International Wealth Inequality

Image Courtesy to C.W. from The Economist

Article by Tyson Wang

Often times, when people think of inequality, people think of intra-national inequality, in which the top and bottom percentages of people in a country have different incomes. A form of inequality that often goes unnoticed, however, is international inequality. Like its name suggests, it refers to the differences in wealth between sovereign nations. Often times, this difference is talked about in terms of the “first world” and the “third world”, with countries like the United States and Switzerland belonging to the former and most sub-saharan countries to the latter.

Basically, a multitude of reasons have been proposed to explain this inequality. Some, like Jared Diamond, a historian at University of California Berkeley who has studied why some civilizations have come to dominate others, has suggested that there are two main reasons: disease resistance, and natural resources, both of which developed countries have in spades compared to less developed countries (Diamond 1997). In his book: Guns, Germs, and Steel, he argues that the Europeans established a global economic and political hegemony primarily due to environmental factors, and against the idea that it was due to any ideological or genetic advantage (Diamond).

Others, like Thomas Sowell of Stanford University pointed to ideological factors such as the greater freedom, especially in Britain, as the cause for the West’s accelerated development (W.C.). Religion is another ideological factor that has been referred to in this argument, with German sociologist Max Weber suggesting that Calvinism, with its touting of “thriftiness, rationality, and concern with material gain” made the European population more economic-minded compared to their foreign counterparts (W.C.).

Joel Mokyr of Northwestern University takes a middle path and states that a combination of environmental factors like more domesticable plants and animals, along with cultural-ideological factors like the increased prevalence of “open science” and capitalism allowed for global European dominance in many areas (W.C.).

However, while economic inequality may be due to any or all of these factors, the fact that it still remains a problem today indicates that there is something preventing the equalization of wealth. Diamond postulates that this resistance has to do with positive feedback loops, which in his example relates to the innate benefits provided by the environment of Europe that has allowed Europeans to develop faster, which allows them to claim more resources faster, and so forth. However, an article written by Ewout Frankema of the World Economic Forum (WEF) posits that there are also negative feedback loops in developing countries mainly due to the aftereffects of a colonial era. In response to the abolishment of slavery in America, for example, the colonial African continent responded by turning to exporting commodities (Frankema). However, this reaction happened throughout Africa, resulting in the suppression of prices due to excess supply. To remedy this problem, African nations were forced to produce even more, which led to worker exploitation and environmental consequences. These two consequences continued to feed off each other, resulting in a loop that never allowed the African countries to truly develop to the level of their European counterparts. These developments reveal that the consequences of colonization can be deep and far-reaching.

A key question to consider, however, is whether inequality is actually bad. In fact, complete equality has many concerning aspects as well, and especially the idea of “equality of outcome”. In contrast to “equality of opportunity”, equality of outcome refers to each member of society being given the same resources regardless of their level of effort, which could have concerning implications on the peoples’ drive to succeed and be a productive member of society. At an international level, this would also be impossible to enforce with no organizations in place with the capability to redistribute wealth globally.

Instead, a better objective may be equality of opportunity, which provides different countries with the resources to be able to succeed without forcing each country to have the same level of wealth. One way this can be achieved is by better allocating aid from developed countries to developing ones to meet the real and specific needs of each country (Ross). For example, according to U.S.News, Uganda has a large issue with providing sufficient water to its citizens, and nearly 40% of its population and to travel over 30 minutes in order to access drinkable water. To rectify this, foreign aid can come in the form of desalination technology or increased wells in order to increase accessibility to potable water.

Another possible solution to the problem of international inequality is the establishment of multinational economic trade agreements (Tragakes). By allowing for the freer movement of goods, services, and technologies, developing countries will be better able to catch up to developed countries via increased opportunities to trade goods and gain access to new technologies.

Whatever the chosen solution is, international wealth inequality despite being less well-known than other forms of inequality, is nonetheless an issue in the modern era, and needs to be addressed, lest it worsen.