Chapter 9: Global Inequalities and Poverty What is the scale of global economic inequality? What is the extent of poverty across the globe? How can we explain the existence of global economic inequality?  modernization theory, dependency theory, world systems perspective

THE SCALE OF GLOBAL INEQUALITY Some facts: World population is more than 6 billion 1.3 billion people live on less than one dollar a day  they are in absolute poverty ** richest 20 percent of world population receives 80 percent of world income ** poorest 20 percent of world population receives 1 percent of global income!!!

Some terms: GDP: gross domestic product: all the goods and services produced on record in a country in a year GNP: Gross national product: all the goods and services produced in a country plus all foreign earnings in a given year (income figures in your book are based on the UN’s concept of “purchasing power parity.” PPP reflects the local purchasing power of each country’s currency.)

High income countries 40 countries (Western Europe, USA, Canada, Japan, Australia, New Zealand) Per capita annual income: USD 9,360 and above 15 percent of world population (870 million people) More than half the world’s total income

Middle Income Countries About 90 countries fall in this category. One third of humanity lives in middle income countries. Latin America, the Middle East, East Asia, West Africa Per capita annual income between USD 760 and 9,360. Half of the population lives in cities. They have moderate levels of industrialization. Several distinct groups within this category: *Newly Industrializing Countries (NICs): Brazil, Argentina, Mexico, South Korea, Taiwan. *Oil-producing nations of the Middle East *former Soviet bloc countries

Low income countries Half of humanity lives in low income countries  About 60 countries, mostly in central and eastern Africa and South Asia Per capita annual income less than USD 760 25 percent of the population lives in cities Little industrialization, mostly agricultural

The world according to incomes

Atlas of Global Inequalities Go to http://ucatlas.ucsc.edu/ for maps demonstrating global poverty according to various indices

THE EXTENT OF POVERTY GLOBALLY Poverty exists in all countries of the world; but it is most severe in low and middle income countries Poverty rates are highest in countries that have weak economies, weak industrialization, and high rates of population growth

Relative poverty: a level of poverty in which a person lacks resources that other members of her society has access to. Absolute poverty: less than 1 $ per capita income per day This is a life-threatening level of poverty, a situation in which a person faces the prospect of hunger and disease on a daily basis

Amartya Sen’s definition of poverty: it should be seen as a “deprivation of basic capabilities rather than merely a lowness of incomes” The Human Development Index (HDI) makes more sense according to this definition HDI measures a combination of life expectancy, per capita income, and education (number of years of schooling and adult literacy) (see chapter 4)

Some facts on absolute poverty 20 percent of world population (1.3 billion) is in absolute poverty. They are seriously malnourished. Among these, 800 million are at risk of their lives. Each year, 15 million people die of starvation. Sub-Saharan Africa is hardest hit by absolute poverty. In Turkey, about 1.3 million people live with about a dollar a day. ( absolute poverty)

Groups most affected by poverty Women Children Refugees and displaced people ( people affected by wars and disasters)

“Feminization of poverty” In all countries, women are overrepresented among the poor. 500 million of the world’s poorest 800 million are women. Why? -- women are paid less than men in many wage-paying jobs -- they have less education than men (in the poorer countries) -- less educated women have more children -- the burden of child-rearing falls on women -- men own most income-generating property and real estate in middle and low-income countries (such as farms, farm animals, tractors, homes, etc.) -- When poverty hits a family, men might leave women.  children and women are left to fend for themselves -- In a poor community, poor women might be unable to get support from family and friends

Children and poverty Poverty forces children to work or to desert their families Results -- children working on the streets -- street children (living on the streets) -- exploitation of child labor -- sexual exploitation -- criminal activities such as drug abuse and theft

Child labor in Turkey Several categories of child labor exist -- children working on the streets (garbage collection, sale of food, tissue paper, flowers, etc.) (younger children) -- children working in sweatshop production (textile, garments, leather, auto repair, etc.) (“older” children, but still working illegally) -- children living on the streets Several studies show that this is not a large group, although it attracts more public attention (such as “tinerci” kids, beggars, etc.)

