Kevin Jae, a member
of our Emerging Fellows
program inspects the impact of economic inequality on migration in his ninth
blog post. The views expressed are those of the author and not necessarily those
of the APF or its other members.
How does economic inequality affect migration? We can examine the question from
two vantage points. The first vantage point will take the international context.
As for the second, we will examine the effects of economic inequality on
migration from the intra-national context.
In the international context, economic inequality and migration seem to be
inextricably tied in a cause-and-effect relationship. In a dominant narrative,
migration happens because of economic inequality, or the differences between the
economically underdeveloped nations and the developed world. In this narrative,
there is an inversely proportional relationship between economic development and
migration: the less economically developed the nation, the greater the
motivation for potential migrants to emigrate and pursue a better livelihood.
Pursuing this logic, some politicians, development workers, and scholars
advocate for a “smart solution” to migration by tackling the problem at the
roots. They advocate for ideas like “circular migration” and suggestions for
temporary migration, in which international migrants contribute to the
development of their home countries through remittances and the development of
human capital through their experiences working abroad. These hopes seem
justified, given the role of remittances on economic output for some
underdeveloped countries. For example, according to the International Labour
Organization (ILO), 42% of Tajikistan’s GDP came from remittances in 2015.
More recent scholarship puts the correlation between development and migration
into doubt. Actual empirical migration processes hardly conform to this
relationship. While it seems rational to assume that people will migrate to
improve their long-term material prospects, a more nuanced way of
conceptualizing migration takes migratory capabilities into consideration.
Realistically speaking, migrants need access to information, personal networks,
a certain degree of capital, and skills for the labour market to migrate to
another country. Higher levels of human and economic development actually
facilitate migration, although migratory aspirations eventually decrease as
nations reach developed country status.
Empirical data also corroborates this way of theorizing migratory patterns. The
largest movement of migrants come from countries like Turkey and Mexico, not
from countries like Liberia and Bhutan. Eventually, after a certain level of
development, potential migrants will be satisfied with the opportunities
available at home and the home country will start to become a destination for
migrants. Countries like South Korea, which has traditionally been a sender of
migrants, are starting to become a receiving nation. In either case, economic
development will lead to migration to a certain extent. Given how vastly
unsuccessful development initiatives have been in the past decades, this does
not promise to radically increase migrations from the global South to the global
North in the future.
In the domestic context, economic inequality plays a role in the reception of
and the attitudes toward migrants by the local population. Studies suggest that
individuals who perceive a lack of control harbour anti-migration sentiments:
these individuals often face financial insecurity, feel political alienation,
and lack trust in public institutions. As it stands, the general feeling of a
lack of control looks to increase in the future. In the current
political-economic landscape, there is increasing alienation of citizens from
the political process, there are the politics of austerity, and income and
wealth inequality are as high as they have been for decades. In the United
States, almost 40% of Americans report that they would struggle to meet an
unexpected $400 expense. These trends were happening before COVID-19 exacerbated
the situation: the wealth of American billionaires has grown $365 billion to
$3.65 trillion since the middle of March, while middle-to- low-income families
have not fared well. Following the research, we may expect anti-migrant
sentiments to increase, along with anti-migrant discourse from political
parties, if these trends continue to hold in the future.
Economic inequality affects migration in both the international context and the
intra-national context. In the international context, economic inequality
creates migratory aspirations while limiting migratory capabilities. In the
intra-national context, economic inequality sets the ground for nationalist,
anti-migration sentiments. This latter point will drive the next article, which
will examine future scenarios of migration given a nationalist response.
Johanna Hoffman, a member of our Emerging Fellows program detects the probable conflicts that may arise due to the shortage of resources. The views expressed are those of the author and not necessarily those of the APF or its other members.
When resources dwindle, conflict soon follows. This is as true today as it was thousands of years ago, when the Roman Empire invaded Egypt in 30 AD largely to secure more grain. The colonial subjugation of peoples in the Americas, India and Africa was partly rationalized as a means to augment declining resource stocks, in everything from timber to enslaved human labor. In this century, the drought in Syria and the famine that followed laid the groundwork for one of the most violent civil wars in living memory.
