Economic Polarization

This article discusses globalization, global poverty, the resulting global systems of stratification, and their relationship to economic polarization. The article defines globalization, global stratification, economic polarization and some factors that may cause it such as neocolonialism, using sociological perspectives including the Modernization, Dependency, and International Division of Labor theories. It goes on to discuss global distribution of wealth, and provides some examples of how economic polarization affects people in several different countries from Mexico to China.

Keywords Absolute Poverty; Caste System; Class System; Colonialism; Dependency Theory; Economic Polarization; Globalization; Global Poverty; High-income Countries; International Division of Labor Theory; Internationalization; Low-income Countries; Middle-income Countries; Modernization Theory; Multinational Corporation; Neocolonialism; Relative Poverty; Slavery; Developing World; World Systems Theory

Economic Polarization

Overview

It is safe to say that most of the world's people are poor. Consider that the wealthiest 20 percent of the world's population receives 75 percent of the world's income, while 40 percent account for only 5 percent of that income (UN Human Development Report 2007/2008). Much of the world's population lives in the poorest regions of the poorest countries, such as in the rural areas of China and the rural and urban areas of India and Africa (Milanovic, 2002).

What is Globalization?

Globalization often refers to the expanding, strengthening, and swift interconnectedness in all aspects of global life from culture to finances to spirituality. For example, consumers in the U.S. can receive customer service from company representatives in India. The Dalai Lama can deliver his spiritual message from a place of exile in India, to followers throughout the world, as well as to his detractors in China. In other words, through enhanced technology such as satellites, the internet, and cell phones, globalization connects one region of the world to developments in another. Americans can follow up-to-the-minute results of political upheaval in Pakistan, while drug addicts in Belfast receive their temporary euphoria from poppies grown in Burmas (Held, McGrew, Goldblatt, & Perraton, 1999).

Global stratification is similar to social stratification, a top-down arrangement of social groups, with their position determined by the amount of control these groups have over resources such as food, clothing, shelter, education, and health care. Global stratification then, is a similar pattern of hierarchical inequality, which spans not only the groups in one country such as the U.S., but all countries throughout the world. Global stratification measures a country's social system and the level of that system's openness. There are three basic social systems in use throughout the world, the class system, slavery, and the caste system. Each of these systems, according to the Kuznets hypothesis, is subject to erosion as technology and industrialization become central to a country's economy (Kuznet, 1955).

Class System

The class system is the most open, allowing people in one class, through social mobility, to have the opportunity to move to a higher class, or even with downward mobility, to a lower class. The class a person occupies determines his or her life chances, or ability to receive more and better resources from the system. Within the class system, the Kuznets hypothesis would argue that inequality among classes would begin to diminish with increased industrialization, but then would begin to level off and even begin to increase during a post-industrial phase. This could be caused by the plethora of service related employment, which takes the place of manufacturing jobs, and which often pays much less.

Slavery

Two closed systems of stratification are slavery and the caste system. Especially the caste system, but also slavery, should begin to erode with the advent of industrialization. India is an example of a country where the caste system is slowly dissolving as education and employment become more universal. Slavery involves the ownership of some people by other people. Slaves are considered property and so they have little or no control over their own lives and often over the lives of their offspring. Historically, there have been only five slave societies: ancient Greece, the Roman Empire, the U.S., the Caribbean, and Brazil (Engerman, 1995).

Caste System

Another closed system is the caste system whereby people's social status is decided at birth, usually because of their parents' status. For example, in India, some people are placed in a caste based on the type of work they do. But the caste system in South Africa, which is also slowly being dismantled with the advent of industrialization, is based on race.

Classifying Economies

The gap between the richest and poorest countries in the world has grown since the middle of the twentieth century, with the wealthiest countries often having 80 times the income of the poorest countries (U.N. Development Programme, 2003). The old method of classifying countries and their economic development into first, second, and third worlds has been replaced. It is no longer possible to lump together third world countries that have a much more diverse range of economic development, not only between one another, but also internally. A more modern classification of the world's 192 nations focuses on per-capita income development and divides them into high-income, middle-income, and low-income categories (Kendall, 2006).

Economic Polarization

The practice of creating products and services that are amenable to different languages and cultures around the world is called internationalization; sometimes referred to as localization enablement. This enablement can include translating labels, help pages, and online menus or manuals into various languages; international character sets for word processing programs; and use of global meanings and symbols (Whatis.com).

