Kuznets Curve

This article discusses global stratification and global systems of stratification such as slavery, the caste system and class system, and their relationship to the Kuznets Curve and its prediction for the future stratification of the world's countries. Also discussed is the Environmental Kuznets Curve (EKC) which economic environmentalists use to measure the relationship between the wealth of a country's citizenry and the level of pollution in that country. The article defines global stratification, and sociological perspectives including the Modernization, Dependency and International Division of Labor theories. The article goes on to discuss global wealth and how it is determined and distributed, along with the differences between absolute, relative and subjective poverty. The Kuznets Curve is defined and discussed, as it relates to how technological advances lead to less inequality during industrialization.

Global Stratification

Overview

The Kuznets hypothesis, developed by Simon Kuznets in 1955 and introduced in his presidential address to the American Economic Association, states that throughout history, the technological advances of a country cause social inequality, or stratification, to increase and then decrease again over time. In other words, income inequality increases in the early stages of industrialization, then later reverses itself. Then, in a post-industrial era, the trend reverses once again (Keutsch & Silber, 2004). According to Kuznets, in agrarian societies, greater levels of inequality contribute to the smooth operation of the social system, but when a country industrializes, equality of life chances is more beneficial (Kuznets, 1955). The Kuznets curve, shown in Figure 1, is a graphic representation of this relationship, with the intensity of social stratification on the y-axis. This intensity is shown increasing from hunting-and-gathering societies through horticultural/pastoral to agrarian, decreasing with industrialization, and actually increasing again during a post-industrial period (Macionis, 2007).

There are other indicators besides economic wealth that must be taken into consideration when discussing the Kuznets curve and the relationship between advanced technology and inequality. Ethnic discrimination in both the political and the economic realms contributes to income inequality. Industrialization does create an inverted U-shaped progression of higher and then lower inequality, but while the influx of foreign capital into a country should foster economic growth and thus lower income inequality, it in fact does just the opposite and causes more income inequality (Kassebaum & Jenkins, 2003).

Kuznets Curve & Population Composition

Inequality can often be related to social situations where a group of people remain unequal, whether they belong to a class, caste, or slavery system, because of ascribed characteristics: those attributes that one cannot change, such as sex, race, ethnicity, and age. Therefore, researchers have determined that by using the Kuznets curve, it is possible to see that low-income countries are often more heterogeneous in their composition and that they become more homogenous as a country industrializes. Following the Kuznets hypothesis that the future is open ended but expected to reverse the curve's trend, post-industrial societies necessarily return to their ethnically diverse origins. This heterogeneity allows for cultural diversity, thus offering, from an economic standpoint, new markets for products and services, as well as new policies regarding common goals and even infra-structure development (Tiemann, Das, & DiRienzo, 2006).

To begin a discussion of the Kuznets curve, which postulates that the technological advances of a country cause social inequality, or stratification, to increase and then decrease over time (Kuznets, 1955), it is necessary to define global stratification. Briefly discussed are major theories hat provide a background for the relationship between global stratification and technological advancements.

Further Insights

What Is Global Stratification?

Global stratification is similar to social stratification: a top-down arrangement of social groups, the positions of which are determined by the amount of control these groups have over resources such as food, clothing, shelter, education, and health care. Global stratification is a similar pattern of hierarchical inequality that spans not only the groups in one country 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

* 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.

The Class System

The class system is the most open, allowing people in each class to have social mobility: the opportunity to move to a higher class or even, with downward mobility, a lower class. The class a person occupies determines his or her life chances, or ability to receive various resources from the system. The Kuznets hypothesis argues that within the class system, inequality among classes would diminish with increased industrialization but then would 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 often pays much less.

Slavery

Two closed systems of stratification are slavery and the caste system. Both should begin to erode with the advent of industrialization. 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 or the lives of their offspring. Historically, there have been only five slave societies: ancient Greece, the Roman Empire, the United States, the Caribbean, and Brazil (Engerman, 1995).

The Caste System

Another closed system is the caste system, whereby social status is decided at birth, usually because of the parents' status. For example, in India, some people are placed in a caste based on the type of work they do. But India is also an example of a country where the caste system is slowly dissolving as education and employment become more universal. The caste system in South Africa, which is also slowly being dismantled with the advent of industrialization, is based on race.

Global Wealth & Poverty

Just as one country can have wealthy pockets of population as well as those living in abject poverty, so too can whole countries find themselves stratified based on wealth or lack thereof. There are three different global economies identified by social scientists: low-income, middle-income, and high-income countries. According to the Kuznets hypothesis, countries that adopt an industrial economy would begin to manifest a higher degree of equality and democracy. But there are questions about how a low-income country can become a high-income country when it has become dependent on foreign aid and other external sources of money as part of its economy.