If current climate change trajectories are not proactively addressed, environmental instability will spark greater resource strain and conflict will spread. These strains will likely take two forms - what researchers call supply-induced scarcity and structural scarcity. The former typically stems from environmental degradation, when the overall amount of a limited resource drops.In the northeast Atlantic Ocean and the Sea of Japan, for example, the combined impacts of rising temperatures and overfishing between 1930 and 2010 have diminished fish populations by as much as 35 percent.Structural scarcity, on the other hand, occurs when governmental dysfunction or systemic discrimination leads to the unequal distribution of necessary goods. Think of the ways corruption and mismanagement have compounded the effects of drought in Zimbabwe in recent years, creating an economic crisis that is quickly threatening to morph into famine. It’s the rare government that becomes more just and effective when instability spikes.
Already powerful disruptors, food and water access are poised to become increasingly significant sources of tension. Researchers have found that roughly two thirds of the world’s existing population live without sufficient access to fresh, safe water for at least one month per year. The extreme weather events and ecosystem collapse that come with our changing climate will exacerbate those numbers. The rise of new diseases, another significant consequence of climate change, could spark greater disruptions in supply chains, leading to rising agricultural vulnerability and economic volatility. Without meaningful intervention, food security is slated to rapidly deteriorate in poorer regions. Already, supply chain disruption from the current coronavirus pandemic is creating a hunger emergency from Sudan to Mozambique that threatens the lives of millions.
The types of conflicts that arise from these resource-constrained conditions will differ depending on location and circumstance. In wealthier nations, trade wars may well be the first step. While technically non-violent, trade wars often lead to increased tension, which can easily grow into larger conflict or outright war. Among other tragedies, warfare creates more refugees. If environmental instability continues as many climate models predict, the amount of places torn apart by aggression will grow, exponentially multiplying the number of humans in need of safe haven.
Which brings us back to the core of the issue -- when population levels are high and resource levels are low, conflict isn’t far away. Rather than isolated incidents, these resource-related conflicts often spark associated tensions. As refugees fleeing aggression migrate to other countries, factors like border disputes and institutional instability can instigate new hostilities, augmenting what becomes an increasingly vicious cycle. In today’s interconnected world, the chain effects of resource-induced conflict cannot be discounted.
Carl Michael makes assumptions about the alternative futures of Belt and Road Initiative in his seventh blog post for our Emerging Fellows program.The views expressed are those of the author and not necessarily those of the APF or its other members.
The future of the BRI will be shaped by factors both inside and outside China. China’s future geopolitical, economic and social conditions will have a significant impact on the rest of the world. Before one considers whether the BRI will be complete by 2050 or not, one must consider what alternative futures are plausible and probable, and the factors which influence those alternative futures. Some factors which impact the future will not change very much. Among these are the rate of technology change, China’s geographic position, the inherent logic of Eurasian integration and China’s demographic destiny. Its aging society and decreased birth-rates will have a major impact on the potential of workforces in China and the world, with consequent impacts on economic competitiveness.
Environmental stress and changing climate will impact not just China and Asia but the Arctic and the wider world. Currently unviable areas could open to further economic exploitation and some current areas may no longer be economically viable. Environmental stress in turn will trigger population movements within and between nations which could be accelerated by growing economic inequality. In both China and in other nations a significant percentage of the current rural population would have migrated to cities, transforming both China and other nations into predominantly urban states with megalopolises poised to change internal political dynamics. The interaction of contributing factors such as these will impact the future of the BRI directly as well as indirectly. The Eurasian littoral has become increasingly crowded as the visible face of the hegemonic ambitions surfaced by the advent of the BRI narrative. Consequently, the concept of the Indo-Pacific has been adopted as a balancing mechanism and narrative in both economic and geopolitical space. The fault lines between the two narratives is where conflict has the greatest ability to impact the future of the BRI.
