International inequality refers to inequality between countries, as compared to global inequality, which is inequality between people across countries. International inequality research has primarily been concentrated on the rise of international income inequality, but other aspects include educational and health inequality,[1] as well as differences in medical access. Reducing inequality within and among countries is the 10th goal of the UN Sustainable Development Goals and ensuring that no one is left behind is central to achieving them.[2] Inequality can be measured by metrics such as the Gini coefficient.
According to the United Nations Human Development Report 2004, the gross domestic product (GDP) per capita in countries with high, medium and low human development (a classification based on the UN Human Development Index) was 24,806, 4,269 and 1,184 PPP$, respectively (PPP$ = purchasing power parity measured in United States dollars).[3]
Economic institutions such as competitive markets, credible contracts and systems of property rights allow economic agents to pursue the economic activities which form the basis of growth. It has been argued that the presence or absence of strong economic institutions is a primary determinant of development. Economists have begun to consider the set of economic institutions adopted by countries as a choice that is in turn determined endogenously by competing social forces.
According to this theory the differences in economic institutions arise as a consequential effect of the difference in political institutions. In their paper “Paths of Economic and Political Development[4] ” Acemoglu and Robinson discuss the intertwined nature of economic institutions to political ones. The authors conclude that although economic institutions are the key factor to final economic outcomes, they are an endogenous one. Meaning economic institutions are determined by political institutions and the distribution of resources.[5] They identify the above mentioned as the “two main state variables”.[6] Accordingly, we find the political institutions to affect economic institutions both directly and indirectly (de jure & de facto power). Connecting to the issue of international inequality, the distribution of resources is identified as the main conflicting point. As the distribution of resources is complex it leads to opposing entities in a country not being able to agree on a set of economic institutions that maximize “aggregate growth”[7] and thus making some countries fall behind. Simply proving the influence of political institutions on economic ones and with that the development of a country. The main conclusion the authors arrive at is that the economic institutions which promote prosperity are conditioned on a foundation of democratic political institutions.
Others on the other hand have argued that a country's success is related to the tradeoff between “dictatorship and disorder”. Dyankov et al in “The New Comparative Economics”[8] discusses this idea and uses the IPF (institutional Possibility Frontier)[8] to measure the optimal points of dictatorship vs disorder trade off in individual countries. The idea of new comparative economics focuses on comparing the differences in institutions of capitalism in different countries.[8] The new reforms to market economy and democracy have been different in each specific country and thus have reached different levels of efficiency. This can than manifest in the final outcome we call International inequality. According to Dyankov Institutions are made and work to control the “twin dangers”[8] of disorder and dictatorship. Coase (1960), also argues that "no rules are fully enforced, and no institution fully eliminates the transaction costs of dictatorship and disorder".[8] The IPF as a system can help to discuss the alternative forms of social control of business. It helps determine the efficient choice by finding the shape and location of a countries IPF on an axis of social loses of dictatorship versus the social losses of disorder. In the end the location of the IPF shows a countries “civic capital”[8] or the institutional possibility of a given society in order to reach its optimum. Many now argue that this study is most relevant to our modern-day capitalist society in order to impose efficient institutional design depending on a country's specific characteristics.
In a widely cited paper by Daron Acemoglu, Simon Johnson and James A. Robinson, the authors concluded that the majority of present-day inequality among former European colonies can be attributed to the persisting role of economic institutions. Describing European colonization as a "natural experiment," they argued that colonizers who encountered dense populations with developed economies such as in Central America and India were incentivized to impose extractive economic institutions, while colonizers who encountered sparse populations with few natural resources such as in North America were more likely to institute broad-based property rights. This resulted in a "reversal of fortune" around 1800 as regions which were under-developed at the time of colonization were able to industrialize more effectively.
In the context of development, path dependence is the idea that certain points in history may have an outsized and persistent impact on the long-term economic and political character of nations. These points may produce outcomes that induce positive feedback and are therefore difficult to reverse. Political scientist James Mahoney has examined the political consequences of a period of liberal reform in Central America during the 19th and early 20th centuries, and argued that whether policies were implemented along radical or reformist guidelines directly determined the success of the liberalization efforts and ultimately resulted in vastly different political outcomes which persisted for decades, ranging from military authoritarian regimes (Guatemala and El Salvador) to progressive democracy (Costa Rica).