Yet this internationalization, which seems to allow greater communication and trade of ideas, goods, and services worldwide, has led to a growing economic marginalization of many developing countries as trade and investment flows within high income countries, to the exclusion of much of the rest of the globe, leading to an economic polarization of the wealthiest countries on one side of the continuum and the poorest countries on the other end (Held, McGrew, Goldblatt, & Perraton, 1999).

These large countries at both ends of the spectrum have been called "twin peaks" (Quah, 1997). On the low end are those people, 2.4 billion in number, who earn less than $1000 per year, such as those in poor areas of India, China, and Indonesia. These billions of people only command 9% of the world's income, although they are some 42% of the world's population. The other smaller peak, representing only about 500 million people, has an income over $11,500 per person per year. The United States, Japan, Germany, France, and the United Kingdom comprise those countries that monopolize 45% of the world's income, while only accounting for 13% of its population. "An American having the average income of the bottom US decile is better-off than 2/3 of world population" (Milanovic, 2002, p. 50). Herein lies the bulk of the world's income inequality and the twin peak image graphically describing the economic polarization that increases exponentially along the continuum between these two groups of countries, with mid-range countries such as Brazil, Mexico, and Russia, adding a bit more to world income inequality.

Since the 1980s, some world regions, such as the already-wealthy Western European countries, America, and Australia, have raised their average income per person, while others, such as Sub-Saharan Africa and Eastern Europe, have declined in income. The Arab States, East Asia, and Latin America as a whole, achieved modest gains, but these are negligible compared to the wealthiest countries, especially because of relatively small population numbers (United Nations Development Programme, 2002). Some researchers argue that the tendency for poor countries to grow faster than wealthy ones should allow their income levels to converge, or to move closer together (Milanovic, 2002).

Yet, consider the rapidly growing economies of India and China, when compared in a hierarchical grouping, with the U.S. and Europe. The bottom of slightly less than one-third of global wealth distribution is dominated by India, with the middle one third held by China. The top one third is comprises North America and Europe. People living in low-income countries have difficulty accumulating wealth. The figures are dramatic: the top 10 percent of the population owns 85% of global household wealth, more than 8.5 times that of the global average, where the bottom half of the hierarchy owns only 1 per cent of global wealth. Only an income of $2161 would place an adult in the top half of the world's wealth distribution, but to be in the top 10% of that, an income of $61,000 per year is necessary, and to be included in the top 1 per cent requires an income of over $500,000 (Davies et al. 2006). A stark example of economic polarization is that, as of 2002, the three richest people in the world had more wealth, consisting primarily of stock in their own companies, than the poorest 10 per cent of the world's population. The 125 richest people in the world together had more wealth than the gross domestic product (GDP) of all the low-income countries combined (Milanovic, 2002).

Some Causes of Economic Polarization & International Inequality

Several sociological perspectives hypothesize about what may cause economic polarization and international inequality.

Dependency Theory

The first cause, often cited using the Dependency theory, is Colonialism and its resulting exploitation.

From the conflict perspective comes Dependency Theory, which argues that exploitation is the key to low income countries failing to provide for their populations, while the high income countries greedily take advantage of the poorer countries and their resources. Because the poor countries need the money offered by high-income countries, they are continually in debt and can never repay what they owe, making them continually dependent on more foreign capital in what amounts to a vicious cycle (Macionis, 2007). Dependency theorists further argue that poor societies today are not as well off as they were in the past and that with European exploration and colonialism, the poor societies have been exploited by high-income countries seizing the wealth created. For example, Africa has a history of foreign colonialism and domination and while most African countries are now politically independent, neocolonialism continues to exist economically and Africa depends heavily on the global economy (Macionis & Gerber, 2008).

International Division of Labor Theory

The International Division of Labor Theory cites internal inequality as a factor in the underdevelopment of nations.

A theory that can be linked to a more post-modern perspective is the International Division of Labor theory, which states that the industry of multinational corporations can locate wherever labor is the easiest and cheapest to obtain. Often, sending jobs into low-income countries does not help alleviate the poverty of the workers involved. Many of them have reported that they cannot afford to buy the products they help to manufacture (Goodman, 1996).

In addition to poverty, there are many other factors involved in underdevelopment. Corruption can affect economic development, as can lack of educational achievements and abilities of a population, as well as technology and geographic features of a country. Structural functionalist theorists would argue that the willingness to overcome these drawbacks is necessary for a country to prosper.

