Global Inequality and Poverty

Global Inequality and Poverty: Rich-poor gap wide, millions live in poverty. Progress was made, but the pace slowed.

Before the industrial revolution, most of the people used to work in the agriculture sector. Industrial Revolution had a huge impact on inequality between countries. But, I would like to focus on economic inequality between different groups of people and the distribution of wealth among them.

There are different types of economic measurement metrics whose focus is on wealth and income. The most common metric to measure inequality is the Gini Coefficient, and a study conducted by the World Institute for Development Economics Research in the United Nations, reports that 1% of adults account for every 85% of the world’s total wealth.

Following is the data from the United Nations and other economic surveys-

6 % of the world’s population owns 52% of the global assets.
50% of the world’s population owns less than 1% of global assets.
1,125 billionaires (US dollars) own 4.4 trillion assets.
Over 80% of the world’s population earns less than $ 10 per day and over 50% of the world’s population earns less than 2 US $ per day.

Today, the richest countries are Western countries, and Asian countries are struggling financially. It can be said that colonial rules have made European countries rich and Asian countries poor.

What are the Main Reasons for Poverty and Inequality?

Many economists argue that capitalism is the reason behind global inequality and poverty. Geoffrey Martin Hodgson defines capitalism in his article, How Capitalism Generates Inequality.

What is capitalism?

Capitalism is the political and economic system in which a country’s trade investment industry and production are controlled by private individuals for profit rather than by the state. After the industrial revolution, most countries shifted towards capitalism because of its ability to generate higher profits. Capitalism has advantages such as efficient allocation of resources, economic freedom and less state interference. But, the main problem is the rising economic inequality because some individuals exploit and take advantage of capitalism.

How does capitalism work?

Capitalism is often considered an economic system in which property is owned and controlled by the private sector. The main motive of capitalism is profit-making. Adam Smith, the father of modern economics said,

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their interest.

In a capitalist economy, capital assets such as factories, mines and railroads can be owned and controlled by the private sector and the labour worked for wages and was not concerned about the company’s profit.

Pillars of capitalism

Private property allows people to build assets. For instance, land and houses.
Self-interest through which people act in pursuit of their good.
A market commission which helps to determine the price of products.
The limited role of government and markets is liberal.

Following are the disadvantages of Capitalism in today’s world :

An opportunity for monopolisation results in inequality which leads to unequal distribution of wealth among people.
Recession and unemployment
An economy based on the market of consumers and producers experiences invariably growth and decline.

The Solution to Inequality of Wealth which Leads to Poverty

Karl Mark was a great philosopher of the Modern era. He influences many economists and philosophers. Karl Mark conveyed capitalism as a progressive historical stage that would eventually stagnate due to internal contradiction, followed by socialism. Marxists define capital as a social-economic relation rather than between people and things. In Karl Mark’s view, the working class thereby create the social condition for a revolution.

If we want to understand how Karl marks views impact social inequality we must understand humans basic needs.

We need to consider how humans eat.
How do we produce essentials?

Throughout history, different societies had different types of economic systems. According to Mark, the ancient human societies were based on a system named primitive communism wherein all the members worked together by hunting and gathering. Later, societies evolved and became a more developed, more specialized division of labour and this led to the formation of a class relationship.

For instance in ancient societies the class relationship between slave owners and slaves under feudalism, the class relationship between barons and serfs under capitalism, and lastly, the class relationship between the bourgeoisie and proletariat. Marx sees the virtual history of class struggle and this perspective on history is known as historical materialism. He focused on capitalist societies such as the United Kingdom. Societies formed industries as per Marxism.

Within capitalism, there are two leading social classes namely the owners of businesses referred to as the bourgeoisie and the working class the bourgeoisie is the group which owns and controls the means of production within the capitalist economy. People believe that the enormous wealth and economic influence of the bourgeoisie dominate the class economically as well as politically. Wealth and power are connected. The class that controls production are also influenced politically within a capitalist society.

With political influence, they can provide society in their favour and then they easily exploit the working class. Mark expressed that the relationship is based on conflict or class struggle. According to this perspective within capitalism, we have a class relationship between the bourgeoisie and the proletariat that is based on exploration. Because the working class based on their wages earns a small part of the profit.

Mark predicted that the lower-class rich acquire 60% of the working-class wealth. As of today, only 1% of people acquire the bottom 60% of wealth in the world. Marxists express their alternate solution regarding the inequality of wealth.

What is the Marxist theory of communism?

Karl Mark published many journals and books. In his book, “Communist Manifesto”, he urged a solution to class inequality. He defined communism as a solution to wealth inequality. In communism, the wealth of the Nation is distributed equally among its citizens. According to Marxist Theory, class conflict arises in capitalist societies due to the contradiction between the material interests of the oppressed and exploited proletariat.

Mark urges that there is a system that encourages inequality because the rich will always need someone to work and this will create conflict. Mark suggests some points for the working class that would realize a change in power through education and personal development.

He believed that such radical change comes through a revolution where workers overthrow those people who exploit them. And then a new system would be established, in which people are treated equally. All must own the factories and businesses. Mark named this system as communism.

Many political leaders were influenced by this theory. Vladimir Lenin builds the Soviet Union, the first communist state by the revolution in 1917. Mao established modern communist China. Fidel Castro established communism in Cuba with the help of the soviet union. A capitalist society such as the United States and other Western countries believed communists are a threat during the cold war.

The whole world was divided into two groups- the liberal and the communist state. In the post-industrial capitalist world, inequality is increasing in every country. Political corruption is also a reason behind inequality.