Another concept of international inequality in the context of development can be found in the notion of dualism in the world, understood as "the coexistence of two situations or phenomena (one desirable and the other not) that are mutually exclusive to different groups of [international] society — for example, extreme poverty and affluence, modern and traditional economic sectors, growth and stagnation, and higher education among a few amid large-scale illiteracy." one can find the trace of dualistic society in structural-change as well as international-dependence theories. This concept demonstrates how the gap between the poor and the rich in the global world is persistent if not steadily increasing. There are four key arguments in this thesis;
The dualism-development thesis rejects the traditional neoclassical and empirical theories that put the blame of poverty and inequality merely on internal factors and the political culture of these poor countries. It also refutes the recommendations given and forced upon developing countries. Instead, it focuses on external and international factors such as international dependence on economics, finance, and trading, and forces that might not have given birth to international inequality, but surely have played an important role in keeping the gap open and wide. Therefore, this doctrine suggests fundamental economic, political, and institutional reforms not only on the regional and domestic levels but also on global and foreign levels.
However, there are criticisms about this type of thesis. First, although it indicates a logical and well-founded explanation regarding international inequality, it lacks a comprehensive solution to the said problem. Second, the number of successful fundamental reforms in many of the concerned countries largely did not showcase significant progress and decrease in the overall state of inequality, whether in domestic or foreign levels.[9]
Multiple other causes of international inequality have been proposed, such as:
The worsening of inequality is considered the most significant outcome of COVID-19.[14] The pandemic has had the greatest impact on vulnerable groups such as the elderly, people with disabilities, children, women and refugees, low-income people, youth, and informal workers.[15] The research and measures of the World Bank, say that "Covid-19 has increased inequality in nearly every sphere: in the availability of vaccines, in economic growth rates, in access to education and health care, and the scale of job and income losses".[16] Between 2020 and 2021 global billionaire wealth grew by $4.4 trillion but at the same time, more than 100 million people fell below the poverty line.[14]
COVID-19 caused the change of view in providing certain activities, goods and services, and certain production processes. They are considered to be riskier and costlier. Staff shortages and breaks of working activity because of compulsory quarantines of Covid-positive workers are the reason for the replacement of the human labor force with robots. Robots are easily managed, don't need masks, can be easily disinfected, and don't get sick.[17] The threat of automation has spread to the work of low-skilled, person-to-person service workers. Before the pandemic, these jobs were seen by literature as less affected – for example, in health and education. New labor market uncertainty brings a decrease in the demand for certain types of labor. This shift consequently causes an increase in inequality.[18] Another inequality was visible after the beginning of lockdowns. Millions of newly unemployed joined the long queues for social security benefits.[19] The loss of jobs differs by the nature of the job. Tourism, gastronomy, recreational services and accommodation, airlines, and industries that rely on personal interactions have been the hardest hit.[20] Lockdown rules and social distance requirements limited employees. The inability of workers to work from home deprived a lot of them of their jobs.