The gap between the richest and poorest countries in the world has grown in the past half century. In 2011, the countries with the highest human development had over twenty-four times the per capita income of those with the lowest, as calculated in terms of purchasing power parity (UN Development Programme, 2013).

Low-Income Countries

Low-income countries often rely on an agrarian economic system that offers little in the way of national or personal wealth. Some 12 percent of the world's population lives in thirty-six countries that have been identified as low income (World Bank, 2013).

Middle-Income Countries

Middle-income countries are still developing their industries and have higher income than low-income countries but lower income than high-income countries. The World Bank has further divided these nations into forty-eight lower-middle-income countries and fifty-five upper-middle-income countries, together holding about 70 percent of the world's population (World Bank, 2013).

High-Income Countries

According to the World Bank, there are seventy-five high-income countries, which have technologically advanced economies and a high level of industrialization as well as national and personal income. These countries contain approximately 18 percent of the world's population (World Bank, 2013).

How Global Wealth & Poverty Are Measured

Because data from individual countries can be difficult to moderate, the United Nations uses the gross domestic product (GDP) of a country, which tracks all the goods and services a country produces each year, and the World Bank uses a measure of income inequality known as the Gini coefficient, which ranges from 0 (perfect equality) to 100 (perfect inequality). Where a country's economy resides along the continuum from 0 to 100 determines its state of wealth or poverty (Macionis, 2007).

Sociological Perspectives on Global Stratification

Several theories have been put forward to answer the question of why so much of the world is getting richer while the poor cannot achieve even a basic standard of living. These theories include the modernization theory, the dependency theory, the world systems theory, and the international division of labor theory. Each of these theories reflects the sociological perspectives of the structural-functionalist and the conflict schools of thought in sociology (Macionis, 2007). Some of these theories coincide with the Kuznets hypothesis, while others seem to contradict it. For example, the dependency and world systems theories argue that because of exploitation, low-income countries may never develop into nations whose citizenry may enjoy economic and social equality.

Development & Modernization Theory

The modernization theory is a structural-functionalist theory within the development-theory group that argues that a higher standard of living occurs when a nation industrializes and social mobility becomes possible. Low-income countries can improve their standard of living through economic growth and the falling away of traditional cultural beliefs and values (Rostow, 1971). Because it is first an economic theory, the Kuznets curve does not necessarily address social issues such as culture or religion, which may continue to prevent economic equality for some people in a society.

Dependency Theory

From the conflict perspective comes the dependency theory, which argues that exploitation is what causes low-income countries to fail to provide for their populations, while the high-income countries greedily take advantage of them and their resources. Because the poor countries need the money offered by high-income countries, they are constantly in debt and can never repay what they owe, making them continuously dependent on more foreign capital in what amounts to a vicious cycle (Macionis, 2007). It remains to be seen whether the Kuznets hypothesis will hold true for the future of poor countries.

World Systems Theory

A postmodern perspective offers the world systems theory, which argues that countries do not have their own separate economies but rather are all part of a single global economy, in which nations are classified as core, semi-peripheral, or peripheral, depending on which ones provide skilled labor and control the means of production (Wallerstein, 1979). The results of such a system could prevent people in the peripheral countries from achieving economic equality with their core counterparts.

International Division of Labor Theory

Another theory that can be linked to a more postmodern perspective is the international division of labor theory, which states that multinational corporations locate themselves wherever labor is the easiest and cheapest to obtain. Often, sending jobs into low-income countries does not lower the poverty level of the workers involved. Many of them have reported that they cannot afford to buy the products they help to manufacture (Goodman, 1996).

Viewpoints

The Environmental Kuznets Curve

While Kuznets's original hypothesis regarding the relationship between industrialization and equality or the lack thereof has been debated by social scientists, environmental economists have taken up the hypothesis and used it to measure the relationship between economic prosperity and pollution standards. The environmental Kuznets curve (EKC), like the original Kuznets curve, uses the same inverted U-curve to describe the relationship between a country's economic growth and its environmental pollution. During the first stages of economic growth, generally brought about by industrialization and manufacturing, environmental pollution worsens, but as the population becomes wealthier, pollution begins to abate. Therefore, the argument goes, if all countries were to have solid economies, the entire planet would benefit from reduced pollution (Leonard, 2006).

