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How Is Economic Globalization Affecting Inequality?

We live in an unequal world in which descriptors of global inequality—especially inequalities in income—abound. “[T]he world’s richest 500 individuals have a combined income greater than that of the poorest 416 million … 2.5 billion people [are] living on less than $2 a day” (Watkins et al., 2005: 18). Researchers and policy makers continue to debate how, and at what scale, inequality trends are changing, but, by any measure, the disparities between rich and poor are striking (Firebaugh, 2003; Milanovic, 2005; The Economist, 2006; Held and Kaya, 2007; Lobao et al., 2007). The recent past has also seen rapid economic globalization—characterized by the supranational spatial integration of economies and societies (Stiglitz, 2002). Globalization has intensified flows of goods, finance, people, and political/cultural interactions all across our planet (Mittelman, 2002; Dicken, 2007). Understanding the nature of, and linkages between, globalization and inequality is crucial because disparities abound in access to needs such as shelter, land, food and clean water, sustainable livelihoods, technology, and information. Inequalities in all of these realms pose challenges to human security and environmental sustainability.

Much of the research on the link between globalization and inequality has focused on the global scale—looking at inequality between countries using aggregate economic indicators such as gross domestic product per capita (sometimes weighted by national population). These measures of global inequality are limited because they implicitly assume that within-country distributions of income are perfectly equal (Milanovic, 2005). Comparisons of inequality across individuals in the global population, and across a broader range of measures, regardless of national boundaries, are much rarer, but are increasingly possible and necessary (Milanovic, 2005). Beyond the need for improved measures of global inequality, we are currently witnessing a historic change in patterns of inequality, termed by Firebaugh (2003) as the “inequality transition.” Since the 1980s, evidence suggests that inequalities have increased more rapidly within countries than between them, heralding the reversal of increasing between-country inequality—a trend that began with the Industrial Revolution (Milanovic, 2005; Held and Kaya, 2007).

Because it may seem counterintuitive that subnational inequality would grow in an era of globalization, this finding points to the importance of research on scale differences in inequality patterns, and on the spatial impacts of specific aspects of economic globalization, so that we can better understand how globalizing processes influence inequality—where and for whom (Kanbur and Venables, 2007). Addressing this problem requires research aimed at identifying how distributional mechanisms within markets and governance arrangements are shaping inequality across geographical scales and differentially distributed populations (see Lobao et al., 2007).

The timing of the recent shift in inequality patterns (the early 1980s) corresponds with the rise of new forms of economic globalization that have transformed spatial relationships around the globe. Expanding transportation and communication networks, trade liberalization, reorganization of financial structures, and the rise of new



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8 How Is Economic Globalization Affecting Inequality? W e live in an unequal world in which Comparisons of inequality across individuals in the descriptors of global inequality—especially global population, and across a broader range of mea- inequalities in income—abound. “[T]he sures, regardless of national boundaries, are much rarer, world’s richest 500 individuals have a combined income but are increasingly possible and necessary (Milanovic, greater than that of the poorest 416 million . . . 2.5 billion 2005). Beyond the need for improved measures of people [are] living on less than $2 a day” (Watkins et global inequality, we are currently witnessing a historic al., 2005: 18). Researchers and policy makers continue change in patterns of inequality, termed by Firebaugh to debate how, and at what scale, inequality trends (2003) as the “inequality transition.” Since the 1980s, are changing, but, by any measure, the disparities evidence suggests that inequalities have increased more between rich and poor are striking (Firebaugh, 2003; rapidly within countries than between them, heralding Milanovic, 2005; The Economist, 2006; Held and Kaya, the reversal of increasing between-country inequality— a trend that began with the Industrial Revolution 2007; Lobao et al., 2007). The recent past has also seen rapid economic globalization—characterized by (Milanovic, 2005; Held and Kaya, 2007). the supranational spatial integration of economies and Because it may seem counterintuitive that sub- societies (Stiglitz, 2002). Globalization has intensified national inequality would grow in an era of globaliza- flows of goods, finance, people, and political/cultural tion, this finding points to the importance of research interactions all across our planet (Mittelman, 2002; on scale differences in inequality patterns, and on the Dicken, 2007). Understanding the nature of, and link- spatial impacts of specific aspects of economic globaliza- ages between, globalization and inequality is crucial tion, so that we can better understand how globalizing because disparities abound in access to needs such as processes influence inequality—where and for whom shelter, land, food and clean water, sustainable liveli- (Kanbur and Venables, 2007). Addressing this problem hoods, technology, and information. Inequalities in all requires research aimed at identifying how distributional of these realms pose challenges to human security and mechanisms within markets and governance arrange- ments are shaping inequality across geographical scales environmental sustainability. and differentially distributed populations (see Lobao et Much of the research on the link between global- al., 2007). ization and inequality has focused on the global scale— The timing of the recent shift in inequality patterns looking at inequality between countries using aggregate (the early 1980s) corresponds with the rise of new forms economic indicators such as gross domestic product per of economic globalization that have transformed spatial capita (sometimes weighted by national population). relationships around the globe. Expanding transporta- These measures of global inequality are limited because tion and communication networks, trade liberalization, they implicitly assume that within-country distribu- reorganization of financial structures, and the rise of new tions of income are perfectly equal (Milanovic, 2005). 

