Globalization & Inequality 

MAY 2021

Economic, social, cultural integration, and exchanges of information and capital has dominated the world in the past decades.

Globalization and economic development are often presumed to have a positive impact on improving women’s rights, as well as empowering and employing the masses. However, this paper will demonstrate that contrary to popular belief, globalization operates as a mechanism which allows for the marginalization of vulnerable groups by increasing the global wealth gap and inequality between and within states.

 

To elaborate, globalization has negatively impacted Indigenous populations, facilitated the exploitation of workers by transnational corporations, propelled inequality in the MENA region, and exposed developing economies to the boom and bust of international markets. Thus, this paper will examine several case studies which illustrate the negative implications of globalization through a multifaceted lens. As this topic has become of increasing importance in the context of the current globalized world, the chief purpose of this paper is to demonstrate the impact of globalization on inequality. 

AUTHOR

Nour Elassiuty,

UofMosaic Fellow


Cohort: 2019-2021

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Globalization

First off, globalization is the process of international integration. It operates at an economic, social, cultural, and political level. Although, the financial aspect, which features the expansion of world markets, privatization, free trade, and foreign investments, is the motivating force behind globalization (Gray 2017). Globalization has also promoted labour specialization to increase economic efficiency, and created a world of interdependent states that heavily rely on trade. Moreover, globalization has partially led to the establishment of international financial institutions, and intergovernmental organizations such as the United Nations.

Ultimately, this paper argues that globalization is a process in which economic gain is prioritized at the expense of human welfare.  

Champions of economic liberalism and globalization argue that globalization has raised the global standard of living and income, although they fail to recognize that globalization also spurs inequality within states and increases the wealth gap. In part, this wealth inequality is a result of a decrease in the income of low-skilled workers due to lower demand and a higher supply of workers. In turn, those with higher skill sets received an increase in wage due to increasing demand (Berger 2014). Furthermore, scholars also argue that several states engage in a “race to the bottom” in the response to international competition. This race to the bottom is characterized by decreasing wages, welfare, and rolling back other social programs. Consequently, this disproportionately impacts the most vulnerable populations who rely on government assistance or work in low-skilled jobs (Dreher & Gaston 2018).   

 

A recent study examining wage, household income, and the social, political, and economic aspects of globalization concluded that globalization has increased inequality.

 

The findings state that this occurred in developed and lesser developed states in addition to democratic and autocratic states. This study also supports the concept that states with decentralized power structures are more likely to shift towards a capitalist system and fail to establish mechanisms of wealth redistribution (Dreher & Gaston 2018). 

 

A second study analyses the impact of globalization on ten countries in the Middle East and North Africa (MENA) region. This study also demonstrates that while globalization has facilitated economic advancement in other regions of the world, it has proven to do the opposite in less developed MENA states. In fact, the study concludes that globalization has exacerbated income inequality, in contrast to the pre-globalization era. An additional analysis of thirty-eight African countries elucidates that the bottom 40% of the population is negatively impacted by free trade, while the top 60% reaps its benefits. This case illustrates that the poorest segment of society is disproportionately faced with the negative by-products of economic globalization (Benar 2007). 

The first case examined in this paper analyses the impact of economic globalization on Indigenous peoples. Ultimately, the process of large-scale economic integration and free trade poses a threat on the lives of Indigenous populations. This is due to the fact that these phenomena feature the destruction of natural habitats and Indigenous land by transnational corporations. Natural resource export-oriented economies often result in the marginalization and subjugation of Indigenous peoples by stripping them of their land and autonomy. Moreover, globalization can also be seen as a form of neo-colonialism, and a continuation of colonialism through the use of international institutions such as the World Bank and the International Monetary Fund, and trade organizations such as the North American Free Trade organization and the World Trade organization (Kuokkanen 2008). In addition to this, globalization plays an instrumental role in establishing and enabling systems of inequality which have violent and life-threatening consequences for Indigenous women. These consequences are presented in the form of the crisis of the missing and murdered Indigenous women in Canada and Mexico (Kuokkanen 2008). 

The Spread of Economic Liberalism and Capitalism

Furthermore, globalization is also strongly linked to the spread of economic liberalism and capitalism. This is accompanied by a shift towards the privatization of the public sector. This has significant consequences on the health sector. Specifically, South East Asia saw a drastic decrease in public health funding, essentially placing women in a precarious position. This is demonstrated in the Philippines, where public health was slashed from 3.45% in the 1980s, to 2% only ten years later. Doctors are also moving from the public sector to private healthcare to receive better pay. This shift is stark in India, with 80% of doctors working in the private sector. Overall, the privatization of health care, and the exploitation of women by multinational corporations due to less government intervention, has created a situation in which women work in dangerous environments with low reward and high risk (Subramaniam 1999). In fact, women’s low wage rate is an influential factor that attracts foreign businesses and investment. Female workers are not guaranteed minimum state protections or reliable access to health care (Kuokkanen 2008). 