Water-Quality Issues

The scarcity of clean water and its increased usage for industrial purposes concerns the global community. As a country's population increases through economic development and an increased well-being of the people, the demand for water heightens, not only for residential use but for industrial purposes as well, thus producing more industrial waste water. In 2012, about 40 percent of the world's population were dealing with water shortages, most often in developing countries, due either to physical scarcity or a lack of necessary infrastructure. Again, the Kuznets curve demonstrates a relationship between economic growth and industrial water use, with that use increasing, leveling off, and then decreasing as income equality rises (Jia, Yang, Zhang, Wang, & Xia, 2006).

Energy Use & Income Relationships

By 2013, carbon dioxide levels in the earth's atmosphere had increased nearly 43 percent since pre-industrial times and still continued to rise, due to deforestation and overuse of fossil fuels worldwide. Researchers have studied the Kuznets hypothesis regarding the relationship between income, the use of natural resources, and increased waste products. Findings indicate that more income equality will not reduce energy use and the resulting waste products. Thus, higher standards of living will not improve the quality of the environment unless wealthier nations are forced to pay higher and higher prices for energy, including fossil fuels (Richmond & Kaufmann, 2006).

How Viable Is the Environmental Kuznets Curve?

Over the last several years, the EKC has lost support. There are a few reasons for this. First, while some pollutants, such as carbon monoxide and sulfur dioxide, seem to follow the bell curve, other types of pollution, such as that due to deforestation and carbon-dioxide emissions, do not have as clear a correlation to the original model. The picture becomes murkier on a global level, where it is argued that high-income nations often export their most polluting industries to low-income countries. For example, Taiwan has improved its air quality in recent years, but that could be because the country has exported its manufacturing (and the accompanying pollution) to China. The question arises whether the countries receiving the manufacturing industries, which should theoretically lead to more democracy and equality for their citizenry, will be able to afford to clean up their air, water, and land as handily as the post-industrial world from where it has been handed down (Leonard, 2006).

Global Stratification in the Future

Kuznets's hypothesis links income inequality with levels of industrialization. The curved section of the shape shows a higher share of wages, but researchers argue that it also indicates an increasing inequality in the distribution of other types of income not taken into account by Kuznets (Deutsch & Silber, 2004). Ethnic diversity and levels of ethnic discrimination, the influx of foreign capital into a country's economy by multinational corporations, and a host of other variables, while maintaining the viability of Kuznets' hypothesis, continue to shed light on global stratification of the future.

Questions arise from the various sociological perspectives. First, we may ask whether the structural-functionalist theory of modernization, which states that a higher standard of living occurs when a nation industrializes and social mobility becomes possible and that low-income countries can improve their standards of living through economic growth and the falling away of traditional cultural beliefs and values, stands true. Second, we may question whether the conflict perspective's dependency theory, which offers a less optimistic future for low-income countries in which industrialization only leads to exploitation of both the people and the country's resources, has more merit.

The future outlook depends on whether equality is considered in a purely economic sense or whether social issues such as human rights, democracy, and secondary education are taken into account. Certainly, issues such as cultural beliefs regarding sex and the role of women in society (often religious in nature), environmental pollution, centralization of economic power in the hands of one or two world organizations, and political unrest in regions of the world can stymie a people's economic welfare and general well-being (Kendall, 2006).

Terms & Concepts

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 that argues that global inequality exists because rich countries exploit poor countries.

Gini Coefficient: A measurement used by the World Bank to determine income inequality.

Global Stratification: A system of social and economic inequality throughout the world.

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

International Division of Labor Theory: A sociological theory that states that multinational corporations locate wherever labor is the easiest and cheapest to obtain.

Kuznets Curve: A trend developed by Simon Kuznets that shows the relationship between technological advances and inequality.

Low-Income Countries: Nations with the highest number of 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 that states that affluence follows higher levels of technology.

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

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

World Systems Theory: A system in which a single global economy features core nations that dominate semi-peripheral and peripheral nations.

Bibliography

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Suggested Reading

Clark, R. (2011). World health inequality: Convergence, divergence, and development. Social Science & Medicine, 72, 617-624. Retrieved November 12, 2013, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/ login.aspx?direct=true&db=sih&AN=57988043&site=ehost-live

Cole, M. (1999). Limits to growth, sustainable development and environmental Kuznets curves: An examination of the environmental impact of economic development. Sustainable Development 7 , 87-97. Retrieved July 29, 2008 from EBSCO online database SocINDEX with Full Text: http://search.ebscohost.com/login.aspx?direct=true& db=sih&AN=8388813&site=ehost-live

Stern, D. I. (2004). The rise and fall of the environmental Kuznets curve, World Development 32 : 1419-1439.

United Nations (1997). Global development. Retrieved July 30, 2008, from http://www.un.org/News/Press/ docs/1997/19970120.endev401.html