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 UNDERSTANDING THE CHANGING PLANET regional trade agreements have been redefining flows tion of economic activity (density), (2) a reduction in of commodities, investments, labor, and political power the friction of distance (i.e., increasing the mobility of across the globe (Murray, 2006; Dicken, 2007). In the goods, capital, and labor), and (3) diminished divisions process, the “where and who” of the winners and losers of between places as a result of borders and differences globalization are changing, as is the traditional role of the in language and regulations (World Bank, 2009: 7). state in economic governance. The state is no longer the Research in the geographical sciences extends the new only, or even the primary, actor in economic processes, economic geography (see Part I, Box 1), positing the because markets are now global, regional, and local as fundamental importance of place-based influences on much as they are national (O’Loughlin et al., 2004). A economic developments. It follows that policy makers key research challenge going forward, then, is to move need to focus more attention on local contextual influ- beyond a focus on individual states and identify the rela- ences, a point highlighted by Kates and Dasgupta (2007: tionships between globalization and shifting patterns of 16749). Along the same lines, Sachs (2006: 73) notes inequality at varying scales (Held and Kaya, 2007). that “policy makers and analysts should be sensitive to geographical, political and cultural conditions that may each play a role (in producing poverty).” role oF The geograPhical scieNces In their efforts to understand uneven develop- Research in the geographical sciences can help identify ment within and across places, geographical scien- the patterns and processes producing inequality across tists have developed a body of work focused on the the world—within states and at local levels. Although spatially variable operation of processes producing sociology takes inequality to be a central problem, inequality in places characterized by different sys- Lobao et al. (2007) argue that too much sociological tems of macroeconomic regulation, different welfare research on inequality still operates at the national scale regimes, different social divisions of labor (between and entails questionable geographical assumptions paid and unpaid work, for example), and different about both the causes and patterns of inequality. These consumption and distribution practices ( Jones and scholars argue for “the systematic incorporation of Kodras, 1990; Smith, 1990; Kodras and Jones, 1991; spatial factors into theory and research on inequalities” Perrons, 2001). Research in this vein, which has been (Tickameyer, 2000: 811) and for research that builds undertaken by geographically oriented researchers multiscale models and draws on spatially referenced in demography, geography, economics, and political data. Geographical scientists are at the forefront of science, has shown that inequality emerges from mul- this research, undertaking projects aimed at represent- tiple processes operating simultaneously at a range of ing and analyzing the intersections between the spatial spatial scales, including unequal global distributions and social dimensions of inequality. For example, geo- of returns to production and work at sites along inter- graphical research is providing innovative cartographic national production and consumption chains; regional representations of inequality that shed light on the trade agreements that limit national sovereignty on environmental and labor protections; and the presence nature and significance of patterns of inequality (Figure of race and gender discrimination in different places 8.1). (Nagar et al., 2002). Their findings are of relevance to Research in what has been termed the “new eco- debates about the economic and inequality impacts of nomic geography” is currently analyzing the spatial market liberalization (see generally Firebaugh, 2003; character of inequality by building structural models of Milanovic, 2005; Dicken, 2007; Kanbur and Venables, the relations between economies of scale, transport costs, 2007).1 geographical remoteness from markets, and biophysical resource endowments (Krugman, 1993; Redding and 1Some scholars take the position that market liberalization is Venables, 2004). The 2009 World Development Report a necessary precursor to expanded economic opportunities for adopts this frame of analysis to argue that three geo- all people across the globe (World Bank, 2009). Others contend graphical dimensions of the global economy must be that international trade agreements (North American Free Trade transformed to reduce inequality. The report argues that Agreement, World Trade Organization) that limit the ability of governments to adopt a wide range of protective environmental and these reductions will result from (1) a greater concentra- social policies contribute to inequality (Stiglitz, 2002).