In addition to horizon scanning, the following sections will consider alternative futures for the multifaceted BRI at the macro level using a two-axes scenario technique. The axes are based on two key factors selected as having the most impact on the future, which is considered in terms of interaction between the two factors. The first of the factors used will be ‘Globalisation vs. Nationalism’. Globalization refers to the trajectory of the international economy and global geopolitics. ‘Nationalism’ refers to the ways that countries other than China promote their own long-term future interests. The second factor will be ‘BRI facilitates vs. BRI impedes’. The combination of factors is presented as two axes encompassing four plausible positive future scenarios. These are used as lenses with which to view possible futures unfolding over the period to 2050. The four future scenarios that will be covered in the next sections are: ‘The BRI facilitates globalisation – A Converging World Order’, ‘The BRI impedes globalisation – A Continuing World Order’, ‘The BRI facilitates nationalism – A Conflicting World Order’, and ‘The BRI impedes nationalism – A Constraining World Order’. It should be noted that these scenarios are objective and plausible caricatures and it is quite probable that components of one may be fused together with another.
The hope is for a BRI which ennobles mankind in the broadest possible sense and the fear is that the drive to ‘complete’ the BRI could end up sowing loss and division. The evolution of the BRI and any effective response to it will require radical geopolitical changes. The goal of presenting the scenarios which follow will have been achieved if they are seen to be plausible, address the fundamental fears of all concerned yet leave room for hope in the image of the future.
Travis Kupp, a member of our Emerging Fellows program checks the possibility of shaping an Asian Union in his sixth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
Asian regionalism has a complex past and an uncertain future. Events of the 20th century including a tumultuous process of decolonization, industrialization, and ideological reconciliation have set the stage for stronger relationships between Asian nations. The growth of the Association of Southeast Asian Nations (ASEAN) provides a potential starting point in the eastern part of the continent that could lead to broader unification, continuing its legacy of increased economic cooperation. Central Asia could serve as another point of origin for unification with its compelling location as the geographic heart of Eurasia. Regardless of where an Asian Union emerges, its approach to international rules and norms—especially from a security standpoint—will ultimately determine how firmly it takes root and how successfully it grows.
The expansion of ASEAN over the years provides a thread toward increased economic cooperation across the continent at a minimum. Originally exclusive to southeast Asia, the Association has added a “Plus Three” component to include economic heavyweights China, Japan, and South Korea, as well as an East Asian Summit that includes India, Australia, and New Zealand. This trajectory could continue into the creation of an East Asian Community that looks similar in nature to that seen in Europe as a precursor to a deeper Asian Union. However, it may be unpalatable to nations in Central and Western Asia who may not be keen on joining an organization that developed over many years without any of their influence in the process.
Alternatively, the dormant seeds of the short-lived Central Asian Union (CAU) could sprout in the fertile soil of China’s Belt and Road Initiative. The establishment of this bloc would initially serve as a counterbalance to the Chinese - and Russian - led Shanghai Cooperation Organization (SCO), which includes many nations that continue to be wary of each other’s intentions. The CAU could then be instrumental in leading to a more equitable framework for continental integration. As the geographic nexus between cultures in every direction, Central Asia could be a more acceptable birthplace for an all-inclusive union.
Whether emerging from East or Central Asia, negotiating existing international relationships and norms will make or break an Asian Union. For instance, many ASEAN nations enjoy a relationship with both China and the USA and would rather keep it that way. However, China has an interest in unchecked access to disputed seas along its entire coast. This could lead to an attempt at forcing the hand of these countries to “side with Asia” for handling its own regional security, thus creating the conditions for potentially decades of intra- and international conflict. Central Asia would similarly need to play a careful balancing act between Chinese and Russian interests without picking sides. Even if successful in this endeavor, the region has historically not integrated well with the existing world order and may not have much incentive to push for the non-hostile establishment of a Union.
