apparel (ready-to-wear clothing) commodity
chain includes, cotton growing, textile mills, stitching
of garments, design, marketing, distribution, retailing
1)

Apparel commodity chain

Multinational companies are concentrated in the high profit
end of the apparel commodity chains such as design, brand
names, high technology and marketing
Companies in countries such as Turkey and Mexico are
concentrated in labor-intensive activities such as the
stitching of garments
Example: when Levis manufactures jeans in Turkey and sells
them in Europe, it retains a higher proportion of the profits
because of its world-popular brand name.
What about Mavi jeans?

2) The South Korean miracle

S. Korea was a special case for two reasons:
a)
having geo-political importance for the U.S. and
therefore a favored economic relationship with
it
b) having an authoritarian state which prioritized
industrialization at the expense of workers
rights and democracy until the early 1990s

In a nutshell, according to the world systems

perspective, the capitalist world economy is
still a system with structural inequalities
between richer and poorer countries

What is the role of multinational corporations and global

financial institutions in perpetuating global inequality?
Examples: the World Trade Organization and the IMF?
WTO (established in 1995) ensures that international trade
takes place in a liberal environment. But by doing so, it
prevents poorer countries from protecting their agricultural
and manufacturing sectors.
IMF (established in 1945) extends stabilization loans to
countries, but in turn, it requires them to cut down on
social spending (education, healthcare, public sector jobs)
and open up (liberalize) their economies.