Development & Modernization Theory

As structural-functionalist theory, the Development and Modernization theory argues that all countries start out poor and that a higher standard of living occurs when a nation industrializes and social mobility becomes possible. Within the Development theoretical group is the so-called Modernization theory, which states that global inequality and economic development are closely linked. Low-income countries can improve their standard of living through economic growth and the falling away of traditional cultural beliefs and values (Rostow, 1971). But, the modernists argue, not all countries are likely to engage in new technologies because of historical cultural values and beliefs that have impeded development, and a failure to make connections with affluent societies (Macionis & Gerber, 2008).

The Severity of Poverty

While deprivation exists in societies like the U.S. and Canada, the poorest countries are characterized by severe and extensive poverty. In the midst of the squalor of low-income societies, however, live enormously rich individuals.

Relative vs Absolute Poverty

While all societies have people living in poverty, in rich countries, poverty is considered to be relative poverty. In other words, people can afford to buy the basic necessities of life, but often do not have enough left over to purchase other goods and services available in that society. But in poor countries, poverty is much more serious and life threatening. It is also more pervasive, with some 40,000 people dying every day in the world from starvation (Macionis & Gerber, 2008).

Applications

The Maquiladoras in Mexico

The term Maquiladoras is a colonial Mexican term, defining a "maquila" as a payment for processing the grain of growers. This same term today is also known as production sharing, or offshore operation, and describes companies that process, or assemble components imported into Mexico which are then exported, usually to the United States.

Many foreign companies have used the Maquiladoras for manufacturing processes such as assembly, packaging, sorting and repair work, paying workers some 25 per cent lower hourly wages than comparable workers in the U.S. for a 48-hour work week that does not require the payment of overtime (Maquiladora Management Services, 2008).

Mexico's maquiladora export-oriented manufacturing plants and zones illustrate economic polarization among workers in the forms of falling wages and deteriorating working conditions, eventual loss of some jobs to countries such as China where even cheaper labor is available, causing increased workplace hazards and industrial pollution exposure. How much more damaging these conditions may or may not become depends on opportunities developed by individual workers, companies, and national economic policies. They are competing with companies and workers with much more financial wealth, skill, and technology and will almost inevitably become more economically polarized in the new global marketplace (Labonte & Schrecker, 2007).

Economic Polarization in Darfur, Sudan

The internal crisis in Sudan has been an increasing concern for the international community. Several factors have caused the crisis, one being the resource competition between non-Arab and Arab groups in the northern and southern areas of the country. Another factor is economic polarization. Darfurian workers tended to migrate to, and then to settle in, the Nile Valley region in the 1960s where modern farming techniques were being used. Wages, however, remained low for the subsistence farmers of Darfur communities, who wanted to earn enough cash to purchase consumer goods. A close interdependence developed via the economic polarization between the modern farming region along the Nile and the family farms in Darfur. As long as farming was merely subsistence in Darfur, the modern farms could rely on Darfur to supply cheap labor. However, the wealthier Arab farmers in the Nile region were more prosperous and tended to dominate the political scene. They began to see themselves as superior to, and ethnically separate from, the non-Arab Darfur farmers who were anti-government. The Sudan government has capitalized on these differences, using a 'divide and conquer' technique to destroy its detractors. In addition, because of the oil reserves present in the Darfur region and the interests of the Chinese in that resource, the Chinese are willing to support the Sudanese government and to allow the persecution of non-Arabs in Darfur to continue (Haaland, 2005).

Lifestyle Indicators of Economic Polarization in Post-Communist Moscow

Before the fall of the U.S.S.R., Moscovians enjoyed a relatively egalitarian economic situation, with university-educated professionals earning only 8% more in income than did unskilled workers, and everyone could enjoy access to a high quality of cultural life. But during the 1990s, things changed and the polarization between the rich and the poor in Moscow became dramatic, with average living standards cut virtually in half. The poor suffered the most from this economic reform, earning only $100 per month to pay for rent, food, and other basic necessities, while the new rich Russians could buy new cars, vacations, restaurant meals, clothing in the latest fashions, and more. In other words, the newly wealthy in Moscow continue to enjoy high culture while the poor are spending their time instead trying to maintain daily subsistence living. These poor people are mending and re-mending worn items, going to the country to get food from farmer relatives, and perhaps watching television shows for entertainment. This behavior takes up the time normally spent in leisure and cultural activities similar to the wealthier Russians. Studies have found that the wealthy were more satisfied with their leisure than the poor, indicating that economic inequality leads to inequality in leisure enjoyment (Roberts et al., 2001).

