Globalization and inequality

Just by judging the sheer number of books on social inequality published by prominent economists, political scientists, and sociologists in the past five years one can be excused for believing that the subject has always been close to the heart for social scientists (some of the leading examples are Atkinson, 2015; Deaton, 2013; Milanovic, 2011; Piketty, 2014, 2015; Stiglitz, 2012). Not so, as it turns out to be the case. The past five years have been highly productive insofar as the literature on social inequality is concerned (following a long hiatus that was only punctuated by anodyne exercises and studies of social stratification). Studies of inequality have taken the center stage in recent years, in part, to reflect on the worsening social inequality in the world, especially in the context of the buildup of high expectations of postsocialist, liberal, ‘end of history’ worldview.

Although economists have done most of the heavy lifting, sociologists have chipped in with their own, sometimes eclectic, brand of analysis. No sociological contribution deserves more attention than the brilliant work (with an evocative title, The Killing Fields of Inequality) of Goran Therborn, who for the past four decades has enlivened the sociological scene, beginning with his earlier innovative Marxist treatises on state, class, and democracy in the 1970s. His creative energy has taken him to various regions of sociology – global modernities, comparative globalization, comparative family, cities, and now back to class and inequality. Although his distinguished fellow travelers, a who’s who of economics, have produced a plethora of works (indicated above) that took for granted the concept of inequality as economic or income inequality without problematizing it, Therborn’s main contribution in this book is what others left unaddressed. He problematized the very idea of inequality.

Starting with the assumption that ‘inequality is a violation of human dignity,’ he plunges into the consequences of inequality – not just the apparent ones such as income inequality or status inequality, but the denial of human capabilities, a theme he borrows from economist-philosopher Amartya Sen and refines to use as a meaningful and serviceable sociological category. In order to sharpen the concept of inequality, Therborn contrasts it with difference (GT, p. 37). Then he returns to the sociological problem of the relationship between poverty and inequality. Although pursuing the sociological and analytical problems of inequality, Therborn never loses sight of the ethical basis of the discourse of inequality. The (near) universal revulsion of Auschwitz and apartheid signals a universal belief in human equality. The parenthetical ‘near’ is to remind us that the perpetrators of the Holocaust and many forms of mass killings today have not accepted, as betrayed by their wanton actions, ideas of the dignity of human life, equality, and common humanity. One may add that the idea of common humanity is predicated on the acceptance of the idea of inherent human equality.

Therborn reminds us that the feminists and the multiculturalists taught us the difference between difference and inequality. For many feminists, the right to equality has to be secured but not at the expense of difference between men and women. Likewise, an ethnic group in a multicultural society is entitled to equality of rights without losing their unique identity. Many of the battles and conflicts in the multicultural societies seem to emanate from this problematic relationship.

For Therborn, ‘Differences are given (by God/nature) or chosen (styles), while inequalities are socially constructed’ (GT, p. 38; emphasis in the original). Our problematizing of inequality originates from a common assumption of equality. Radical egalitarianism often overlooks the difference between difference and inequality. The call for equality is conditional. Even for Karl Marx, the indefatigable champion of equality, who asked for ‘each according to his [her] needs,’ assumed that needs are variable, which Amartya Sen calls the ‘capability to function.’ Therborn clarifies these complex ideas without resorting to simplification: he endorses Sen’s call for equality, ‘equality of capability to function fully as a human being,’ as expanded by Martha Nussbaum who suggests that capability entails survival, health, freedom of education, to choose one’s life-path, etc. (GT, p. 41). Achieving equality demands the removal of various barriers to human capabilities: ‘[I]nequalities are . . . violations of human rights, preventing billions of human beings from full human development,’ according to Therborn (GT, p. 41). Although he discusses poverty as a product of inequality, Therborn shows that American poor are worse off than European poor (west of the Balkans; GT, p. 43). The rates of relative poverty are highest in the three OECD countries with the greatest inequality: Mexico, Turkey, and the United States (GT, p. 43).

