lesson 9: Poverty and Wealth

Class Topics Review

• Supply versus demand was discussed, providing examples such as the War on Drugs, which illustrates the challenges of curbing supply when demand is high, versus the lack of housing, where insufficient supply drives up prices and creates shortages. This discussion included an analysis of elasticity of demand and the impact of government policies on market equilibrium.

• The concept of trying to stop a flow, such as the efforts of militaries at borders to control immigration or the movement of goods, was mentioned. This highlighted the limitations and unintended consequences of restrictive policies.

• A substantive discussion on the difference between Syria and Venezuela was noted, focusing on push versus pull factors and state obligation. Syria was presented as an example of a country where citizens are pushed out due to conflict and instability, while Venezuela exemplifies economic factors pulling people out of their country, such as hyperinflation and lack of opportunities. The discussion included international laws and norms regarding state obligations to protect their citizens and the rights of refugees.

• Concepts such as non-refoulement, the principle of not forcing refugees or asylum seekers to return to a country where they are liable to be subjected to persecution, and inflationary pressures, which refer to the sustained increase in the general price level of goods and services in an economy, were touched upon. Various types of inflation were discussed and analyzed, including demand-pull inflation and cost-push inflation.

• The topic of citizenship and blood, referring to the legal principle of jus sanguinis, where citizenship is determined by ancestral descent, was also part of the review, comparing it with jus soli, where citizenship is based on the right of the birthplace.

Absent IPE

• Actors, including state and non-state entities, and their roles in the international political economy.

• Trade theories, policies, and agreements that shape global economic interactions.

• Production processes and global supply chains.

• Finance, including international monetary systems, capital flows, and financial crises.

• Globalization versus global governance, examining the tension between interconnectedness and regulatory frameworks.

• Economics departments versus business schools, highlighting their differing approaches to economic analysis and education.

• International political economy versus the analysis of capitalism, distinguishing between the study of global economic interactions and the critique of capitalism.

Enduring Question

• The central question posed is: In a world full of riches, why is there a seemingly endless cycle of poverty? This involves delving into systemic issues, historical factors, and policy failures that perpetuate poverty despite global wealth.

Inequality

• The lecture will address how to think about inequality, referencing wealth and global inequality, including discussions of income distribution, wealth concentration, and social mobility.

• Khan Academy is mentioned in association with this topic as it provides resources and explanations on understanding inequality.

Equality and Equity

• Definitions:

  • Equality: Providing the same resources or opportunities to everyone, ensuring each individual has access to the same support, regardless of their circumstances.

  • Equity: Recognizing that each person has different circumstances and allocating the exact resources and opportunities needed to reach an equal outcome, involving tailored support and accommodations to address disparities.

Equality and equity as political principles

• Progression from reality to equality, equity, and ultimately, liberation is visualized, demonstrating how these concepts build upon each other to achieve social justice and fairness.

GDP by Country (USD Million)

• The lecture includes a table of GDP (USD Million) by country, using data from IMF, World Bank, and United Nations.

• The table includes world GDP, followed by GDP of specific countries such as United States, China, Germany, Japan, India, United Kingdom, France, Italy, Brazil, Canada, Russia, Mexico, South Korea, Australia, Spain, Indonesia, Turkey, Netherlands, Saudi Arabia, Switzerland, Poland, Taiwan, Belgium, Argentina, Sweden, Ireland, Norway, and Austria.

• The table presents data from different years (2021, 2022, and forecast for 2023) and sources, along with UN region classifications, allowing for comparative analysis of economic performance and trends.

GDP Data for Various Territories

• The lecture continues with GDP data for Lesotho, Eritrea, Seychelles, Zanzibar, East Timor, San Marino, Guinea-Bissau, Antigua and Barbuda, Solomon Islands, Sint Maarten, British Virgin Islands, Comoros, Grenada, Vanuatu, Turks and Caicos Islands, Saint Kitts and Nevis, Saint Vincent and the Grenadines, Samoa, Dominica, Sao Tome and Principe, Tonga, Micronesia, Cook Islands, Anguilla, Marshall Islands, Palau, Kiribati, Nauru, Montserrat and Tuvalu.