The Connection Between Economic Polarization & Political Corruption in China

Since the 1990s, despite the apparent prosperity of the country as a whole, China's urban workers have become poorer than ever because of unemployment or reduced wages. This so-called re-impoverishment blame is placed by some researchers on the corruption of government-appointed directors of state-owned enterprises. These enterprises tend to lose money for the state when compared to private businesses, where the concentration of wealth is taking place. Certainly, in a traditional capitalist society, there is a small pocket of people, the capitalists, who accumulate the most wealth. But in China, the economic polarization that exists between rich and poor is only due in part to the mechanisms of capitalism. Because China still considers itself a communist country, the corruption in state-owned enterprises, where the majority of urban workers are employed, is being blamed, at least in part, for the unequal distribution of wealth. State-appointed directors steal enterprise assets and turn them into personal wealth, seemingly with the blessing of party officials in cahoots. Because of this corruption, the state-owned enterprises are losing money and thus are dropping bonuses, lowering wages, and firing workers. Some enterprises are going bankrupt completely, or turning into private enterprises. Laid off or unemployed state employees make up 84 per cent of China's urban poor. This is a major factor for China's economic polarization and some believe it could develop into a radicalized class identity and rapid political opposition to the ruling party (Chen, 2002).

Conclusion

Globalization and economic polarization have affected both low income and high-income countries. In the poorest nations, people often die of starvation, while even in wealthy countries like the U.S., jobs are lost to overseas factories.

While economic output increases rapidly worldwide, there is more of it in rich countries, which are becoming wealthier than poor countries. The gap is widening and improvements tend to clump in some countries and not in others. In south Saharan Africa, there is more poverty than ever (Macionis & Gerber, 2008).

While economic development in low-income societies puts great demand on a country's resources, it is the hope of many that more technological change will lead to the creation of industrial societies where literacy and consciousness of the political process will ease levels of poverty and shorten the distance between the economic poles of wealthy and poor countries.

Terms & Concepts

Absolute Poverty: When the lack of basic needs threatens life.

Caste System: A system that determines people's status at birth based on their parents' permanent, or ascribed characteristics.

Class System: A system that stratifies people into classes based on the type of work they do and the amount of resources they control.

Colonialism: When one country dominates and occupies another country for the purpose of exploiting that country's resources.

Dependency Theory: A conflict perspective, which argues that global inequality exists because rich countries exploit poor countries.

Globalization: The development, manufacture, and marketing of products that are intended for worldwide distribution, often utilizing multinational corporations and workforces.

Global Poverty: The absolute poverty line as determined by the World Bank, set at an income of $2 a day or less.

High-income Countries: Nations with the highest overall standards of living.

International Division of Labor Theory: Commodity production is being split into fragments that can be assigned to wherever production costs are cheapest.

Internationalization: The practice of creating products and services that are amenable to different languages and cultures around the world; sometimes referred to localization enablement.

Low-income Countries: Nations with the most poor people and a low standard of living.

Middle-income Countries: Nations with a middle-of-the-road standard of living.

Modernization Theory: A functionalist perspective which states that affluence follows higher levels of technology.

Multinational Corporation: A large business that operates and has interest in several countries.

Neocolonialism: A form of colonialism that is practiced by multinational corporations rather than by nations.

Relative Poverty: When some people in a country lack the resources that others enjoy, but they can afford the basic necessities.

Slavery: A system whereby people are held in some form of bondage by other people.

Developing World: The poorest countries with little industrialization, short life expectancies for people, and little or no democracy.

World Systems Theory: Domination by high income, or core nations, of semi peripheral (middle income) and peripheral (low income) nations.

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Suggested Reading

Hackett, R. & Zhao, Y., eds. (2005). Democratizing global media. Maryland: Rowman & Littlefield.

Hellier, J., & Chusseau, N. (Eds.). (2013). Growing income inequalities: Economic analyses. New York: Palgrave Macmillan.

Sachweh, P. (2012). The moral economy of inequality: Popular views on income differentiation, poverty and wealth. Socio-Economic Review, 10, 419–445. Retrieved November 4, 2013 from EBSCO online database, SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=77391163&site=ehost-live

Shannon, T. (1992). An introduction to the world-system perspective. Boulder, Colorado: Westview Press.

Wallerstein, I. (1999). The end of the world as we know it: Social science for the twenty-first century. Minneapolis: University of Minnesota Press.