Displaced people Every year, millions of people are displaced from their homes and lands because of armed conflicts and wars, natural disasters and “development projects” Refugees: are the people who flee their own country and cross international borders to avoid war or political/economic oppression. Currently, there are more than 20 million refugees in the world. Examples of recent refugee flows: Afghanistan, Rwanda, Bosnia, Kosovo, Iraqi Kurds

Refugees Why might refugees be poor? Because they leave everything behind. And often, they might not get sufficient aid and basic services in the countries they arrive. Since, not all refugees are granted asylum. Current international refugee regime was established in 1951 in response to the population displacement after WWII. UNHCR was established. The greatest refugee flow was between India and Pakistan in the late 1940s after the Partition  more than 20 million people crossed borders, thousands died on the road.

Internally displaced people IDPs flee their homes because of wars, disasters or development projects, but unlike refugees, do not cross international boundaries. Thus, they do not have the same rights as people who are recognized by the UNHCR as refugees. Today, there are nearly 20 million IDPs globally. Do you know which country in Europe has one of the greatest numbers of IDPs right now?

Turkey! An estimated 350,000 to 1 million people (overwhelmingly Kurds) have been displaced since the late 1980s from their homes in the Southeast. Why? “low intensity conflict”, fear of terror, village evacuations, collapse of the regional pastoral economy and agriculture

Why are IDPs poor? They leave behind property and belongings. They do not have skills required for finding jobs in their new environment.

HOW CAN POVERTY BE EXPLAINED? Technology: most poor nations are still agricultural; they don’t have much industry But does this explain poverty? Population growth: the poorest nations have the highest population growth rates But what’s the correlation between poverty and high birth rates? Cultural patterns Some poor nations are more “traditional”. But what does this mean? Social stratification: income distribution in poor countries is very uneven. That is correct, but it is also uneven in some wealthy nations. Gender inequality: women are more subordinated in some poor countries than in rich ones.

Global power relationships: historically, wealth flowed from poor to rich nations Colonialism: political domination and economic exploitation of some countries by others Neo-colonialism: economic exploitation of some nations by multinational corporations and wealthy countries, but without political domination

Three theories on global inequality and “development” Modernization theory (W.W. Rostow) Dependency theory (A.G. Frank) World systems approach (I. Wallerstein)

Modernization theory It is a theory of social and economic development which explains global inequality between countries in terms of different levels of technological development Traditional societies are “backward,” “underdeveloped,” and poorer. Societies which embrace modernity and change are wealthier and more developed

Modernization theory Western Europe, and then North America “modernized” and “developed” thanks to the Industrial Revolution. If traditional societies industrialize and embrace modernize, they will also become developed. So, the path to modernization is open to all who want it.

Rostow’s stage theory of modernization W.W. Rostow’s book : The Stages of Economic Growth. A Non-Communist Manifesto (1960) All societies will eventually pass through the following stages Tradition Preconditions for take-off Take-off Drive to technological maturity High mass consumption

Rostow’s modernization theory Each country reaches the “take-off” for industrialization when a market economy emerges. Britain reached that stage in 1800. Non-western nations will reach that stage when their productive investments grow. How? Through foreign aid and technology transfer. By the 1950s, the US reached the stage of “high mass consumption.”

Modernization Role of rich nations in the “modernization” of the poor -- foreign aid -- industrial technology transfer -- transfer of food production technology  the Green Revolution

Criticism of Modernization Theory Modernization theory is the ideological justification of Western-led capitalism Modernization theory does not take into account the colonial exploitation of the non-Western world by Europe Wealthier nations are often the cause of poverty, rather than being a solution for it

Cont’d The wealth gap between the rich and the poor countries is not diminishing; in fact, it has increased since the 1950s Industrialization does not guarantee an increase in living standards Modernization theory looks for internal causes of poverty; doesn’t consider any external factors It holds the life style of Western countries as a yardstick to judge the development of other nations. Hence, it is ethnocentric.

Dependency theory A model of economic and social development that explains global inequality in terms of the historical exploitation of poor societies by Western nations. Andre Gunder Frank: The Development of Underdevelopment (1975) He argued that colonial and post-colonial exploitation by Western Europe and the USA caused the underdevelopment of non-Western societies, rather than their development Why?