• Data includes Forecast for 2023, Estimate for 2022 and Estimate for 2021, providing a comprehensive view of economic activity in these territories.

Global Wellness Economy

• The global wellness economy was valued at 4.2 trillion in 2017, indicating the significant economic impact of wellness-related industries.

• Segments of the wellness economy include:

  • Traditional & Complementary Medicine: 360 billion, encompassing practices like acupuncture, herbal medicine, and traditional healing systems.

  • Wellness Real Estate: 134 billion, including the development and sale of properties designed to enhance health and well-being.

  • Preventive & Personalized Medicine and Public Health: 575 billion, covering services aimed at preventing disease and promoting individual health.

  • Personal Care, Beauty & Anti-Aging: 1,083 billion, including cosmetics, skincare, and anti-aging treatments.

  • Healthy Eating, Nutrition & Weight Loss: 702 billion, covering diet plans, nutritional supplements, and health foods.

  • Fitness & Mind-Body: 595 billion, including gym memberships, yoga classes, and mindfulness practices.

  • Wellness Tourism: 639 billion, involving travel for the purpose of promoting health and well-being.

  • Spa Economy: 119 billion, including spa treatments, services, and facilities.

Dieting Trends

• A graph shows the percentage of American adults on a diet from 1988 to 2019, reflecting changing attitudes towards weight loss and health.

• The percentage of adults dieting peaked at 60% in 1991, followed by 54% in 1993 and then fluctuated over the years, eventually reaching around 24% in 2019, indicating a shift towards broader wellness trends rather than strict dieting.

Self-Help Book Sales

• A graph shows the number of self-help book unit sales in millions from 2013 to 2018, sourced from The NPD Group/NPD BookScan.

• Unit sales gradually increased from 15 million in 2013 to approximately 19 million in 2018, showcasing the growing interest in personal development and self-improvement.

Societal Issues

• Ryan Boyd's tweet highlights the issues of depression and anxiety among young people in a society with rising costs, monetization of human actions, and environmental concerns, reflecting the psychological impact of modern societal pressures.

Income Tax Rates

• A graph shows the top marginal income tax rate in select countries (France, Germany, UK, U.S.) from 1900-2013.

• The data, sourced from Thomas Piketty's "Capital in the 21st Century", indicates significant fluctuations in tax rates over the years, reflecting changing economic policies and priorities.

Minimum Wage

• Minimum wage history:

  • October 1938: Minimum wage established at 11.12.

  • February 1968: Peak value of 9.17, equivalent to 19,074/yr.

  • July 2009: Last increase, remains at 7.25, equivalent to 15,080/yr, which is 21% less than in 2009 (loss of 3,997 in annual earnings) and 34% less than in 1968 (loss of 8,040 in annual earnings).

  • July 2021: 7.25

Key Terminology

• Extreme Poverty:

  • The World Bank estimates 700-730 million people live in extreme poverty as of 2021 (9% of global population), compared to 35% in 1990, highlighting progress in reducing poverty but also the remaining challenges.

• Failed State:

  • When a body that rules a nation no longer functions as a government, leading to a breakdown of law and order and essential services.

• Fragile State:

  • States that are vulnerable due to deteriorating social, economic, or political indicators, making them susceptible to instability and crisis.

Defining Extreme Poverty

• The World Bank estimates approximately 700-730 million people in extreme poverty in 2021, about 9% of the global population.

• Poverty baselines (2018a) in US dollars:

  • 1.90 per person per day - in low-income states.

  • 3.20 per person per day - in lower-middle-income states.

  • 5.50 per person per day - in upper-middle-income states.

  • 21.70 per person per day - in high-income states.

Defining Poverty

• The World Bank defines global poverty as living on 1.90 or less a day, but this definition does not include essential services, such as healthcare, education, and sanitation.

• Four conditions that prevent access to wealth:

  • History of exploitation: Poorest states were exploited through colonialism, imperialism, and/or slavery, creating lasting economic disadvantages.

  • War and political instability: Act as significant disturbances to economic development and nation building, diverting resources and hindering progress.

  • Structural economic conditions: Institutions like the World Bank, IMF, and WTO enact policies that put developing countries at a disadvantage, perpetuating poverty.