COVID-19 is the biggest health crisis in a century. Not only were poor countries with weak health care systems hard-hit, but also economically strong and developed rich countries. America is considered the most hit country in a term of unequal access to resources and health services.[21] One of the reasons for their highest number of cases and deaths is their worst average healthcare standards among the major developed economies.[18] The poorest suffer from the lack of a universal healthcare system and high prices of medicaments (and for health care, in general) the most. Many Americans skipped testing to know if they are infected because of the high price of tests. They went to work, spreading the virus mostly among those, who could not have a home office. After being infected, they could not afford to buy medicament or to search for medical help since they have no insurance.[14]
The development, production, and distribution of vaccines was a scientific, political, and economic triumph seeing that it was relatively quick. However, despite having the technology and the resources, the society failed to raise vaccine supply and distribute enough doses in poor countries.[14] "As of October 1st, 2021, the highest-income countries—as classified by the World Bank—had a per-capita vaccination rate of 125.3 vaccinations per 100 people, representing nearly 3-fold higher than the rate for lower-middle-income countries of 45.3 per 100, and 30-fold higher than lower-income countries with 4.2 per 100."[22] Also, the efficacy varied between distributed vaccines. They are more likely to be a lower efficacy on average in lower-income locations. Sputnik, Sinopharm, and Janssen vaccines are mostly used in low and middle-income countries with lower efficacy against new variants of virus compared to vaccines from Pfizer and Moderna – used mainly in higher-income areas.[22]
The control measures introduced around the world to curb the spread of the virus had a considerable impact on education. By April 2020, an unprecedented 1.4 billion students were shut out of their pre-primary, primary, and secondary schools in more than 190 countries and the classroom present education had moved to online distance learning.[23] The number and duration of periods of school closures have varied across countries. Inequalities were observable in the extent to which their learning is supported by their family and home environment background. Lack of opportunities, tools, or access to affordable, reliable internet connections were daily problems to deal with.[24] Children from low-income families were more likely to be excluded from online distance learning because of an inability to afford sufficient internet or devices.[23]
Another dimension of inequality relevant to distance learning is the one between low- and high-achieving students. Education from home implies a large amount of self-regulated learning where students must independently acquire and understand the academic content without the support of teachers. This self-regulated learning may be feasible for high-achieving students, but it may be especially challenging for low-achieving students and for students with special needs.[25]
In addition, in some countries, girls have faced widespread discrimination in access to education and to the internet. Society was much more likely to expect them to take on a greater burden in the household during distance learning than boys. In developing and poor countries girls who were out of school were at greater risk than boys of facing abuses such as child marriage and other forms of gender-based violence.[23]
See also: List of countries by distribution of wealth. Between 1820 and 2000, global income inequality increased with almost 50%. However, this change occurred mostly before 1950. Afterwards, the level of inequality remained mostly stable. It is important to differentiate between between-country inequality, which was the driving force for this pattern, and within country inequality, which remained largely constant.
Global income inequality peaked approximately in the 1970s, when world income was distributed bimodally into "rich" and "poor" countries with little overlap. Since then, inequality has been rapidly decreasing, and this trend seems to be accelerating. Income distribution is now unimodal, with most people living in middle-income countries.[26]
, a study by the World Institute for Development Economics Research at United Nations University found that the richest 1% of adults owned 40% of global assets, and that the richest 10% of adults accounted for 85% of the world total. The bottom half of the world adult population owned barely 1% of global wealth. Oxfam International reported that the richest 1 percent of people owned 48 percent of global wealth,[27] and would own more than half of global wealth by 2016.[28] In 2014, Oxfam reported that the 85 wealthiest individuals in the world had a combined wealth equal to that of the bottom half of the world's population, or about 3.5 billion people.[29] [30] [31] [32] [33]
, the major component of the world's income inequality (the global Gini coefficient) was comprised by two groups of countries (called the "twin peaks" by Quah [1997]). The first group has 13% of the world's population and receives 45% of the world's PPP income. This group includes the United States, Japan, Germany, the United Kingdom, France, Australia and Canada, and comprises 500 million people with an annual income level over 11,500 PPP$. The second group has 42% of the world's population and receives only 9% of the world PPP income. This group includes India, Indonesia and rural China, and comprises 2.1 billion people with an income level under 1,000 PPP$.[34]
In terms of between country inequality, between 1820 and 2000, Latin America, Africa and the middle east almost always had a higher average Gini coefficient than Europe, implying a higher level of inequality. Asia was usually below average.[35]
, over 70% of the world's adults had under $10,000 in wealth. Only 0.7% of the world had one million dollars or more in wealth, but this number is increasing.[36], there were 1,125 billionaires (in US dollars) who owned $4.4 trillion in assets.[37], the total value of global assets was about $125 trillion.[38]
The evolution of the income gap between poor and rich countries is related to convergence. Convergence can be defined as "the tendency for poorer countries to grow faster than richer ones and, hence, for their levels of income to converge".[39]
Overall, social spending is lower in the Global South, with some regions registering just a few percentage points of GDP.[40]
Potential approaches to decrease inequality include:
Research has stressed the need to address inequality with a multi-pronged approach, including taxation reform and curbing excesses associated with financial deregulation, country-specific circumstances, and potential trade-offs with other policy objectives.[47]