An Asian Union that spans the entire continent is an unlikely future for 2050 but should not be disregarded as impossible. Tremendous shifts that have taken place over the last century both within and between Asian states, in particular through the development of economic infrastructure under Western security guarantees, make such a regional institution worth considering. This could emerge from China’s relationships with Central Asia and Russia in the west, or with from China’s involvement with ASEAN in the east. Either way, a successful Asian Union will need to carefully navigate its security framework in order to avoid provoking the distrust and potential opposition of the rest of the world. An Asian Century without a broad Union is a more probable outcome in the next few decades.
Tyler Mongan, a member of our Emerging Fellows program inspects the alternative futures of the Arctic region through the lens of potential stakeholders in his sixth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
On the surface, Arctic Nations envision an open and cooperative high north. However, some national strategies paint a different picture.
Russia’s arctic strategy is one of “strategic-rule breaking,” envisioning the expansion of their economic activities and military presence in the region, along with increased control over Arctic shipping routes. Continued financial partnerships with China will allow the development of infrastructure for LNG and Oil, and other natural resource extraction projects. Russia will also establish more infrastructure and control over transportation along the NSR to capitalize on the economic gains from transportation fees. Investments in rebuilding Soviet-era military facilities and building new bases along the northern coastal settlements and islands will grow. This will slowly fortify an Anti-Access/Area Denial (A2/AD) strategy, which extends around Russia to include the Baltic and Black seas, fulfilling the craving for access to warm water ports since the time of the Czars.
China’s arctic strategy is “opportunistic,” envisioning continued expansion of the Polar Silk Road as part of the BRI within an open and cooperative Arctic. This means the continued development of unilateral partnerships on scientific research with Arctic Nations, sea port infrastructure development with Russia along the NSR, and resource extraction with Russia and Greenland. China will also pursue the development of Arctic worthy vessels, like ice-breakers, and overtime a growing military presence to protect their interests in the region.
The US arctic strategy is “sustain rule-of-law”, envisioning an open and cooperative Arctic, within a growing context of strategic competition. Although there is growing US military concern over Russian and Chinese developments, US investment will continue to lag behind. The US is hoping that rule of law and climate challenges will limit the militarization of the Arctic region. However, as melting ice thins the barriers between US and Russian territories, strategic military operations and cooperation with allies will increase. The US will continue to take a reactive role to Russia and China developments, while slowly increasing investment in military, economic, and transportation infrastructure projects in the region.
Canada’s arctic strategy is “environmental and economic balance,” envisioning an open and cooperative Arctic that is guided by a shared vision. This vision includes, monitoring climate change, safeguarding the environment, sustainable development, open sea routes, and economic cooperation. Canada is shifting away from Arctic oil development and focusing on developing infrastructure and economic opportunities that support their northern indigenous population. Canada will also work to strengthen the mutual-defense initiatives with the US.
The European strategy is “preservation and sustainability,” with a vision that is along the same lines as Canada. European nations will expand their unilateral cooperation with Russia and China, especially in the areas of scientific research, resource extraction, and sea route development. However, some of these unilateral agreements and economic activities will lead to growing tensions. To mitigate conflict, the European nations might envision a stronger Arctic Council or the development of a legal governing body in the Arctic.
As Arctic nations seek to realize their visions and pursue national military, economic, and political interests, the trade-offs they are willing to make will determine if the region remains open and cooperative or transitions into to closed and conflicting.
Sarah Skidmore, a member of our Emerging Fellows program inspects the economic aspect of local entrepreneurship in Africa through her fifth blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
In the early 2000s, the Africa Rising movement spurred the development of entrepreneurial opportunities in a contemporary way. But reflecting on the past two decades, what real momentum has come from entrepreneurship throughout the continent? What has hindered a lasting momentum and an enduring growth? Consider the impact that factionalism, tribalism, nepotism, and corruption have had on the successful long-term growth of entrepreneurship to date. Reflect on what real prosperity and development have accompanied the traditional political leadership model throughout the continent. Contemporary efforts of top-down development from African leaders over the past twenty years have not catapulted a robust existence of entrepreneurship across the general population. What can be done, starting now, so that a theme of thriving local entrepreneurship exists throughout the continent by 2050?