  • Inequality: Reinforces divisions between the so-called ‘haves’ and ‘have-nots’, limiting opportunities for the poor to improve their economic standing.

Gini Coefficient

• ‘Gini coefficient’ is a statistical measurement for inequality looking at income distribution.

• Higher coefficients coincide with high levels of inequality, which make the likelihood of violent crimes, high levels of drug use and instability higher, suggesting a link between economic disparity and social problems.

The Spirit Level

• Wilkinson & Pickett's book, The Spirit Level: Why Equality is Better for Everyone (2010), is referenced, which examines the social and economic effects of income inequality.

Life Expectancy and Income

• Health is related to income differences within rich societies but not necessarily to those between them, indicating that relative income matters more than absolute income for health outcomes.

Income Inequality Comparison

• Graph comparing how much richer the richest 20% are than the poorest 20% in various countries, illustrating the degree of income disparity in different nations.

Health and Social Problems Index

• A comparison index of health and social problems, indicating that these issues are worse in more unequal countries but not necessarily related to average income in rich countries, suggesting that inequality, rather than poverty, is a key driver of social problems.

Child Wellbeing

• UNICEF index of child wellbeing is referenced, noting that child wellbeing is better in more equal rich countries and unrelated to average incomes, reinforcing the idea that equality promotes better outcomes for children.

Trust Levels

• Levels of trust are higher in more equal rich countries and U.S. states, suggesting that greater equality fosters social cohesion and trust.

Mental Illness

• The prevalence of mental illness is higher in more unequal rich countries, indicating a link between inequality and mental health.

Drug Use

• Drug use is more common in more unequal countries, suggesting that inequality may contribute to substance abuse.

Infant Mortality

• Infant mortality rates are higher in more unequal countries, indicating that inequality may negatively impact infant health.

Obesity

• More adults are obese in more unequal rich countries, suggesting that inequality may be associated with unhealthy lifestyles.

Education

• Educational scores are higher in more equal rich countries, indicating that equality promotes better educational outcomes.

High School Dropout Rates

• More children drop out of high school in more unequal U.S. states, suggesting that inequality may lead to disengagement from education.

Teenage Birth Rates

• Teenage birth rates are higher in more unequal rich countries and U.S. states, indicating that inequality may be associated with social problems.

Homicide Rates

• Homicide rates are higher in more unequal rich countries and U.S. states, suggesting that inequality may contribute to violent crime.

Experience of Conflict

• Children experience more conflict in more unequal societies, indicating that inequality may create social tensions.

Rates of Imprisonment

• Rates of imprisonment are higher in more unequal countries and US states, suggesting that inequality may be linked to higher crime rates and incarceration.

Social Mobility

• Social mobility is lower in more unequal countries, indicating that inequality can limit opportunities for upward mobility.

Minimum CO2 Emissions

• High life expectancy can be achieved with low CO_2 emissions, suggesting that sustainable development is possible.

Recycling

• More equal countries rank better on recycling, indicating that equality may promote environmentally friendly behavior.

Income Inequality

• Graphs show the rising gap between rich and poor in the UK (1979-2005/06) relative to 1976, and in the US (1975-2005) relative to 1975, illustrating the growing income disparities in these countries.

Inequality Trust

• The rich developed societies have reached a turning point in human history where politics should now be about the quality of social relations and how to develop harmonious and sustainable societies, suggesting a need for a shift in priorities towards social well-being and sustainability.

Data Sources

• Lists the sources of data for the index of health and social problems, ensuring transparency and credibility.

The Price of Inequality

• Details the price of inequality regarding prison population, social mobility, life expectancy, teenage pregnancy, obesity, voting rates, trust, infant mortality and murder rate in certain countries (Japan, Sweden, Germany, UK, France, US), illustrating the multifaceted costs of inequality.

Reducing Poverty

• States have attempted to address poverty in four ways:

  • Official development (aid): Developed countries provide official development assistance with inconsistent and negative results, highlighting the challenges of aid effectiveness.

  • Trade and investment: Attempts to provide opportunity for states in the international system to grow economically (not always beneficial), indicating that trade policies need to be carefully designed to benefit developing countries.