In conventional liberal discourse, much is made of a distinction between equality of opportunity and equality of outcome. The commonsense liberal accepts the latter but not the former. The main problem of ‘equality of opportunity’ argument is that it looks at one point in time (e.g., at birth). However, an individual’s life may have different momentous points that may work as turning points (GT, p. 44). And outcomes at different points in life – as students of social mobility attest – may change the opportunities. Then, of course, macro-social variation will convert equal opportunities to unequal outcomes, hence, the dichotomy between equality of opportunity and outcome is untenable and an ideological construct (GT, p. 47). Anthony Atkinson (2015), an economist, also thinks that the distinction between the two is largely false.

Following the lead of Sen and Nussbaum, Therborn explores the dimensions of human capability predicated on the choice of a life of well-being and dignity. Aligning the central capabilities deemed necessary for full functioning as a human being, Therborn depicts three kinds of inequalities that may stand in our way of fully functioning human being: (1) Vital inequality: health and physical well-being; (2) Existential inequality: autonomy, dignity, self-development; and (3) Resource inequality, which includes family (i.e., parents), inheritance, and income. Therborn correctly notes that the concept of existential inequality has not received much traction among the social scientists (GT, p. 50). Each of these types of inequality has an impact on the others. For example, health inequality, as a typical aspect of vital inequality, affects resource inequality; at the same time, it is affected by resource and existential inequalities. An unhealthy woman from an ethnic minority community is unable to command resources by income because of conditions of ill-health (vital inequality, existential inequality), which perpetuates her resource inequality.

Inequalities are produced and sustained socially by systemic arrangements and processes. There are four processes: Distanciation, which produces so-called ‘winners’ and ‘losers’; Exploitation, which is based on a categorical division between some superior and some inferior people (GT, p. 57); Exclusion, which is a variable rather than a category, reflected in in-group versus out-group relationships, obstacles, and hurdles such as ‘glass ceilings’ faced by some people or groups (GT, p. 59). Stigmatization is a marker of exclusion, and exclusion, in turn, may involve hierarchization (GT, p. 59). Hierarchization is common in bureaucracies and in traditional social orders. It can be seen in the caste system (e.g., Brahmins and Mandarins in India; GT, p. 60).

These four mechanisms are cumulative in their mode of operation. The mechanisms are not mutually exclusive. Any distributive outcome may well be the result of two or more mechanisms (GT, pp. 60–61). Together these four mechanisms can account for producing all kinds of inequality (GT, p. 61). They all four operate on health and life expectancy as well as on autonomy, recognition, and respect, and on economic and other resources, according to Therborn, who claims that these mechanisms will help explain life expectancy in London as well as gender discrimination in an Indian village (GT, p. 61).

To overcome inequality, Therborn suggests that we need the opposites of these mechanisms of inequality, e.g., approximation (i.e., catching up) to overcome distanciation; inclusion to overcome needs exclusion; and hierarchization flattened by opening more channels of mobility and policies such as minimum wage legislation, labor rights, etc. And exploitation can be overcome by redistribution, which has become a major feature of contemporary advanced capitalism of the social democratic variety (GT, p. 63). Self-criticism with reparations may redress existential inequality.

Tracing the history of inequality, Therborn argues that in premodern times there were differences, vertical differences of free men and slaves, of kings and commoners, of rich and poor like there were differences between men and women or old and young. Before the rise of the discourse of inequality, socially constructed inequality was so deeply entrenched in the fabric of society that it seemed to be more like nature- (or God-)given social inequalities. Rise of this-world common humanity was a precondition for the rise of the discourse of inequality. It is modernity that created the issue or the discourse of inequality. Two reasons were salient: first, that society is malleable, not a fixed entity ordained by God, which was an idea that evolved during the Enlightenment as a companion to the emergence of large-scale commercial capitalism (GT, p. 71). Second, was the secular notion of some fundamental human equality (GT, p. 72). These two ideas provided the ideological blast for the social revolutions of the 18th century, argues Therborn.

Therborn traces the discourses on inequality in relation to modernity in the 19th century via the master narratives of de Tocqueville (Democracy in America [1840]) and Marx (Das Kapital [1867]). He then considers the 20th-century narrative (via Simon Kuznets, 1955) that with industrial modernity, inequality first rises and then declines. Since the 1980s, rising income inequality has become a universal tendency of the centers of capitalism (GT, p. 78).

