Globalization, growth and distribution Inequality: the record

United Nations Conference on Trade and Development, Geneva. Trade and Development Report, 1997, Overview

I enclose just a few choice items from the T & D report overview. The full thing (overview only—10 pages) can be found on the unctad site in pdf format. There is solid (I presume so being a UN report) refutation that globalisation is inevitably good and that inequity is only a temporary problem. ...stu http://www.unicc.org/unctad/en/pressref/ps2btdr7.htm

The big story of the world economy since the early 1980s has been the unleashing of market forces. The deregulation of domestic markets and their opening up to international competition have become universal features. The “invisible hand” now operates globally and with fewer countervailing pressures from governments than for decades. Many commentators are optimistic about the prospects for faster growth and for convergence of incomes and living standards which greater global competition should bring.

However, there is also another big story. Since the early 1980s the world economy has been characterized by rising inequality and slow growth. Income gaps between North and South have continued to widen. In 1965, the average per capita income of the G7 countries was 20 times that of the world's poorest seven countries. By 1995 it was 39 times as much.

Polarization among countries has been accompanied by increasing income inequality within countries. The income share of the richest 20 per cent has risen almost everywhere since the early 1980s, in many cases reversing a postwar trend. In more than half of the developing countries the richest 20 per cent today receive over 50 per cent of the national income. Those at the bottom have failed to see real gains in living standards, and in some cases have had to endure real losses. In many countries, the per capita income of the poorest 20 per cent now averages less than one tenth that of the richest 20 per cent. But the increase in the shares of the latter has invariably also been associated with a fall in the share of the middle class. Indeed, this hollowing out of the middle class has become a prominent feature of income distribution in many countries.

Growing wage inequality between skilled and unskilled workers is not just a problem for the North. It is becoming a global one. In almost all developing countries that have undertaken rapid trade liberalization, wage inequality has increased, most often in the context of declining industrial employment of unskilled workers and large absolute falls in their real wages, of the order of 20-30 per cent in some Latin American countries;

Does inequality matter? It is possible that these international and national divisions reflect merely temporary adjustments to a rapidly changing world economy. Helping the rich to get richer may indeed be a prelude to rapid growth and the trickling down of income gains to all other socio-economic groups. But evidence is mounting that slow growth and rising inequalities are becoming more permanent features.