The inequality fallacy behind the G20 protests

In support of this, World Bank data has shown that globalisation only benefits countries that actually globalise. Countries retracting from the global economy necessarily lose trade, foreign investment, skilled migration, and regress in real terms when compared with states that have removed structural barriers and facilitated globalisation. While growing inequality has become a feature of countries that have resisted globalisation, developing economies that have embraced globalisation have universally witnessed a net benefit. On average, such developing countries have seen their income per-capita increase at approximately 6 times the rates experienced within the developed world.

India and China have epitomised this trend. India, in a variety of different capacities, had resisted globalisation up until the late 1980’s. As societal forces shifted, India compressively reversed its ideological stance, liberalising its markets, pursing privatisation, and buying into globalisation. Once a stagnant economy, by 2000 India’s GDP per capita had more than doubled - an upward trend that continued thereafter. Ahead of India in terms of economic liberalisation, during the same period Chinese incomes increased by 400%.

During this period of accelerated globalisation, South Asian nations, representing 22% of the global population, grew in terms of GDP per capita at 2.4% annually, and East Asian nations, representing 31% of the global population, grew at 5.9%. This in-and-of-itself constitutes the largest ever increase in global living-standards, and the largest ever elevation of human beings out of poverty. In contrast, from 1975 to 2001, GDP per capita within the developed world increased by only 2.1% and declined to 1.7% after 1990.

At this point it might seem like two separate discussions have taken place. One where inequality has increased, and one, for the same period, where inequality as decreased. The trouble is statistical:

The first set of data, and the understanding that inequality has increased, is fundamentally a comparison between the income of the poor with the assets of rich. Assets, regardless of the ownership, intrinsically produce wealth. To draw an accurate income comparison between states during the period of globalisation, the data would need to be corrected by an approximate 20 times reduction in the existing asset-base of developed countries. Without this correction, global inequality misleadingly appears to have increased.

To explain this situation it is worthwhile drawing a comparison between the United States and China. For the period from 1980 to 2000, World Bank figures indicated an increase in the inequality-gap between the two countries based on Purchasing Power Parity (PPP) (China: $20,600, United States: $30,200 per capita). Yet the reason for this increase, was the already large divide that existed between the two countries. At the onset of this data, China’s standard of living was already 13 times less than that of the United States. From these disparate starting points, the Chinese economy would need to have grown by approximately 30 times that of the United States’ just to maintain this original gap. To simplify things, if economy ‘A’ was valued at $10 and economy ‘B’ valued at $130, then if both economy’s doubled in size to $20 and $260 respectively, then the inequality gap would have increased from $120 to $240, despite both economies having identical growth rates.

A more accurate comparison for this period shows that, while per capita income in the United States increased by 60%, in China, for the same period, per capita income increased by over 400%. And, the percentage of Chinese incomes on Purchasing Power Parity with the United States increased from 3% to 12% of the total population.

Inequality matters. It matters primarily because at the bottom end of its spectrum there exists extreme poverty on a scale so vast that it has been described by justice theorist Thomas Pogge as “a monumental crime against humanity”. According to World Bank data, 39.7% of all humanity are living in poverty (2.533 billion people), 830 million people are ‘chronically undernourished’, and 18 million people die each year due to poverty related-causes (one-third of all recorded human deaths). Since the end of the Cold War alone, vastly more people have died from hunger and related ailments than have died from all the wars, civil wars, genocides, mass atrocities and repressive governments throughout the entire 20^th century (the most violent century on record).

Rather than exacerbating this problem, globalisation, that is unrestricted globalisation, offers a partial solution. The United Nations Conference on Trade and Development (UNCTAD) estimates that $700 billion in global trade is being lost each year through rich countries simply refusing to live up their internationally agreed obligations and open their markets to outside competition: an international environment whereby the powerful and wealthy protect their status by limiting opportunities and market-access to the weak and poor. As a correction to this, and similar situations, a truly globalised economic environment is a morally positive outcome.

The G20 is far from being an ideal organisation. And its protestors have plenty to be concerned about. But the fear that globalisation is increasing global economic inequality, and thereby harming the global poor, should not be one of these concerns.