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Suggested Citation:"8 How Is Economic Globalization Affecting Inequality?." National Research Council. 2010. Understanding the Changing Planet: Strategic Directions for the Geographical Sciences. Washington, DC: The National Academies Press. doi: 10.17226/12860.
We live in an unequal world in which descriptors of global inequality—especially inequalities in income—abound. “[T]he world’s richest 500 individuals have a combined income greater than that of the poorest 416 million … 2.5 billion people [are] living on less than $2 a day” (Watkins et al., 2005: 18). Researchers and policy makers continue to debate how, and at what scale, inequality trends are changing, but, by any measure, the disparities between rich and poor are striking (Firebaugh, 2003; Milanovic, 2005; The Economist, 2006; Held and Kaya, 2007; Lobao et al., 2007). The recent past has also seen rapid economic globalization—characterized by the supranational spatial integration of economies and societies (Stiglitz, 2002). Globalization has intensified flows of goods, finance, people, and political/cultural interactions all across our planet (Mittelman, 2002; Dicken, 2007). Understanding the nature of, and linkages between, globalization and inequality is crucial because disparities abound in access to needs such as shelter, land, food and clean water, sustainable livelihoods, technology, and information. Inequalities in all of these realms pose challenges to human security and environmental sustainability.
Much of the research on the link between globalization and inequality has focused on the global scale—looking at inequality between countries using aggregate economic indicators such as gross domestic product per capita (sometimes weighted by national population). These measures of global inequality are limited because they implicitly assume that within-country distributions of income are perfectly equal (Milanovic, 2005). Comparisons of inequality across individuals in the global population, and across a broader range of measures, regardless of national boundaries, are much rarer, but are increasingly possible and necessary (Milanovic, 2005). Beyond the need for improved measures of global inequality, we are currently witnessing a historic change in patterns of inequality, termed by Firebaugh (2003) as the “inequality transition.” Since the 1980s, evidence suggests that inequalities have increased more rapidly within countries than between them, heralding the reversal of increasing between-country inequality—a trend that began with the Industrial Revolution (Milanovic, 2005; Held and Kaya, 2007).
Because it may seem counterintuitive that subnational inequality would grow in an era of globalization, this finding points to the importance of research on scale differences in inequality patterns, and on the spatial impacts of specific aspects of economic globalization, so that we can better understand how globalizing processes influence inequality—where and for whom (Kanbur and Venables, 2007). Addressing this problem requires research aimed at identifying how distributional mechanisms within markets and governance arrangements are shaping inequality across geographical scales and differentially distributed populations (see Lobao et al., 2007).
The timing of the recent shift in inequality patterns (the early 1980s) corresponds with the rise of new forms of economic globalization that have transformed spatial relationships around the globe. Expanding transportation and communication networks, trade liberalization, reorganization of financial structures, and the rise of new
Suggested Citation:"8 How Is Economic Globalization Affecting Inequality?." National Research Council. 2010. Understanding the Changing Planet: Strategic Directions for the Geographical Sciences. Washington, DC: The National Academies Press. doi: 10.17226/12860.
regional trade agreements have been redefining flows of commodities, investments, labor, and political power across the globe (Murray, 2006; Dicken, 2007). In the process, the “where and who” of the winners and losers of globalization are changing, as is the traditional role of the state in economic governance. The state is no longer the only, or even the primary, actor in economic processes, because markets are now global, regional, and local as much as they are national (O’Loughlin et al., 2004). A key research challenge going forward, then, is to move beyond a focus on individual states and identify the relationships between globalization and shifting patterns of inequality at varying scales (Held and Kaya, 2007).
Research in the geographical sciences can help identify the patterns and processes producing inequality across the world—within states and at local levels. Although sociology takes inequality to be a central problem, Lobao et al. (2007) argue that too much sociological research on inequality still operates at the national scale and entails questionable geographical assumptions about both the causes and patterns of inequality. These scholars argue for “the systematic incorporation of spatial factors into theory and research on inequalities” (Tickameyer, 2000: 811) and for research that builds multiscale models and draws on spatially referenced data. Geographical scientists are at the forefront of this research, undertaking projects aimed at representing and analyzing the intersections between the spatial and social dimensions of inequality. For example, geographical research is providing innovative cartographic representations of inequality that shed light on the nature and significance of patterns of inequality (Figure 8.1).
Research in what has been termed the “new economic geography” is currently analyzing the spatial character of inequality by building structural models of the relations between economies of scale, transport costs, geographical remoteness from markets, and biophysical resource endowments (Krugman, 1993; Redding and Venables, 2004). The 2009 World Development Report adopts this frame of analysis to argue that three geographical dimensions of the global economy must be transformed to reduce inequality. The report argues that these reductions will result from (1) a greater concentration of economic activity (density), (2) a reduction in the friction of distance (i.e., increasing the mobility of goods, capital, and labor), and (3) diminished divisions between places as a result of borders and differences in language and regulations (World Bank, 2009: 7). Research in the geographical sciences extends the new economic geography (see Part I, Box 1), positing the fundamental importance of place-based influences on economic developments. It follows that policy makers need to focus more attention on local contextual influences, a point highlighted by Kates and Dasgupta (2007: 16749). Along the same lines, Sachs (2006: 73) notes that “policy makers and analysts should be sensitive to geographical, political and cultural conditions that may each play a role (in producing poverty).”
In their efforts to understand uneven development within and across places, geographical scientists have developed a body of work focused on the spatially variable operation of processes producing inequality in places characterized by different systems of macroeconomic regulation, different welfare regimes, different social divisions of labor (between paid and unpaid work, for example), and different consumption and distribution practices (Jones and Kodras, 1990; Smith, 1990; Kodras and Jones, 1991; Perrons, 2001). Research in this vein, which has been undertaken by geographically oriented researchers in demography, geography, economics, and political science, has shown that inequality emerges from multiple processes operating simultaneously at a range of spatial scales, including unequal global distributions of returns to production and work at sites along international production and consumption chains; regional trade agreements that limit national sovereignty on environmental and labor protections; and the presence of race and gender discrimination in different places (Nagar et al., 2002). Their findings are of relevance to debates about the economic and inequality impacts of market liberalization (see generally Firebaugh, 2003; Milanovic, 2005; Dicken, 2007; Kanbur and Venables, 2007). 1
Some scholars take the position that market liberalization is a necessary precursor to expanded economic opportunities for all people across the globe (World Bank, 2009). Others contend that international trade agreements (North American Free Trade Agreement, World Trade Organization) that limit the ability of governments to adopt a wide range of protective environmental and social policies contribute to inequality (Stiglitz, 2002).
Suggested Citation:"8 How Is Economic Globalization Affecting Inequality?." National Research Council. 2010. Understanding the Changing Planet: Strategic Directions for the Geographical Sciences. Washington, DC: The National Academies Press. doi: 10.17226/12860.