 

On the other hand, Globalization does not only increase inequality within states but also amongst them in the international arena. This is because globalization promotes single export-driven economies due to specialisation and international competition. This is otherwise known as “extractivism,” which is a model premised on the mass extraction and export of basic commodities and the large-scale exploitation of non-renewable raw materials. Through extractivism, natural resource extraction has become an imperative source of income, employment, and financing for social programs and infrastructure (Szeman 2017). Hence, the impacts of extractivism are starkly evident in Latin American countries such as Bolivia, Venezuela, and Ecuador. In Ecuador, natural resources make up more than 70% of exports, and petroleum alone amounts to more than half of exports. Therefore, this results in the Ecuadorian economy being vulnerable to the fluctuations of the petroleum market. For instance, in 2015 the drop in petroleum prices led to a 50% decrease in petroleum exports, which decreased state exports by 39% (Villalba-Eguiluz and Etxano 2017). 

 

Evidently, the heavy reliance on international markets causes states to experience fluctuations in their economy and their socio-political sectors. This is further aggravated when there are sudden drops in global prices. This phenomenon is not unique to Latin America, as the ‘resource curse’ hypothesis contends that countries with incessant natural resource wealth tend to have slower economic growth and worse development outcomes. Furthermore, extractivism results in an inequality of costs and benefits as parts of society, such as peasant workers or Indigenous groups, are burdened environmentally, socially, and culturally from extractivism. Meanwhile, urban populations or political elites benefit (Arsel 2016).

 

In conclusion, the globalized world features the quick and easy spread of information, free trade, economic liberalism, and interdependence between states. Globalization prioritizes economic profit and establishes a world of constant economic competition in a world market. Additionally, globalization works to benefit the wealthy elite and harms the vulnerable poor. Although globalization has provided employment opportunities for women in developing countries, these women are exploited by corporations, paid an unreasonable wage, and are subject to hazardous working conditions. Moreover, indigenous populations are negatively impacted by globalization and stripped of their territory and ability to practice their cultural values. Globalization further entrenches the existing systems of inequality between and within states. Latin American countries with export-based economies are powerless against the impact of volatile world markets on their societies. While globalization cannot be reversed, it is important to ensure that special emphasis is placed on defenseless groups, and social policies are created to protect them from the forces of the international market. 

References

Afshar, H., & Barrientos, S. (1999). Introduction: Women, globalization and fragmentation.  


In Women, globalization and fragmentation in the developing world (pp. 1-17). Palgrave Macmillan, London. 


Arsel, M., Hogenboom, B., & Pellegrini, L. (2016). The extractive imperative in Latin  


America. The extractive industries and society, 3(4), 880-887. 


Benar, H. (2007). Has globalization increased income inequality in the MENA region? International Journal of Economic Perspectives, 1(4), 195-VI. Retrieved from http://myaccess.library.utoronto.ca/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F725819777%3Faccountid%3D14771 


Berger, N. (2014). Theorist Eric Maskin: Globalization Is Increasing Inequality. Retrieved from https://www.worldbank.org/en/news/feature/2014/06/23/theorist-eric-maskin-globalization-is-increasing-inequality  


Dreher, A., & Gaston, N. (2008). Has globalization increased inequality? Review of International Economics, 16(3), 516-536. 


Dreher, A., & Gaston, N. (2007). Has globalisation really had no effect on  unions?. Kyklos, 60(2), 165-186 


Gray, A. (2017). What is globalization anyway? Retrieved from https://www.weforum.org/agenda/2017/01/what-is-globalization-explainer/ 


Kuokkanen, R. (2008). Globalization as racialized, sexualized violence: The case of indigenous women. International feminist journal of politics, 10(2), 216-233. 


McMahon, M. (2002). Resisting globalization: Women organic farmers and local food systems. Canadian Woman Studies, 21(4). 


Subramaniam, V. (1999). The impact of globalization on women's reproductive health and rights: a regional perspective. Development, 42(4), 145-149 


Szeman, I. (2017). On the politics of extraction. Cultural studies, 31(2-3), 440-447. https://www.weforum.org/agenda/2017/01/what-is-globalization-explainer/ 


Villalba-Eguiluz, C. U., & Etxano, I. (2017). Buen Vivir vs development (II): the limits of (Neo)  Extractivism. Ecological Economics, 138, 1-11. 

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Meet Nour Elassiuty

Nour is a third-year student at the University of Toronto, with a specialist in Political science and a minor in Philosophy.

Through her undergraduate career she developed a special interest in the study of international relations and foreign policy. Nour is also passionate about local level advocacy and spreading awareness about issues important to her, as she believes that the first step to change is education.