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5 INEQUALITY FIGURE 8.1 This cartogram resizes national territories by the earnings of the poorest 10th living in each territory, focusing atten­ tion on comparative issues of importance for research on space, scale, and inequality. By visualizing the relative scope of inequality across major regions, questions are raised about the causes of similarly deep inequality in both Latin America and Africa vis­à­vis the countries of the Organisation for Economic Co­operation and Development. Striking spatial patterns such as these point to the potential importance of common social and economic histories that situate each of these regions in particular ways within global divi­ sions of labor, commerce, politics, and cultural flows. SOURCE: Worldmapper. Copyright 2006 SASI Group (University of Sheffield) and Mark Newman (University of Michigan). Systematic comparisons of subnational inequality research is now 20 years old, however, and we lack an and its causes across a range of countries, and in the adequate understanding of how recent developments context of global processes, could move the research are changing economic, social and political landscapes agenda forward. Prior research has compared patterns as a result of global financial instability, new global and processes of within-country inequality for Britain, trade regimes, and environmental instability in the t he United States, South Africa, and the former wake of the transition from socialist to capitalist, Soviet Union to determine how different economic globalized economies in some parts of the world (cf. structures, institutional arrangements and processes Mykhenko and Swain, 2010, who provide a con- of discrimination (apartheid, class, gender and race) temporary example of research on the links between territorial inequality, post-socialist transition, and the are associated with distinct patterns of spatial and importation of foreign capital). social inequality (Smith, 1987). Smith’s comparative

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6 UNDERSTANDING THE CHANGING PLANET Studies by Dicken (2007) and Leichenko and race/ethnicity, place, and poverty in different parts of O’Brien (2008) in particular highlight the value of focus- the United States (Figure 8.2). This within-country ing on the specific mechanisms of globalization and the representation of variables associated with poverty role they play in shaping who and where the winners provides a model for the type of comparative spatial and losers of globalization are found. Their work points analyses that are needed across countries. to the importance of analyzing the inequality outcomes New geographical visualization techniques also of international trade treaties, global environmental offer insights into linkages between inequality and regulations, global regulations on investments and the the multiple consequences of globalization. Professor Danny Dorling’s team at the University of Sheffield is activities of transnational corporations, as well as spatial developing geovisualizations of social spatial structures variations in labor standards and laws. Yet to date, the inequality impacts of these seismic shifts in global insti- (at a range of scales) that allow the research community tutional and societal processes have not been system- to pose new questions about how people’s life chances are distributed and how are they changing (Figure 8.3).2 atically compared as they play out between and within countries around the globe (Murray, 2006; Dicken, This research group has also developed a series of virtual 2007). In the next 10 years, researchers will have access atlases using flow lines and multidimensional scaling to to decennial census data and household income surveys visualize global city networks (see Figure 8.3). These visualizations demonstrate how fast Internet connectivity (from many countries) that will allow them to represent for some people and places changes their possibilities for and understand the spatial and scalar dimensions of engaging globalization processes, with different implica- inequality—both between and within countries during tions for places that remain relatively disconnected. a period that will likely be characterized by intensify- The digital divide in Internet connectivity could ing globalization and economic instability. Against this influence the ways in which places are understood in the backdrop, the investigation of the following research future, as volunteer geographical information becomes questions would be particularly productive. increasingly central to the collection of georeferenced data about our world. Those cities and countries that research suBQuesTioNs are relatively underresourced in technologies, relevant education, and Internet connectivity will be poorly What patterns of inequality are emerging at the represented in terms of data accuracy or the range of subnational scale? information available (elaborated further in Chapter 11 A long tradition of geographical work focuses on of this report). In the future, teams of researchers could developing visualizations of spatial patterns that can fa- use geovisualizations to model uncertainty in inequal- cilitate deeper understanding of sociospatial processes. ity patterns that may result from distinct scenarios of Cartographic representations of inequality across coun- globalization. By representing the possible impacts of tries and scales reveal current patterns of winners and global connectivity and isolation, they could inform losers in the face of globalization processes. For exam- policy decisions about the implications of connectivity ple, Glasmeier’s Atlas of Poverty in America (2005) iden- and isolation for access to key resources (land, water, tifies regions in distress: Appalachia, the Mississippi energy, etc.), engagement with the global economy, and Delta, areas where indigenous people are concentrated, environmental alteration at the subnational level (Smith, and much of the U.S.-Mexico border region. Drawing 1987; Murray, 2006; Moseley and Gray, 2008). on state, county, and metro-scale socioeconomic data across four decades, the Atlas represents the social and Where and how does market liberalization spatial dimensions of poverty within each region and exacerbate or reduce spatial inequalities? identifies vulnerable populations of children, women- headed households, and minorities. This detailed Market liberalization has been a central facet of mapping of poverty over time suggests relationships globalization since the 1980s. Market liberalization between places and people, raising analytical questions about the intersections of gender, household structure, 2See www.sasi.group.shef.ac.uk/ (accessed January 20, 2010).

