Global Social Problems Week 2 (Socio-Economic Fault Lines: Inequality, Poverty, and Development)

income inequality among regions

-uneven growth- while a few regions converge with higher income countries, many remain stagnant or have declined

-GNI (gross national income) per capita of low income countries is only about one sixtieth of high income countries

-

wealth inequality among regions

-income vs wealth

• income is an amount received over a period of timer, wealth is the net assets, both financial and nonfinancial minus debt

-wealth inequalities are greater than income inequalities

-the more wealth in a region or country, the more it can invest in its people

inequality of income within countries

-explosive income growth is the main reason for the increase in inequality

-productivity drivers growth, but productivity and worker compensation do not necessarily grow together

• ex. china

impacts of global poverty and inequality

-UN Development Program

• measures and tracks indicators on which the quality of life and life chances depend

-the foundation of life chances: good health, education, food, shelter, wealth, income

quality of life along levels of development

-the bottom of the pyramid

• the forgotten, the unorganized, but the indispensable units of economic power (FDR)

• referred to bankrupt farmers and workers

• top down economic plans

• Roosevelt wanted to help these people

origins of contemporary inequality among nations

-Industrial Revolution

• prior to the industrial revolution, all societies were poor, few elites

-Three sectors of economic activity

• Primary (agricultural)

• Secondary (manufacturing)

• Tertiary (service)

-argument that people are poor because they are lazy

• broadly false

• people in low levels of development often work harder than wealthy societies, but work for less money

factors influencing varying levels of development

-extractive institutions and inequality

• extractive institutions did not support long term development and did not disappear with the end of colonization

• North America developed inclusive (direct rule) institutions

• The type of institution a society developed made the biggest differences in industrialization

Factors Influencing Varying levels of development

1) Diversity and conflict

• diversity can inhibit many developing countries

2) Corruption

• Endemic to inequality and underdevelopment

• Corrodes public trust, undermines the rule of law, bribery and kleptocracy, and excludes poor people from public services

3) The Resource Curse

• Many countries that are rich in resources are poor

• “Dutch disease”- become overdependent on a source, mismanage it

• Resources are not always a curse

  • depends on human agency

  • depends on the governance strucutre

4) Climate Change

• Costs include adapting agriculture, preventing and treating increases in vector-borne diseases, and harm to trade and fisheries

• Contributes to violent conflict

  • drought and food insecurity

  • terrorist groups

5) The Global Economy

• participating in the global economy is essential for lifting countries out of poverty

• openness to the global economy is positively related to human development

Varying pathways to development

-societies exist across the continuum of development

• developed countries diverged at the time of industrial revolution

• others took off and are slowly growing

-slow growth or income traps?

• the explosion of growth in the 2000s lifted many countries and people out of poverty and into the low income status

• moving from middle to upper income is progressing more slowly

How do we fight poverty and inequality?

1) no one size fits all answer to any global problem

• the Washington consensus- called this bc Washington is the base for all the big organizations of the world, answer for everything based on the US model (free trade, free market)

• providing people with equal life chances is increasingly recognized as a human right

  • this requires addressing the needs of the poor (programs and policies for inclusive and sustainable growth)

2) National Governments

• social welfare programs cover a few of the poorest people in the poorest nations

• economic growth is not the best measure of the health of the global or domestic economy

3) Equal Access to the tools of success

• ex. education- competing in a global economy requires skills and knowledge, lifelong learning and skill training need to be available to all people

• recognizing the value of unpaid work could be a critical step in reducing poverty

  • household production has a slight correlation with income

4) Intergovernmental and Non-governmental Aid Organizations

• Third world debt has crippled many nations

• Foreign aid as a mixed record of success

  • puts more money into poverty reduction efforts

  • comes with conditionality- transparency, fragmentation, selectivity

5) The Private Sector

• microfinance

  • the poor do not have access to the same financial services as middle or upper class

  • not everyone needs thousands of dollars to start a successful business

    • microlenders have a repayment rate close to 99% and range from US $100- 1500

• patient capitalism

  • Investment Strategy developed by Novogratz

    • Acumen fund- Investing in worthwhile projects was better than fast cash that produced no value

    • She looks for investments that will make a profit and contribute social value to communities

    • $300,000- 2.5 million

6) Fair Trade

• Global trade has lifted many people out of poverty

• Free trade is not always fair trade