Dependency theory Rich and poor nations are linked economically. “Modernization” of countries cannot be considered in isolation from each other. During colonial period, European countries extracted raw materials, mineral and food from their colonies.  this enabled them to industrialize Exploitation of their resources left colonized societies poor. They were dependent on imports of industrial goods from Europe. Most of the peasantry worked on farms or mines from which products were exported to Europe

Unequal exchange: the importation of manufactures from Europe and the exportation of raw materials and food to Europe was detrimental for the economies of colonial and post-colonial nations. WHY? Manufactures are more expensive to buy than to sell raw materials

Did the end of colonization – “decolonization” – bring an end to exploitation of the newly independent states? No.  Political liberation has not translated into economic autonomy.

Criticism of dependency theory It only focuses on external factors of global inequality. It does not take into account that some segments of the population in a poor country also benefit from “dependent development” and from exploiting poor members of their society. The rapid development of some countries such as South Korea cast doubt on the thesis that “it is rich nations which make others poor.”

World systems perspective This perspective builds on the “dependency” approach. But it has a “world systemic” angle. Immanuel Wallerstein (1974): The Modern World Economy Wallerstein argues that capitalism is a “world economy.” The unit of analysis for studying the world economy is the “world” rather than individual nation-states (contra modernization theory) The capitalist world economy emerged in the 16th century in western Europe in the wake of the “discovery” of the Americas

World systems perspective The capitalist world economy consists of a “core,” a “periphery,” and a “semiperiphery.” Historically, the core was western Europe, which became industrialized by “extracting surplus” (funneling raw materials and precious metals) from the “periphery.” The semiperiphery stood in-between the core and the periphery in terms of incomes and levels of industrialization. In this world economy, the core exploited, or extracted surplus from the periphery in terms of cheap labor, natural resources, raw materials and as markets for European manufactures. Example: In the 19th century, the Ottoman Empire was an exporter of dried fruits and nuts to Europe and was dependent on imports of manufactures (“English cloth,” for example). It was heavily indebted to European countries.

World systems perspective What is the situation today? In the postwar period, many countries in the periphery have become relatively industrialized For example, Turkey is a relatively industrialized nation today, the majority of whose exports are manufactures (industrial goods) Does this mean that the core no longer extracts surplus from the periphery? Or, does it mean that peripheral countries have entered the core?

The answer to both questions is no. 1) Surplus extraction from the periphery to the core is still ongoing. 2) Only a few countries have entered the semiperiphery or the core (e.g. South Korea) in the postwar period. Wallerstein calls this situation, “development by invitation.”

“Commodity chains” Peripheral countries are usually specialized in low-profit and labor-intensive links in international commodity chains. Core countries are usually specialized in high profit links of commodity chains. A commodity chain: a chain of activities from the manufacturing to the distribution of a final product. Example: the apparel (ready-to-wear clothing) commodity chain includes, cotton growing, textile mills, stitching of garments, design, marketing, distribution, retailing

Apparel commodity chain Multinational companies are concentrated in the high profit end of the apparel commodity chains such as design, brand names, high technology and marketing Companies in countries such as Turkey and Mexico are concentrated in labor-intensive activities such as the stitching of garments Example: when Levi’s manufactures jeans in Turkey and sells them in Europe, it retains a higher proportion of the profits because of its world-popular brand name. What about Mavi jeans?

2) The South Korean “miracle” S. Korea was a special case for two reasons: having geo-political importance for the U.S. and therefore a “favored” economic relationship with it having an authoritarian state which prioritized industrialization at the expense of workers’ rights and democracy until the early 1990s

In a nutshell, according to the world systems perspective, the capitalist world economy is still a system with structural inequalities between richer and poorer countries

What is the role of multinational corporations and global financial institutions in perpetuating global inequality? Examples: the World Trade Organization and the IMF? WTO (established in 1995) ensures that international trade takes place in a “liberal” environment. But by doing so, it prevents poorer countries from protecting their agricultural and manufacturing sectors. IMF (established in 1945) extends “stabilization” loans to countries, but in turn, it requires them to cut down on social spending (education, healthcare, public sector jobs) and open up (liberalize) their economies.