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 INEQUALITY FIGURE 8.2 A map series showing the spatial distributions of different populations in poverty in the United States. SOURCE: Glasmeier (2005). entails the global integration of trade and capital the 1990s, the global financial crisis of 2008; Krugman, markets through free trade agreements and changes in 2000). Market liberalization has also led to a rework- national trade and financial regulations such as tariff ing and intensification of networks of connectivity be- barriers and capital controls. These liberalization pro- tween many cities; an expanding role for transnational cesses, along with exuberant lending, overconfidence in corporations in global production and consumption monetary policy (as an effective control on money and networks; and the large-scale privatization, and inter- credit supplies), and floating currencies, brought both national ownership, of telecommunications, transport high economic growth rates and considerable economic systems, and primary resource extraction in low-income turbulence, with dramatically different impacts for countries (Dicken, 2003). different people and places (as in the Latin American In recent years, geographical research has yielded debt crisis of the 1980s, the Asian financial crisis of important insights into the social and spatial trade-offs

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 UNDERSTANDING THE CHANGING PLANET FIGURE 8.3 City connection map that demonstrates how “close” other cities are to London in a virtual space of relationships based entirely on connection values. SOURCE: Social and Spatial Inequalities. Used with permission. between trade liberalization and inequality (includ- India that are “double exposed” to climate change and ing research focused on economic growth, environ- trade liberalization and places that are less exposed, mental change, and human vulnerability). For example, and therefore are likely to be less vulnerable in the face Leichenko and O’Brien (2008) have exposed patterns of of these processes (Figure 8.4). advantage and harm in agricultural communities in India Similar methodologies and tools can be employed in the face of twinned processes of market liberalization to analyze the changing geography of inequality in and climate change. Their work begins from the premise the face of the twin impacts of market liberaliza- that the inequality effects of global processes have dis- tion and climate change (Liverman and Vilas, 2006). tinct spatial and social expressions (see also Sachs, 2006; Research in this vein will require the construction of Kates and Dasgupta, 2007). Drawing together data on integrated datasets from existing national and inter- climate impacts on crop yields, changes in plant pollina- national sources at a range of spatial scales, including tion and competition, and human vulnerability to climate production and trade data, household income surveys, change, Leichenko and O’Brien (2008) constructed national census data, and United Nations and World maps revealing the regions that are most vulnerable to Bank data (see Ravallion, 2001; Redding and Venables, predicted climate changes across the country (see also 2004). These new datasets can be employed to produce the discussion of this study in Chapter 3). A geographic targeted sectoral and regional analyses of understudied information system analysis of the relationship between economic sectors (e.g., industry and energy systems that map and patterns of agricultural export advantage, in the tropics), which in turn can pave the way for import sensitivity, and the resilience of farmers to socio- research exploring the ways in which a variety of key economic change allowed them to identify places across economic sectors are influenced by global trade and