Therborn, after discussing the three narratives of inequality, moves on to discuss the state of play of the three kinds of inequalities: vital, existential, and resource. This disaggregation of inequality is a breakthrough in the discussion of inequality because all forms of inequalities are reduced to income or wealth inequality. The economic discourse on inequality has made a distinction between income and resource (inherited wealth) inequality, but has not included other forms of inequality. One could fall into economic reductionism or determinism by suggesting that vital inequality is a direct outcome of income inequality. However, a careful review of the facts on the ground would reveal that there are cultural, political, and historical circumstances that make the relationship less straightforward. Resource inequality may be a necessary but by no means sufficient condition for vital inequality. The case of Cuba is illustrative. Compared to resource-rich Brazil, resource-poor Cuba is better off (i.e., is more egalitarian) in terms of vital equality/inequality as evidenced in health indicators.

In light of Angus Maddison’s research, it is surmised that by the mid-16th century English life expectancy was the highest in the world (GT, p. 79). Sweden, Japan, the United States, and France joined that level in the 18th century. Historically, life expectancy has increased. The two aberrations – sub-Saharan Africa and Russia – can be attributed to the AIDS epidemic in the former and breakup of socialism in the latter (Therborn uses the term ‘restoration of capitalism’; GT, p. 80). It was more likely related to the dislocation resulting from the breakup of the socialist state and the transition to state-directed capitalism. Vital inequality reflects class inequality within the state (all industrialized states including [much-vaunted egalitarian] Sweden). This tendency has been stable for over 100 years (GT, p. 81). In America, the Native Indians lost their rights in the 19th century. British data, perhaps the best example here, reveal class-based, rich-versus-poor borough, and official-rank-based vital inequality. Members of the upper classes and upper echelons of the bureaucracy outlived the lower class and lower-ranked occupants of the bureaucratic ladder (GT, p. 83). What is sometimes referred to as lifestyle diseases, according to Therborn, are life option diseases: an unemployed person under stress may tend to drink and smoke more and contribute to lowering life expectancy for that class.

Existential inequality has also a nonlinear trajectory. Racism grew with imperialism, reaching its peak in Nazi Germany in the first half of the 20th century (GT, p. 83). Existential inequality has been in steep decline since 1945, according to Therborn. A clear example is the achievement of equality by women. ‘Sexism came under global attack’ in the 1970s with a UN-sponsored women’s conference in Mexico (GT, p. 83). A tidal wave of global feminism in the 1970s and 1980s followed. The end of apartheid in 1990 and the rise of indigenous movements in the 2000s are examples of reduction of existential inequality. The low castes gaining ground in Indian politics and global claims to LGBT rights in the beginning decades of the 21st century illustrate that (GT, p. 85). The last third of the 20th century was a period of major global existential equalization. The global mainstream clearly moved into existential equalization after 1945 (GT, p. 86).

Although Therborn writes, ‘equalization of personal autonomy, recognition and respect remains the main tendency of today’s world’ (GT, p. 86), a distinction may be made between the ideals and the reality on the ground. The second distinction is cultural difference, where there is a great deal of variation. The refugees fleeing the war in Syria are a case in point. The refugees were not welcome in some non-European countries. In Europe, the general tendency has been favorable yet a great deal of variation was noted, ranging from hostility to a warm welcome. Whereas Serbia shut its doors; Germany and Sweden welcomed the refugees until they reached a tipping point. The ideas of universal equality are often recorded in the exalted documents, international conventions, and charters of the UN, for instance. Lofty ideals are stated in national constitutions but the realties on the ground are different. The gap between the ideals and the values that shape everyday reality is often wide.

Of course, achievements have been made – most visible with regard to women’s equality – but it is still a work in progress. Therborn is right about the clamor over the 1% versus 99% – income inequality drowns the achievements (GT, p. 86). Yet there is no linear progress, according to Therborn: ‘It has not been a gradual human evolution of modernity. The worst genocides in history took place rather recently, in the 1940s and in the 1990s’ (GT, p. 86). Therborn reminds us of the backlash against women’s rights and against immigrants: ‘Islamophobia has spread in Europe and North America, and anti-Arabism seems to be mounting among Israelis in Palestine’ (GT, p. 86). Patriarchy and misogyny dominate certain parts of the world (most of Africa, West and South Asia, and even in developed East Asia, in discrimination against women in the labor market; GT, p. 86). South Africa turned explicitly racist in the late 1940s, the United States was similar until the 1970s. The Australian Labor Party kept the slogan ‘Keep Australia White’ until the early 1970s (GT, p. 86). Sub-Saharan Africa, India, and the rest of South Asia are more sexist than the Arab countries, according to the United Nations Development Report (UNDP) 2011 (GT, p. 87). Yet even in Arab countries there are variations. A recent survey (The Gulf News, 2014) found that women are more respected in the United Arab Emirates (UAE) than in any other country.

