Introduction
As promised last week, today’s column begins with a brief report on the only recent study that I know of, which provides a quantitative measure of the direct impact of the global economy on poverty and inequality within nations. That study was conducted by Niheer Dasandi and published earlier this year in the British academic journal New Political Economy, (Volume 19 No 2, 2014). In the interests of full disclosure I report here that I am a member of the journal’s Editorial Advisory Board.
As the author states the study aims “to conduct a multivariate regression analysis of the effect of inequality between countries on world poverty between 1980-2007, employing a new structural measure of international inequality which is created using social network analysis to calculate countries’ positions in international trade networks” for regression against their poverty rates. Proxies for these poverty rates are provided by their respective “infant mortality rates.”
Clearly it is well beyond the scope and purpose of this column to engage readers in a technical discussion of these concepts and the methodology utilized by the author. Suffice it to observe that social network analysis (SNA) seeks to calculate countries’ positions within international trade networks in order to provide a quantitative measure of structural inequality between countries
The specific issue of concern to this column is highlighting the key results of this study. The author summarizes these as follows: “The results of the empirical analysis provide cross-country evidence to demonstrate that structural inequalities in the international system have a significant impact on poverty around the world.” Further, he also found: “international inequality has a significant impact on poverty which is robust when controlling for a countries’ overall income levels.”
As observed last week, the author stresses that he has undertaken the study principally because “dominant explanations within the existing development literature for differences in poverty levels around the world [tend generally] to ignore the influence of international inequality on poverty.” Indeed this has occurred for most of my treatment of the Guyana situation; right up until last week my focus has been exclusively on domestic factors!
The author’s emphasis on international factors has important implications for public policy responses. This was briefly indicated in last week’s column when I referred to Guyana’s increasing external economic and political ties (for example Caricom, the European Community- Cariforum Economic Partnership Agreement, EPA, as well as global and regional anti-money laundering and financing of terrorism arrangements). As readers know these ties directly impact on Guyana’s resource availability, laws, and governance, thereby affecting its generation of inequality and poverty.
The above observations are even more relevant in this age of intensified globalisation. Indeed we can go further and assert that, from Guyana’s earliest history, its society has been closely inserted (through slavery, indenture, colonial discovery and settlement, as well as economic reliance on plantation sugar) into global networks of production in which it has always been manifest that international factors have been impacting on every facet of the country’s domestic life.
To round off this week’s discussion, in the next section I introduce readers to some useful information illustrating global inequality.
International inequality
What does recent information on global inequality reveal, even though this topic is not the main focus of today’s column? The short answer is a mixed situation. On the one hand, global inequality remains quite stark. But, on the other, there is solid evidence showing that coordinated and sustained action at the international level could have aided in modifying sharp extremes. Thus for example, data recently published by United Nations agencies show that, worldwide, as few as 85 billionaires own more income and wealth than the poorest half of the world’s population (3.5 billion persons). But at the same time, the data reveal that six decades ago in the 1950s two in five persons lived on less than US$1 per day. Today, however, the figure has been reduced to one in seven. Further, life expectancy for the poorest part of the world’s population in the early 1950s was only 42 years, but today, it is as much as 68 years.
Such global policies as 1) those spearheaded by intergovernmental agencies and the United Nations under the aegis of the targeted Millennium Development Goals (MDG); 2) rich country to poor country official transfers of official assistance (both technical and financial); 3) private investment flows (both direct and portfolio); 4) trade access and 5) transfers of technology; along with, perhaps most importantly 6) domestic efforts aimed at structural reforms and suitable national policies have been largely responsible for these mixed outcomes.
These mixed outcomes are also revealed in the performances of rich countries. Thus in the United States over the past three decades the share of its total income going to the top one per cent of its households rose to as much as 22.5 per cent in 2012. Indeed the one ‘percenters’ share of income in the USA had more than doubled over this same period. Meanwhile, the share of labour income in the USA in 1970 was 68 per cent, but this had fallen to 62 per cent by 2012, with the trend in tax cuts and loopholes for the rich moving in the opposite direction!
A recent issue of Third World Economics (TWE) has reported on an IMF internal study, not officially released, which indicates that inequality in the advanced economies can be effectively addressed through social transfers and redistributive spending by governments. If accurate, this represents a sharp reversal of received IMF orthodoxy, which has always focused on the adverse impacts of government redistributive interventions in developed market economies. Further, TWE cites the not yet released study as claiming IMF internal data also reveal that 1) lower net inequality is robustly correlated with faster and more durable growth, and 2) past policies of income redistribution have had a benign effect on economic growth.
If made official these claims would substantially modify the IMF’s traditional neoliberal stance, which has been hostile to redistributive policies.
Next week I publish the final column on inequality and poverty in Guyana.