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 INEQUALITY FIGURE 8.4 Maps depicting district­level response capacity and sensitivities to climate change and import competition. SOURCE: Leichenko and O’Brien (2008). capital flows in ways that produce shifting landscapes geographical distribution of value, at each node along of production, consumption, and vulnerability (Liver- the production and marketing trajectory of a specific man, 2008). commodity (Gereffi and Korzeniewicz, 1994; Leslie and Reimer, 1999). Geographical research on commodity chains is en- how are poverty, wealth, and consumption chancing understanding of the ways in which inequal- interrelated across space and at multiple ity is reworked through production and consumption geographical scales? linkages. For example, Nepstad et al. (2005) have traced Differences in wealth and poverty are often not how consumers in high-income countries shape the solely the result of local circumstances; they are pro- nature of agricultural commodity chains through an duced by relationships that link far-flung places. Geo- examination of the globalization of soy and beef indus- graphical scientists investigate how spatial relationships tries based in the Brazilian Amazon. They developed a shape inequality, such as the relationships between network analysis that connects growing fears of bovine production in low-income countries and rich-country spongiform encephalopathy (BSE or mad cow disease) consumption, or the inequality effects of deploying in ration-fed beef in the United States and Europe with agricultural lands for domestic foodstuffs or for export increasing demand for grass-fed beef from the Amazon. crops. They have developed conceptual and analytical Their work demonstrates how conditions of production tools for tracing the networks of production, con- are reworked by pressures from consumers demanding sumption, and exchange that link people across world both improved environmental stewardship and better markets and for identifying the processes through social conditions for workers. Their study reveals that which wealth and poverty are explicitly linked. Of par- pressures from lender and consumer organizations to ticular significance is work on (1) production chains— reduce the negative socioecological impacts of pro- linked sequences of place-based functions where each duction are leading to the environmental and social stage adds value to the commodity (Dicken, 2007); (2) certification of beef, timber, and soybeans. Additional consumption chains—links between consumption and geographical research building on this conceptual and the conditions of production (Hartwick, 1998); and (3) empirical foundation could further elucidate the nature global commodity chains, which expose prices, and the of commodity networks and show how certification

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0 UNDERSTANDING THE CHANGING PLANET programs rework inequality (e.g., Mutersbaugh, 2003; producers, who generate 40 percent of global cotton Tovar et al., 2005; Klooster, 2006). production—thereby suppressing global cotton prices. Bassett’s (2008, 2010) empirical research on cotton As a result, farmers in West Africa, who do not have commodity chains linking West African agriculture to access to similar subsidies, face lower prices on inter- global markets provides further evidence that poverty national markets, resulting in lowered incomes (see and consumption are linked across space and scale also Friedberg, 2004, for a commodity chain analysis (Moseley and Gray, 2008). Bassett explores how pat- of French bean crops, and Gwynne, 2002, for a study terns of inequality across space and scale are shaped by of fruit exports from Chile). the linkage of West African cotton farmers’ incomes Geographical research aimed at integrating eco- to market liberalization; relationships between produc- nomic, environmental, and social variables across place ers, workers, and consumers; and interactions between and scale can shed additional light on the impacts of ecological and social systems. He found that African market liberalization on inequality within states, at the cotton growers are relatively marginalized in negotia- local scale and across the globe. In particular, much tions over prices for seed cotton, fertilizers, and pes- could be gained from comparative case studies employ- ticides vis-à-vis ginning and marketing companies, as ing rigorous experimental frameworks that include well as in dealings with cotton trading companies that common questions and metrics to facilitate aggregation set prices based on world markets. These negotiations and meta-analysis. with national cotton companies and the World Trade Organization are central to the setting of global cotton summarY prices and so shape how and where returns to the crop An understanding of the causes and consequences are distributed among growers, ginners, and traders. of inequality requires consideration of geographical Bassett’s research also traces the relationship between patterns and networks—whether economic, political, currency values and farmers’ incomes. For example, cot- or environmental. Spatial analyses that take explicit ton trades globally in U.S. dollars, and yet currencies account of place-to-place variations and scalar differ- in Burkina Faso and Mali are pegged to the Euro. The ences can be of particular value in the effort to elucidate recent devaluation of the dollar relative to the Euro thus the complex interactions between globalization and reduced cotton farmers’ returns on their internationally inequality. traded crops. In addition, Bassett’s work reveals that U.S. cotton subsidies result in overproduction by U.S.