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The inequality fallacy behind the G20 protests

By Jed Lea-Henry - posted Thursday, 13 November 2014


For a mental image that instinctively breeds mistrust, imagine the twenty most powerful businessmen and women of a small town holding a behind-closed-doors meeting in order to facilitate better economic and political control over the already dominated population. Despite the professed altruism behind some of the closeted discussions, this scenario is an accurate microcosm for what the G20 represents at a global level – at least on face value. It is therefore unsurprising that the G20 attracts such visceral and persistent protests in response to its annual conventions. These protests will once again materialise at the end of this week, as the G20 convenes in Brisbane, Australia.

The central theme to the protests will be, as it has been historically, an opposition to the lack of transparency, the lack of democratic representation, the oligarchical control over international politics, and the plutocratic self-fulfilment of the member states. Based on the structure and nature of the G20, this represents a valid set of grievances. However, and similarly predictable based on recent history, the converging protest movements will undoubtedly attach themselves to the much repeated claim that increased rates of globalisation, as a perceived by-product of these summits, produce ever-increasing levels of global economic inequality - thereby inflicting further suffering upon already impoverished societies. This is a statistical misunderstanding.

The first difficulty with this claim is conceptual. Ubiquitous now in casual discourse, the terms ‘globalisation’ and ‘inequality’ tend to be internalised as singular, straight-forward principles – in reality they are far from it.

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Distinct from internationalisation, globalisation is a relatively modern phenomenon. It is a term that encapsulates not just a multi-dimensional shrinking of the globe, but also a weakening of state authority, a predominance of the global market, the free flow of capital, a practical realisation of theoretical liberalisation; and the normative underpinning for a range of desires, attitudes, expectations, and trepidations.

Similarly, inequality can be a highly theoretical and non-tangible concept – understandable via a range of measurements and degrees. Popularly employed methodologies include: collating global income and assets at a purely individual level (judging global inequality in terms of a singular global statistical group, regardless of state boundaries). Alternatively, by measuring the representative income of states (in terms of GDP per-capita). Or, by a comparison between the mean income of states (in terms of raw GDP figures).

Far from being frivolous, this terminological challenge is vital to understanding global trends. Yet, even if we defer to innate knowledge, and concede for the sake of expediency, that despite being unable to completely verbalise their specific meanings, ‘globalisation’ and ‘inequality’ can still be conceptually grasped (thereby abandoning the problem before it has been resolved), the proposition that globalisation produces economic inequality still has it all to prove.

To begin with a clearing of the data that seems to give credence to the claim: Globalisation undoubtedly, though not in isolation, has contributed to the changing scope of global inequality. Without much variation between modelling and methods, inequality has steadily increased since the 1820’s, and has then greatly intensified from the mid-1970’s onwards – a spike that coincided with the rise of neoliberalism. As global exports and Foreign Direct Investment (FDI), as a percentage of GDP, increased, inequality increased in unison. For figures from 1960 onwards, the wealthiest one-fifth of the world’s states have seen their Gross National Product (GNP), as a share of the global pool, increase from 70% to 85%, while the poorest one-fifth have seen their GNP share decrease from 2.3% to 1.4%. To further support this trend, the Gini Coefficient as the World Bank’s adopted standard measurement for inequality, has been steadily increasing throughout this period.

On face value, this might seem conclusive. That is, globalisation is only beneficial to the main cultivators of the phenomenon – the already wealthy countries. That despite Adam Smith predicting that a globalised environment would be essentially ‘win-win’ (a system of “absolute advantage”), the only real advantage would be presented to those already equipped with sufficient wealth, resources and power to exploit the new environment.

With data that seemingly supports their preconceptions, the G20 protestors leave the argument at this point and begin placarding. They have however, and perhaps wilfully, embraced a fallacy.

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To begin with, it is important to note that international regimes such as the G20 do not in-and-of-themselves constitute globalisation. They are merely reacting to a trend that would still be moving in their absence.

Furthermore, the data cited does not satisfactorily account for certain mitigating circumstances: the vast majority of political instability, collapsed states, internally displaced people, civil wars, and mass atrocities have occurred within the developing world. This has predicably damaged, and often reversed, growth and development irrespective of the forces of globalisation. Similarly, the developing world has been witness to population growth well above the global average. Large population expansions naturally dilute statistical GDP per-capita.

Beyond this, there exists a more structural challenge and counterclaim. Rather than globalisation increasing economic inequality, it has been the incomplete and restricted nature of globalisation that has spurred this trend. A wholehearted embrace of globalisation necessarily includes the free movement of labour. Such free migration would not only optimise production, but also equalise wages across the globe. Blocks of extreme wealth form, as they have done, only insofar as globalisation exists as a restricted phenomenon.

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About the Author

Jed Lea-Henry is an Australia born academic. After graduating from La Trobe University with majors in Political Science and Philosophy, Jed completed his post-graduate education in International Relations at Deakin University. His research has covered a broad range of topics, including humanitarian intervention, civil conflict, violence prevention, regional development and moral philosophy. Jed is currently an Assistant Professor in Humanities and Social Sciences at Vignan University, and the host of the Korea Now Podcast. You can follow his work, or contact him directly at http://www.jedleahenry.org/

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