For example, the rules governing castes in some parts of India continue to deny existential equality. In rich countries, successful industrialization brought self-respect to the working class (GT, p. 87). Indigenous people got some respect and sometimes an apology for past discrimination and injustice (GT, pp. 87–88), but not reparations. In resource inequality, Asia lost out to the West from an earlier historical advantage (GT, p. 89), and international income inequality has grown. Therborn draws on Branco Milanovic, who found three global measures of income inequality: (1) GDP per country capita; (2) GDP per capita weighted by the population of the country; and (3) inequality within the country (by household surveys instead of national accounts [GT, p. 90]). In the mid-20th century, the curve of inequality flattened out mostly because of the decolonization of India and China. Yet global polarization among countries continues.

Therborn summarizes the historical trajectory of inequality as follows. The 19th-century rise of industrial capitalism generated more economic inequality but it was not a dramatic change. The 20th century brought about equalization in Europe since the First World War, in United States after the Great Depression, and in East Asia after the 1940s. Income inequality increased in virtually all the rich countries from the mid-1980s to the mid-2000s, even including Sweden, Therborn’s native country, which had a strong surge in inequality in the mid-1990s (GT, p. 5). Therborn recognizes the role of education in global equalization. For example, women are doing better than men (‘clearly overtaking’ them) in Argentina, Brazil, Malaysia, Bangladesh, China, Iran, and Mexico, but not (yet) in India, Indonesia, or Vietnam (GT, pp. 96–97).

Democratization in the advanced countries helped reduce some forms of historical inequality but it reached its limits. There is a trend towards inclusion, even in erstwhile dictatorships. The ‘Arab Spring’ and other mass mobilizations gave hope but also showed their limits for social transformation (GT, p. 99). Gender inequality remains high in South Asia (0.601) compared to China (0.299; (GT, Table 9, p. 106). Gender equality is worst in the African Sahel countries: Chad, Mali, and Niger. Rwanda and Burundi are somewhat better than the world average (GT, p. 107). And three categories of people recently gained recognition and respect in the modern era: indigenous people, homosexuals, bisexuals, and transgender persons (LGBT); and people with disabilities (GT, p. 111).

Japan, Korea, and Taiwan have an economic distribution strikingly similar to that of the European welfare states (GT, p. 118). In China, India, Indonesia, and Bangladesh, economic inequality has risen in the last two decades (GT, p. 118). No Western European country has a Gini ratio over 0.40 because of the legacy of the labor movement and its manifestations in social democracy, Christian democracy, and communism (GT, p. 119). In Latin America, popular education has been extended, minimum wages raised, and social entitlement extended. Targeted social programs have lifted many out of extreme poverty and increased schooling and child health (GT, p. 129). Income distribution is not only bound up with capitalism, but also with existential relations, e.g., male–female relations. The gender gap in income varies across countries in Latin America, the Middle East, North Africa, and South Asia.

Some of the puzzles presented by Therborn are: Why have the Northern welfare states failed on vital inequality? Despite socioeconomic and existential egalitarianism, these states do not do well in class-based vital inequality. Danish premature mortality is above the Western European average.

Existential equality resulted from the struggles and the strength of the disadvantaged groups themselves. As higher education expanded it allowed the downtrodden to become more articulate and well-informed, which made their movement more effective. Unlike resource inequality, existential inequality is not a zero-sum game with few exceptions (GT, p. 143). Existential equality has been a ‘gift of costless egalitarianism’ for powerful elites (GT, p. 145).

Rising economic inequality in the world, which started to ascend in the early 19th century, flattened out after the Second World War in per capita income terms.

