Notes on Globalization and Global Inequality

F10 - Explain reasons globalization causes global inequality.
F13 - Discuss reasons different perspectives should be used to understand global inequality, using evidence/examples from different countries.

Globalization can lead to increased inequality within and between nations.
Developing Countries:
- Experience reduced costs for trade and better access to financial markets.
- Relative gains may occur due to increased opportunities, closing the gap with richer countries.
Developed Countries:
- Working class faces competition from cheaper foreign labor.
- Middle class in developing countries benefits, causing a rise in inequality within wealthier nations.

Specialization leads to trade:
- Increased trade-to-GDP ratios indicate growing trade volume and value.
- Can stimulate economic growth but may also raise relative poverty.
- Example: Importing cheaper steel can cause domestic job losses and lower wages in related industries, leading to structural unemployment.

De-industrialization in regions leads to high long-term unemployment and economic deprivation.
Pressure from globalization and cheaper labor from the East contributed to the decline of manufacturing.

Income share of the top 1% surged from 11% in 1980 to 20% in 2014.
Working class no longer competes effectively against lower labor costs abroad, affecting jobs in the Rust Belt.

Globalization’s benefits could increase tax revenues through economic growth, aiding investment in public goods and retraining programs.
Depends on government capabilities and political will to promote active policies.

Multinationals can exacerbate inequality via high executive pay and shareholder dividends.
They contribute to tax avoidance, reducing government revenue for public services and redistribution efforts.
- Example: UK multinationals avoided nearly £6 billion in taxes in 2017.
- Developing countries lose approximately $170 billion annually due to tax avoidance, hindering education and healthcare.

Criticized for facilitating tax avoidance through secret deals with multinationals, resulting in lost tax revenue and increased inequality.

Governments can enhance tax collection through various measures:
- Country-by-country reporting for transparency.
- Limiting interest rate charges among subsidiaries.
- Implementing taxes on offshore cash held by companies.

FDI flows to low-cost production countries, creating jobs there while reducing demand for similar skilled jobs in higher-income countries.
Workers in higher-income countries may end up in low-wage service jobs.

Technological advancement raises demand for skilled workers but outpaces unskilled labor, leading to long-term unemployment in certain sectors due to automation.

Globalization has reduced inequality between countries but increased it within nations, evident in cases like the US and China.
Milanovic's findings indicate benefits for a global middle class while the lower-income brackets suffer.

Significant income growth for the global middle class, particularly in emerging economies like China, India, and Brazil, while many in Africa see declines.

Local economies can suffer from increased competition from imports, exemplified by recent research on job losses in manufacturing areas due to Chinese imports.

Global billionaires saw wealth increase by $3.9 trillion during pandemic while workers’ earnings fell by $3.7 trillion, highlighting severe economic disparities.

To combat inequality, Oxfam suggests:
- Implement higher tax rates on the wealthy.
- Invest in healthcare and social protection.
- Reform systemic laws to promote gender equity and representation.

Economist Anthony Atkinson advocates for substantial reforms targeting technology, employment, taxation, and social security to alleviate income disparities effectively.
Suggests that creative policies are needed beyond taxing the wealthy to address growing inequality issues effectively.

A: Specter

A specter refers to a ghost or a spirit, but in a more figurative sense, it can also mean a looming threat or an unsettling, haunting idea, often associated with fear or danger.

B: Stagnate

To stagnate means to stop developing, progressing, or moving forward. It often implies a state of inactivity or lack of growth, whether it's a business, economy, or even a person’s skills.

C: High-tech Industries

High-tech industries are sectors that focus on the development, production, and utilization of advanced technology and innovations. This can include industries like robotics, software, biotechnology, telecommunications, and other cutting-edge fields.

D: Trade Barriers

Trade barriers are government-imposed regulations or policies that restrict or limit international trade. These can include tariffs, quotas, import bans, or subsidies that make it harder for foreign businesses to compete in the domestic market.