Global Economic Disparities

Global Economic Disparities▪Enormous economic

disparity exists in the world▪The situation has been

described as a race to the bottom

▪The U.N. reports that in 100 countries the per capita income has dropped from the maximum level they reached

▪Many countries reached their maximum in the 1960's and 1970's

Global Economic Disparities

▪By the end of the 1990's the 13 richest countries had per capita GDP’s of more than U.S. $20 000 per year

▪The 26 poorest countries have a GDP less than U.S. $ 350 per year

Global Economic Disparities

▪200 million people saw incomes drop between 1965 and 1983

▪Between 1980 and 1995 five times as many saw a decline▪At the same time some have enjoyed remarkable success▪The traditional “fat cats” - most members of the OECD

(Organization for Economic Co-operation and Development) -have maintained or increased their growth

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Global Economic Disparities▪The “Asian Tigers” - Taiwan, South Korea,

Singapore and Hong Kong have a model for growth and prosperity that the developing world has tried in vain to copy

▪Much of the growth in these regions is fueled by foreign investment (Hong Kong) or by taking advantage of significant trade barrier reductions (Taiwan, South Korea)

▪Hong Kong has experienced reduced growth since the Chinese reclaimed the territory in 1999

Global Economic Disparities

▪Less than 20% of the global GDP is produced in the developing world but there are 80% of the people there

Global Economic Disparities▪Over the next 25 years the world population will grow by 2 billion▪97% of this growth will be in the developing world▪The vast majority of the people in the developing world will be

poor

▪This will lead to a great reduction in opportunity for human development

▪The gap between rich and poor will grow steadily

Global Economic Disparities▪Income disparities can be

measured using a statistical tool called the GINI INDEX

▪Gini values can range from 0 (income is perfectly distributed amongst everyone) to 1 (all the income is held by one person)

▪The index is sometimes given as decimals and sometimes as whole numbers

▪In 1988 the world Gini index was 0.625 but by 1993 it was 0.66

Global Economic Disparities

▪The Gini Index can also be used to show disparities within each nation

▪Many countries exceed 0.6, creating a concentration of wealth in the hands of a few

▪The U.N. uses a Gini value of 0.4 as a warning that a country’s economic disparities are becoming excessive

▪Canada’s Gini Index in 1994 was 0.315, the U.S. had a value of 0.408

▪By 2006 the Canadian Index grew to 0.326 while the American index was stable

Global Economic Disparities▪Dire poverty is defined as a per

capita income of less than $1US per day

▪India, an emerging economy still has 47% of its population living in dire poverty

▪A further 40% live on $1-$2 per day

▪Zambia, an African nation wracked by civil war for many years has 85% of its population living in dire poverty and another 13% living on $1-$2US per day

Global Economic Disparities

▪The causes of disparity are very complex

▪Many nations remain in dire poverty because they can not fund an economic takeoff

▪The population explosion caused by reducing the death rate has not been accompanied by a similar decline in the birth rate which leaves more people to provide for with limited funds

▪The effects of colonization are continuing to disrupt many countries

Global Economic Disparities▪Foreign debt creates a

barrier to economic growth as well

▪In 2000 developing nations owed a conbined 2.5 trillion dollars to creditors in developed nations

▪Debts are so high that after paying interest on the loans there is little left for economic development, education or health care

Global Economic Disparities▪Poor nations are often dealing with war and/or civil unrest

arising from tribal conflicts or the presence of competing warlords

▪Africa is very vulnerable to this given the arbitrary borders created by European colonists

▪The poorest countries often have to deal with leaders who have little interest or skill in improving the economic situation of their people

Global Economic Disparities

▪The Group of Eight (G8) nations, excluding Russia, have traditionally used tariffs and non-tariff barriers to restrict imports from developing countries

▪For example, tariffs on cloth and clothing from Africa and the Middle East are 4 times higher than those levied against other G8 countries

Global Economic Disparities▪Most developing nations rely on foreign capital and

investment to develop their economies, either as private corporations or in the form of foreign aid

▪This means that many critical decisions are being made by the U.N., the World Bank, the I.M.F., governments of first world nations and by the management of transnational corporations