There is no visible link between growing inequality in rich countries and the growing equality internationally. This is a point on which François Bourguignon concurs (FB, p. 1). Bourguignon shows that after two centuries of rising inequalities among countries, in recent years the gap has begun to decline, while the income gap within countries is increasing. Could there be a link between the low-wage competitive trade and outsourcing that weakened the working class in the rich countries? For Therborn, the jury is still out on that (GT, p. 147). Here François Bourguignon provides an important filler. Bourguignon shows that the expansion of global trade, the transnational mobility of capital and labor, and the spread of technology account for the reduction of income gaps among the countries, while at the same time, paradoxically, has contributed to the widening of inequality within countries. The transfer of low-wage, low-skill jobs to the Global South played a role in making the working classes in the North poorer (FB, p. 2). Global inequality, for Bourguignon, is the level of inequality among all the inhabitants of the single world, as if unencumbered by national entities. By using several measurement techniques – beyond traditional GDP calculations – Bourguignon concludes that the world is ‘extraordinarily unequal’ (FB, p. 22). If the less extreme metric of poverty of US$2.50 per day is used, 3 billion (or almost half of humanity) would be classified as poor. Twenty per cent of the people at the bottom (about 1.44 billion people) live a precarious existence; they constitute the subject of the Paul Collier’s important book, The Bottom Billion (2007). Bourguignon also seeks to go beyond poverty and income as the only dimensions of inequality and take infrastructure and social institutions into consideration. ‘After two centuries of steady economic growth,’ Bourguignon reminds us, ‘global inequality has significantly decreased over the last twenty years. But this should mask the fact that a small number of less populous countries have fallen significantly behind the rest of the world’ (FB, p. 29). A combination of El Niño and a bad economic situation made 7.9 million people in Ethiopia ‘chronically food insecure,’ rendered 400,000 people in South Sudan ‘on the brink of catastrophe,’ and left 3 million people in Zimbabwe requiring food aid in 2016 (Mungai, 2016). Bourguignon recommends that conclusions about world poverty and inequality will have to be nuanced.

The logic of the divergent growth of the world economy since the Industrial Revolution led to rapid growth in Western European countries, followed by the founding of European colonies. For the next 150 years, global economic growth took place exclusively in the region now known as the North. Japan’s development before the Second World War, and the economic development in the Asian Tiger economies (South Korea, Hong Kong, Taiwan, and Singapore) since the 1970s, and the robust development in China and India since the final decades of the 20th century helped reverse intercountry inequality, especially between developed and developing countries. Intracountry inequality, after its historic increase, began to decrease in developed countries during the interwar period with the advent of various income redistributive strategies. The socialist states of the 20th century (the USSR and China) also contributed to the reduction of intracountry inequality. Although global inequality (if all the people of the world are taken into account) has decreased due to the growth in the emerging economies in the South, the growth of intracountry inequality may blight the positive picture.

What is Therborn’s prognosis? ‘Inequalities are social constructions, and as such amenable to deconstruction’ (GT, p. 53). According to Therborn, the French Revolution (and to a lesser extent, the American Revolution) focused on existential inequality among male citizens. The Russian and Chinese revolutions brought rapid resource equalizations. Communist revolutions also attacked patriarchy (i.e., existential inequality), and vital inequality in these countries (including Cuba) decreased as life expectancy increased (GT, p. 154). On the eve of their turn towards capitalism, income inequality in China and Russia was at its lowest point (GT, p. 154). The Gini ratio in Russia was 0.26 in 1989 and 0.32 in China in 1978 (GT, p. 154). Today, with no competition with communism, and no incentive for ‘any mitigations of capitalist inequality,’ China has become more unequal than the United States. Therborn calls UN institutions and World Bank forces of egalitarian supply (GT, p. 164). The World Bank is no longer a monolithic bastion of neoliberalism – it contains some of the best researchers on inequality.

Bourguignon differentiates between wealth inequality and income inequality and notices an interesting divergence. ‘In the United States, the richest 10% receive 40% of total primary household income, but possess 71% total wealth. For the richest 1%, the numbers are 15% and 35%, respectively’ (FB, p. 57). Bourguignon goes on to discuss nonmonetary inequality in terms of inequality of opportunity, mainly due to social differences, e.g., race, gender, migrants versus citizens, intergenerational differences, and the quality of jobs. Some of these inequalities are hard to measure. In addition, there is the perception of inequality held by the populace, which is often revealed in opinion polls. The uniformity of these trends across countries can be attributed to globalization (FB, p. 72).

