Income Disparity, Global

Refers to the increasing gap between the wealth of first-world nations (the wealthy industrialized nations) and the wealth of developing nations. Global income disparity can also refer to the increasing gap between individual incomes among the wealthy and the impoverished in a global context.

There is little debate that the income disparity has increased substantially in the last three decades. Until the early 1970s, the trend for individual incomes in developed, industrialized countries was one of both growth and increasing equality. In the mid-1970s, this trend of increasing equality was sharply reversed, however. Whereas in the mid-1970s, the average income of the wealthiest 5% of Americans was 7 times that of the poorest 40%, by 1995, the wealthiest 5% had incomes that were 10 times that of the bottom 40%. This pattern of increasing income inequality also occurred in the United Kingdom and, to a much lesser degree, in other Western European countries.

During the same period that individual income inequality was increasing, so too was the gap between wealthy states and developing states. The current ratio between the average income of wealthy nations and the average income in developing nations is 1:98, a notable increase from the 1:87 ratio of two decades ago. In simple terms, both within countries and between countries, the wealthy are getting much wealthier and the poor are getting poorer.

Reasons for Increasing Income Inequality

There are several opinions as to why global income inequality is increasing. Many experts cite the current organization of international trade. In the last two decades, developed countries have worked very hard to force open the borders of developing countries and decrease the system of tariffs and quotas that had previously made imports expensive in these developing nations. At the same time, Western countries have been slow in removing their own barriers to imports from these developing countries.

This dynamic has been particularly apparent in agriculture, as Western subsidies to domestic farmers make foreign imports of agricultural products unattractive to the domestic markets. Given that nearly 70% of developing countries rely on agricultural products as their main source of income, the difficulty in exporting agricultural products to the West has made economic growth difficult.

Other explanations for the increasing global income disparity emphasize the inability of the primarily unskilled labor force of developing nations to effectively capitalize on the rapid advances in productivity and technology. Most developing countries, with rapidly increasing populations and limited educational [Page 353]opportunities, are incapable of developing their industries to be capable of the sort of global competitiveness necessary to increase their national wealth.

Responses to Global Income Disparity

The increase in global income disparity has been of particular concern for developing nations, the United Nations, and certain nongovernmental organizations (such as Oxfam) and labor organizations. Others in the international community, including developed countries, the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO), while recognizing the increase in global income disparity, have chosen to focus instead on the absolute income gains made by some developing countries, particularly in Southeast Asia.

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