How Globalization affects our Economy on a Daily Basis

“ There is this feeling that contemporary capitalism isn’t working for everybody”- Sir
Deaton
Definition:
Economic inequality is the unequal distribution of income, opportunity and wealth between
different groups in society (between individuals and populations)
It is also described as the gap between rich and poor or the “wealth gap”.

Income inequality Wealth inequality

The extent to which income is unevenly distributed The unequal distribution of assets among a population.
among a certain population Assets = owned personal residence, cash in savings,
Income = wages, earnings people make from owning investments in stock/real estate
shares or rent

According to Forbes magazine’s rich list, America has 421

billionaires that own about 10.5 % of the total GDP2

According to Emmanuel Suez, UC Berkeley, 0.1% of

America's population take in as much as 188 times as
the bottom 90%.1

The poorest 10% of Americans went from having 0 assets to being 1000 in debt while families near the top
(at the 90th percentile) saw their wealth increase fivefold
1
https://inequality.org/facts/income-inequality/
2
https://www.economist.com/node/21564414
3
https://apps.urban.org/features/wealth-inequality-charts/
Reasons of economic inequality:
1.Globalisation:
-This process has resulted in the emergence of various "global players" such as Amazon,
Apple and McDonald's who dominate market shares and therefore lower survival chances
for small businesses.
This leads to an unfair distribution of wealth and power
- American Big Players ( incl. Amazon and Apple) started offshoring and relocating in other
low-wage countries such as China in order to benefit from low wages.
This lessens the standards of living and income there and leads to horrible work
conditions
- Increase in trade and Offshoring contributed to income inequality between nations

2. Technology and Education:

- Large wages are reserved for workers with a high level of education which leads to a
consistently increasing demand for skills.
Wealth for those with the skills (e.g. problem solving, organization skills)
Eliminates "middle-skill" jobs (e.g. repetitive tasks in production lines)
- Computer software and industrial machines fill roles that were once filled by
middle-skilled workers

5 6

4
https://www.americanprogress.org/issues/economy/news/2014/07/30/94864/offshoring-work-is-taking-a-
toll-on-the-u-s-economy/
 Labor market requires skilled workers to use computers and operate machines
Shift in demand for skilled workers creates increase in the wages of skilled
compared to unskilled workers
The income gap between skilled and unskilled workers widens
3. Gender inequality:
-Males are paid more than women doing the same job
-Women are derepresented in highly paid jobs and overrepresented in low- paying jobs
-The World Bank's women report measured gender discrimination in all countries except
Belgium, Denmark, France, Latvia, Luxembourg and Sweden. These six countries give
women equal legal work rights as men.7
- In America, the average salary of a woman is about 77% of that of men

Consequences resulting from economic inequality:

The Poor The Middle Class The Rich
Large amounts of poor people Economic inequality Higher crime levels in wealthy
affect economic growth by "squeezes" the middle class, neighbourhoods (In 2016 the
hindering investments in the threatening it's existence London School of Economics
educational sector. and reducing its demand for found that greater income gaps
goods and services between US neighbourhoods lead
to more crime in richer
neighborhoods)
- Income inequality leads to a higher level of poverty
Increased crime and poor public health ( higher disease and mortality rates)
Diminished governmental support
Wealthy citizens maintain political power over poor citizens
Development of tax structures in favor of the wealthy which increased political
instability

5
https://www.brookings.edu/blog/brookings-now/2019/02/08/charts-of-the-week-automation-and-jobs/
6
https://www.countable.us/articles/18654-unemployment-gap-skilled-unskilled-workers-shrinking
7
weforum.org/agenda/2019/03/surprising-stats-about-gender-inequality/
8
https://www.businessinsider.com/gender-wage-pay-gap-charts-2017-3
 Increase in political inequality as wealth concentrated in a number of hands leads to
political power in favor of a small wealthy group who can manipulate government in their
favor

What is the future of global inequality and how could it be tackled ?

To conclude, there is no doubt that contemporary capitalism leads to further economic
inequality. In a future in which “business as usual” continues to be of uphold importance,
global inequality is projected to increase sharply within the next few decades. As per the
British House of Commons, two-thirds of all assets in the world will be owned by the top 1%
of the world’s richest people by the year 2030. It is our reality now, that the three richest
people in the world own more than the lowest 48 nations combined as stated in a study
conducted by the World Institute. To combat economic inequality, the minimum wage has
to be increased in order to provide workers with a better life as increasing the minimum
wage does not hurt employment nor does it decelerate economic growth. Providing good
and free education to all citizens regardless of their social status would be the only effective
way to combat inequality between laborers. As long as the distribution of wealth and
income continues to be unequally distributed as it is today, economic inequality is
inevitable and capitalism, which led to the emergence of multiple billionaire-capitalists such
as Bill Gates or Jeff Bezos certainly will not be working for everybody, as Sir Angus Deaton
once asserted.

Sources:
https://www.economist.com/node/21564414
https://www.theguardian.com/business/2018/jan/02/do-globalisation-and-world-trade-fuel-inequality
https://www.economist.com/graphic-detail/2018/06/07/the-stark-relationship-between-income-inequality-and-
crime
https://www.worldbank.org/en/news/feature/2014/06/23/theorist-eric-maskin-globalization-is-increasing-
inequality
https://www.hrw.org/united-states/poverty-and-economic-inequality
https://www.weforum.org/agenda/2014/08/mexico-study-income-inequality-crime/
https://www.theguardian.com/news/2019/sep/09/inequality-is-it-rising-and-can-we-reverse-it
https://inequality.org/facts/income-inequality/
https://www.investopedia.com/terms/i/income-inequality.asp