Bourguignon, in an attempt to explain the link between globalization and inequality, concludes that although part of the problem lies in exogenous global economic phenomena, economic policies and institutional structures within countries also play a decisive role. In the developed North, globalization played a role in deindustrialization, but saw the rise of tertiary sectors and increased productivity to offset the cost of deindustrialization. Domestic policies, often saturated in the ideologies of economic neoliberalism, corporate tax cuts and increases in general taxes, and cutting back on social programs, increased internal inequality. In the Global South, especially in the emerging economies, increasing access to global trade, direct foreign investment, relocation of production from the North to the South, as well as the spread of information technology, played a role in fostering rapid economic growth – reducing the inequality among the countries, while structural reforms and implementation of assorted neoliberal policies increased inequality within countries.

In predicting the future trends, it is worth emphasizing that Bourguignon cautions that despite the recent high growth in sub-Saharan Africa, making these countries ‘emerge’ is fraught with challenges. This recent growth is explained by favorable terms of trade and an improvement in political and economic governance. However, structural reforms have yet to be initiated, and with an unfettered population growth rate the battle against poverty may not be easily won; the historic decline of inequality among countries should not be taken for granted. The prognosis for the future of inequality within countries is more difficult to make because of the divergence within countries. Countries with income from natural resources with a small population (e.g., the UAE) have a better shot at reducing internal inequality than highly populated countries like Nigeria.

As Bourguignon notes, and as is attested by certain strands of research in economics, there is a tradeoff between equality and efficiency, because such enforced equality or wholesale redistribution will have a cost in efficiency. Yet unchecked inequality will erode efficiency. An inclusive society could level the field in terms of equality of opportunity, which will, in turn, ‘reduce economic inequality and lead to gains in efficiency for the economy as whole’ (FB, p. 141). Apart from the economic cost of inequality, growing inequality may be socially and politically disruptive, not just within a country but beyond national boundaries. All kinds of tax instruments in developed countries can help with redistribution. Hence several policy options remain. For the developing countries, a mixture of foreign aid and access to global trade has benefited a number of countries. Bangladesh has made a successful transition from an aid-dependent to a trade-dependent country with tangible results (e.g., an increase in GDP). Protectionism and deglobalization are not viable options. For the developed countries, redistribution by imposing taxes (property and income tax) is a theoretical option because in a globalized world, states are constrained by competition and possibility of the flight of the rich class to tax havens. More competition will be found among developed countries. Because an individual state is unable to avoid the consequences of redistribution, it may be possible to reverse the ‘contagion’ of the past regression of tax cuts for the rich in the developed countries and towards a progressive taxation that will collectively help the country. Global policies and actions are needed to offset the globalization of inequality as well as leveraging the benefits of globalization. Whereas Bourguignon depends on the states to lead the way by harmonizing their redistributive policies, Therborn examines social processes in explaining the growing inequality, its consequences, and the possible way out.

For Therborn, the three kinds of inequality – vital, existential, and resource – are all interactive and interdependent. Income inequality has devastating social, political, medical, and psychological consequences (GT, p. 167). Hence, the egalitarian focus has to be on all the multidimensional violations of and human-made hindrances to the capabilities of all humans to develop and flourish in the world of the rich (as well as in the rest of the world). The solutions have to be found with capitalism, which is going to stay, and which can be made to behave by granting people labor rights as well as citizens’ rights.

The nation evolved as an institution of equality and cohesion, which in the post-1990 phase of economic globalization was sacrificed in order to attract foreign capital in China, Vietnam, Argentina, and Eastern Europe. In Therborn’s words: ‘nations have become territories of cheap bodies, pimped by their elites to foreign capital’ resulting in unprecedented inequality (GT, p. 175). Rather than politicizing the discourse of human rights and using this for imperialistic missions, human rights need to be restored their original meaning as ‘the right to survival, to develop one’s own human capability, and to use that capability at one’s own choice’ (GT, p. 176). Therborn ends on an optimistic note. The 20th century was the century of the working class (GT, p. 177) and the 21st century is likely to be the century of the middle class (GT, p. 178). If the middle class today emulates the values of their classical counterparts – autonomy, rationality, and responsibility – realizing an inclusive, egalitarian, enlightened society may not be an impossible goal.