Globalisation and worsening inequalities

Written by Subhash Agrawal | Updated: Apr 15 2006, 05:30am hrs
Going by a number of recent surveys by McKinsey, Pew, Gall-up and AC Nielsen, India is one of the few places where people are most confident about their future and where globalisation finds largest support among the middle class. It is a rather twisted irony that international anxiety about the new global order is rising just as India begins to finally feel comfortable about its new post-socialist avatar.

Despite broad-based economic growth in most OECD countries and the glitter of a rising China/India marketplace, the globalisation agenda is now facing a rising barrage of questions. In recent months, perennial globalists, like The Economist and The Wall Street Journal have carried cautionary wisdom about globalisation rather than their usual cheerleading. Davos 2006 closed on a note of sobriety rather than celebration, and end message, if any, was as much about the social and economic imbalances in the world as it was about the rise of India and China.

In his recent column, Globalizations New Underclass, even Stephen Roach, chief economist at Morgan Stanley, has said that: Billed as the great equalizer between the rich and the poor, globalization has been anything but. He adds: Only the elite at the upper end of the occupational hierarchy have been spared the pressures of an increasingly brutal wage compression. The rich are getting richer but the rest of the workforce is not. This is all pretty serious criticism, that too from family insiders.

Inequality is making a comeback on the global conscience and agenda. How unequal is the world The question is simple, but it addresses a concept that remains tricky and mired in arcane analysis among economists.

Roughly, there are three measures of inequality: cross-country, in-country and global. The first two are exactly as they sound, while the latter is a variation of the second, as if everyone was a citizen of the same country. Pro-globalisation economists usually tout the third measure, and they are right: taken as one big unit, not as different societies, the world is less unequal. But as any sociologist will affirm, what really matters is not this theoretical sense of one world but how people have done in relation to those around them. And going by that definition, economic inequality has become progressively worse and monstrously huge in the last few decades. In the last 20 years, income inequality has worsened in over 50 countries that together comprise over 80% of the worlds population. In China, for instance, the rise in income is so uneven that a recent World Bank study commented: If they were countries, Guizhou would rank just above Namibia and Shanghai alongside Portugal.

Inequality is growing alarmingly even in the western world. The country with perhaps one the widest rich-poor gaps in the developed world is the US, something that surprises many because of its deeply egalitarian instinct and track record in economic mobility. The US wealth gap in 1960 between the top 20% and the bottom 20% was 30-fold, now it is more than 75-fold. This gets progressively worse as we move further towards either end of the scale, with the top 1% Americans owning a over 50% of wealth. The poverty ratio in the US rose from 11.3% to 12.7% between 2000 and 2004. Of course, poverty in America is not a terrifyingly threatening battle of daily survival, but its existence and increase point to the fact that the US is a far less upwardly mobile society than ever in the past 100 years.

If all this is too technical, consider the following: the richest 50 individuals in the world have a combined income greater than that of the poorest 416 million, and the average amount of money spent daily in the richest 20 countries on dog and cat food is enough to feed the worlds poor for that day. Or, consider this interesting take from a website which has pegged Bill Gates wealth accretion from his stock portfolio to roughly a $1 million per hour or around $300 per second: assuming that it takes about 4 seconds to bend down and pick up something from the floor, if Bill were to see or drop a $1,000 bill on the ground, its just not worth his time to pick it up.

Should any individual be really worth so much Gates and many others like him are, of course, brilliant innovators whose success has resulted from personal genius rather than inheritance or corruption, but are their achievements really equal to the quiet struggles, accomplishments and dignity of millions others This massive scale of inequality now disturbs not just faint-hearted liberals but even the most committed capitalists.

The writer is editor, India Focus