  • Money lending: Loans provided for key infrastructure projects like bridges, roads, electricity lines, and power plants to spur economic development, but these loans can also create debt burdens.

  • United Nations goals: Sustainable Development Goals (2015) have 169 clear targets spread over 17 priority areas to be achieved by 2030, providing a comprehensive framework for addressing global challenges.

Globalization and the Wealth-Poverty Dynamic

• Globalization refers to the integration of national economies and the view that the world is being molded into a shared social space by economic and technological forces.

• The World Bank (2018) contends that globalisation has improved material circumstances of those who have engaged in the global economy, but this view fails to account for structural conditions that influence poverty.

Income Deciles and Emissions

• The richest 10% of the world population are responsible for almost half of total lifestyle consumption emissions, while the poorest 50% account for only around 10%, highlighting the unequal contribution to environmental degradation.

Sustainable Development Goals (Fabian Socialist)

• 1. No poverty

• 2. Zero hunger

• 3. Good health and well-being

• 4. Quality education

• 5. Gender equality

• 6. Clean water and sanitation

• 7. Affordable and clean energy

• 8. Decent work and economic growth

• 9. Industry, innovation and infrastructure

• Reduced inequalities

• Sustainable cities and communities

• Responsible consumption and production

• Climate action

• Life below water

• Life on land

• Peace, justice and strong institutions

• Partnerships for the goals

Population Growth

• Fears about carrying capacity, referring to the maximum number of individuals an environment can sustain without degradation.

• Economic fears about distribution, movement, consumption of resources, highlighting concerns about resource scarcity and inequality.

• Malthusian and Neo-Malthusian arguments, which posit that population growth will outstrip resource availability, leading to crisis.

Population Growth: India and China

• Case of India and China – 38% of global population, illustrating the significant impact of these countries on global population trends.

• Fertility and frequency of birth dependent on:

  • Period of infertility after birth

  • Time between ovulation and conception

  • Average length of pregnancy

  • Fetal mortality

  • Presence or absence of birth control techniques

• Length of time between births has the biggest impact, influencing overall population growth rates.

Estimated Annual Expenditures

• Estimates are for the younger child in husband-wife families with two children and assume an average annual inflation rate of 3.05 percent (USDA 2009).

Social Implications

• Nuclear family versus extended family, examining the impact of family structure on social support and resource allocation.

• Changes in birth rate are linked to cultural norms changing, reflecting the influence of social values on demographic trends.

• Gender dynamics will impact social reproduction, highlighting the role of women in childbearing and raising children.

Social Structures

• 1950s West Indian families – weak conjugal bonds (Handwerker).

Globalization and Wealth Poverty, cont.

• An alternative view highlights how globalisation causes poverty by entrenching inequality and concentrating gains in the hands of the wealthy.

• Neoliberal policies have driven reforms that minimise the role of government, removes trade barriers (even ones that protect workers’ rights), and reliance on ‘trickle down’ economics.

Ethical Concerns

• Interdependence of economies is best accompanied by an equal measure of ethical concerns, emphasizing the need for fairness and responsibility in global economic interactions.

Washington Consensus

• The Washington Consensus refers to 10 principles that the IMF, World Bank, US Treasury, and policymakers could agree on.

Globalization Since the 1960s

• New international division of labor.

What Killed Alternative Development

• ISI - OPEC Oil crisis.

• ISI Premised on developing domestic Industries to compete globally.

What is a Global Value Chain?

• A way of governing corporate/economic development.

Ways to Improve GVCSs in China

1. Product upgrading, or moving into more sophisticated product lines;

2. Process upgrading, which transforms inputs into outputs more efficiently by reorganizing the production system or introducing superior technology;

3. Functional upgrading, which entails acquiring new functions (or abandoning existing functions) to increase the overall skill content of the activities; and

4. Chain upgrading, in which firms move into new but often related industries.

iPhone Global Balance

• Figure shows that 1 iPhone equals $194.04 where VA (Value Added) is 6.54. Input examples being JAP ($62.79), SK ($80.05), USA ($24.63). Overall Trade Balance from iPhone 4 model -169.41.

Export Oriented Indusrialization

• EOI and GVC is the new 'Washington consensus'

• Shift from trade in goods to trade in value added, tasks and business functions.