Factors Leading to the Increase in the Gap Between Rich and Poor Nations Due to Globalization

Topics: Poverty, Third World, Country classifications Pages: 7 (2447 words) Published: July 15, 2008


Inequality must be defined and be able to be measured so that comparisons can be made between rich and poor countries. Once the causes are determined, the effects of globalization can be evaluated and be measured. The World Bank defines inequality as the disparity of income and standard of living among nations and their citizens (Birdsall, 2002) The income gap that exists between the rich and poor countries has become substantial. In 2003, the richest fifth of the world’s population received 85% of the total world income, while poorest fifth received just 1.4% of the global income (infoplease, 2005).When the GDP is compared between the richest and the poorest nations over the past century, a wider income gap can be seen growing and this therefore means that income inequality has increased and continued widening.

Globalization has become painful, rather than controversial, to the developing world. It has produced increasing global economic interdependence through the growing volume and variety of cross-border flows of finance, investment, goods, and services, and the rapid and widespread diffusion of technology which has led to widening in the gap between the rich and the poor nations. Some of the factors that support this assertion include;

The growing economic interdependence is highly asymmetrical. The benefits of linking and the costs of de-linking are not equally distributed. Industrialized countries - the European Union, Japan, and the United States - are genuinely and highly interdependent in their relations with one another. The developing countries, on the other hand, are largely independent from one another in terms of economic relations, while being highly dependent on industrialized countries. Indeed, globalization creates losers as well as winners, and entails risks as well as opportunities. The losers in this case are the developing countries leading to the widening in the gap.

Some globalization observers have vouched that there has been a growing divergence, not convergence, in income levels, both between countries and peoples. Inequality among, and within, nations, has widened. Assets and incomes are more concentrated. Wage shares have fallen while profit shares have risen. Capital mobility alongside labor immobility has reduced the bargaining power of organized labor. The rise in unemployment and the accompanying "casualization" of the workforce, with more and more people working in the informal sector, have generated an excess supply of labor and depressed real wages.

Globalization has spurred inequality - both in the wealthiest countries as well as the developing world. China and India compete globally, yet only a fraction of their citizens prosper. Increasing inequality between rural and urban populations, and between coastal and inland areas in China, could have disastrous consequences in the event of political transition. Forty of the poorest nations, many in Africa, have had zero growth during the past 20 years. Their governments followed advice from wealthy nations and World Bank consultants on issues ranging from privatization to development, but millions of people suffer from poverty. Ironically, the wealthiest people benefit from the source of cheap labor. Western policies reinforce the growing divide between rich and poor.

Nearly three-quarters of Africa's population live in rural areas in contrast with less-than-10-percent in the developed world. Globalization has driven a wedge between social classes in the rich countries, while among the world's poor, the main divide is between countries - those that adapted well to globalization and, in many areas, prospered, and those that maladjusted and, in many cases, collapsed.

As the Second World collapsed and globalization took off, the latter rationale evaporated and a few countries, notably India and China,...
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