Globalisation of inequality: Ramesh Shrestha

No money no rights

Globalisation and inequality have coexisted for centuries but the issue of globalisation became of interest among the academics, politicians and the general public around the 1970s while the issue of inequality became of interest starting in the 1980s. People generally think of globalisation simply as 'free' movement of goods, services, capitals, etc. across international borders but remain oblivious to the broader negative impacts on social & cultural and overall inequality among the consumers of globalisation. The opinion depends on whom you ask. It pushed international trade, finance, a particular way of development strategy, global expansion of western culture and tacitly a particular political ideology across the globe. Globalisation is credited for everything that has happened in our society, both good and bad. There has always been rich & poor and powerful and weak throughout our history but globalisation has redefined the meaning of being rich, poor, powerful and the weak.

It is necessary to acknowledge that globalisation has contributed substantially in the growth of industries and jobs creation with the increase in international trade & free trade agreement between countries. It improved the standard of living of people across the board in the majority of countries. Employment of people with all skill sets including unskilled laborers especially in export-oriented trade such as farming and mining grew exponentially. It raised the income level of all economic classes everywhere but the benefits of globalisation in the Western hemisphere which benefited most from the outsourcing of manufacturing and import of cheap resources from the developing countries is leaps ahead of the developing countries. It is one of the reasons for major wealth inequality between the rich and poor between countries and between people therein.

Proponents of globalisation believe that globalisation is essential for development, modernisation and in creating wealth. Others say it is distorting the economy as it favours only the elitists who can invest, causing a great divide between haves and have nots. It is also credited as the main cause of environmental degradation with over extraction, pollution, deforestation, periodic economic crisis and corruption. One of the undesirable outcomes of this divide is the undue political influence of the rich - the globalists, on the government policies on labour laws and taxation. As the corporate power continues to be pushed by the globalists, even the basic needs such as education, health care and water have become a commodity on which profit can be made. But we all – the UN and countries continue to lament these as basic human rights! No money - no rights! Social activists claim that globalisation made the rich richer and poor poorer, pushing the idea of social justice to a near state of comma.

Inequality, does it matter?

One cannot deny the fact that over the past decades people's standard of living has improved everywhere due to the spread of employment attributed to globalisation. The gap in the standard of living between rich countries and mid income countries is becoming narrower irrespective of their national wealth. It is made possible with expansion of international trade, mobility of the labour market and spread of technology. However, inequality between the rich and the poor within countries is rising at an alarming level. Besides the difference in individual earning, inequality also impacts opportunity in life. Inequality in income has adverse impacts on other opportunities due to inadequate cash at hand.

With the current economic policy adopted worldwide there is little hope of closing the rising tide of inequality. According to the Economic Policy Institute (Sept 2023) the CEOs of private firms earn much more today than in the 1990s. The annual compensation package for a typical CEO in the USA was $1,072.K in 1965 which increased to $29,596.K in 2021 compared to $48.K in 1965 to $67.K in 2021 for a typical employee in the same sector. Since the USA sets the trend for the private sector worldwide a similar figure could be imagined for the rest of the world. With the continued employment of robotics and in recent years application of AI technology there is also a growing risk of gradual decrease in employment of skilled workers too.

Government vs. private sector

Over the past forty years with the trade liberalisation and privatisation of the public sector spreading like a wildfire, countries have become very rich but the cash is in the hands of the private individuals not the governments. Many governments are in debt. Governments simply increase taxes to meet its public service needs, which negatively impacts the poor and the middle class, not the ultrarich. According to Forbes there are 2,781 billionaires in the world with a net worth of $14.2 trillion. One of these billionaires is on the way to becoming the first trillionaire very soon. According to Wealth-X, if we take into account people with $5 million as the base instead of billion, 3.6 million people have $75.3 trillion. It is a glaring testimony that the current economic and social policy is not working for the majority.

It is the biggest disservice done to the world at large by the Washington Consensus, which the leaders may never accept as accepting mistakes and guilt is not in the dictionary of politicians. The money spent in advertising by the private sector companies per capita is more than the cost of investment in education. Is it the best use of money?

It is not promoting socialism or communism, it is humanism

The world is facing two conflicting issues: with the application of AI and other technology there are risks of gradual decline in employment of people including skilled ones, while the world population will continue to grow with a new cohort of people entering the employment market every year. The universal basic income policy and unemployment insurance where it exists may give some relief but might not be enough to resolve the growing problem of inequality. In order to avoid unrest among the youth, there is a need for serious intervention for redistribution of wealth to address income inequality. As a matter of priority, countries need to review their socioeconomic policy and taxation policy. Eventually the continued inequality will be a political risk for the governments.

There is no one size fits all policy which has been the guiding principle of the globalists - World Bank and IMF and other international institutions which provide technical assistance to low- and mid-income countries. The potential interventions have to be decided by each country based on their local, institutional, human resources and policy imperatives, separately for the poor and the middle class. It is a matter of fairness irrespective of type of governance.

First step will be to review the remuneration structure across all sectors with a view to increasing worker's salaries, a difficult task but there is no alternative. It will help to redistribute the income within the private sector as it is the frontline workers who bring in profits for the industries and businesses. It is one of the ways to relieve economic pressure and to close the insane income gap. Second will be to reform the taxation policy. In terms of percentage, the low- and mid-income people are paying much more taxes against their income compared to the rich. However, these are easier said than done; but have to be done. It is a political choice the governments have to enforce without mercy - the idea is to control the unregulated greed of the rich and richest.

Finding a solution to resolve the issue of income inequality will be the biggest challenge to the policy makers and politicians in this century as the income inequality leads to inequalities in access to quality education, health care and housing, etc.

Since globalization is here to stay, the current level of income inequality may never be closed but it should at least be made possible for everyone to have enough to meet their basic needs. Countries need a people oriented not money-oriented political system. Can this happen without major political upheaval, before it is too late to save human civilisation?

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