There is a real prospect for exponential growth related to entrepreneurial opportunities. As Africa seeks to unlock its potential by 2050, entrepreneurial ventures are essential to growth. However, an important nuance to a renewed effort involves an alternative approach. Consider the manifested impact that may arise for the African people as they adopt a bottom-up approach. How might ventures led by the African people opposed to a top-down approach from formal African leadership offer greater evolution? As systems of governmental instability, military rule, suppression, and genocide are overturned by grassroots efforts such as human rights, a growing feminist presence, educational advances, and increased networking, the continent is reshaped. Along with this evolution, entrepreneurship further opens the doors for new hope and prospects not before available to the people at large.
Transforming the continent calls for shifting values. A shift away from racism toward valuing human development. A shift away from communism and command economies toward appreciating open markets. A shift toward valuing educational and vocational programs. A shift away from poverty toward valuing a skilled workforce. A shift from destruction toward comparative progress and peace. Further, these values fuel long-term expansion and sustainability of a bottom-up form of entrepreneurship.
Local entrepreneurship lends itself to a variety of beneficial aspects for the African economy. Empowered local business owners, in turn, provide communities with sustainability, employment opportunities, internship and apprenticeship positions, and greater voice. At the same time, prosperous and meaningful local entrepreneurship disrupts historical power dynamics, contends against generational cycles of poverty, and encourages an end to the African brain drain. With the people driving the growth of local entrepreneurship, there is an exponential opportunity for higher discretionary spending throughout the economy from the bottom-up.
Another critical benefit of local entrepreneurship on the economy is its inclusive nature. Entrepreneurship is non-discriminating and can be inclusive across all geographies, industries, and cultures. Consider the economic benefits available to all sectors through local business innovations - businesses to address the infrastructure issues, climate change, oil and gas discoveries, preventative health care, urbanization, technological advances, living conditions, and agriculture, for example. Local entrepreneurship is the best hope for Africa and its people as they unlock their potential by 2050.
Martin Duys, a member of our Emerging Fellows program inspects the drivers of in-country inequality in his third blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
When income inequality is discussed in casual conversation, people are generally referring to in-country inequality - the measure of how income is distributed amongst the population of a single country. The factors that drive in-country income inequality are multiple, interrelated, complex, and sometimes contradictory. Some factors tend to be more prevalent in advanced economies and others are more influential in emerging markets and developing countries (EMDCs). Geography, political history, and even culture also play a role.
The International Monetary Fund (IMF) has attempted to identify, measure, and rank the most important factors driving in-country income inequality. They conclude that over the past thirty years the three dominant factors have been: labour market flexibility, financial deepening and technological progress - in that order.
Flexible labour markets allow firms to reallocate resources and create conditions that encourage a certain amount of economic dynamism, but they also put tend to put the salaries of workers, and especially low skilled workers, under pressure. The primary beneficiaries of increased labour market flexibility tend to be those in the top ten percent of the income distribution. In EMDCs labour markets that are too rigid can create conditions that encourage informality resulting in increased levels of inequality. There is a strong body of evidence to suggest that labour market regulation (a legislated minimum wage, unionisation, and compulsory social security contributions) tends to improve income distribution. Labour market flexibility ranks as the most important factor in EMDCs and the second most important in advanced economies.
Financial deepening - increasing the provision and sophistication of financial services - is associated with increased inequality in EMDCs (ranked third), largely because the beneficiaries of this deepening tend to be those at the higher end of the income distribution. In advanced economies, where levels of financial inclusion are historically higher, the impact of financial deepening is not as significant, and it is only ranked fourth.
Advances in technology generate economic growth by increasing productivity. They also shed jobs through increased automation and require higher skill levels to run them. This ‘skill premium’ increases levels of income inequality as jobs shift from low-skilled workers at the bottom end of the income distribution to more skilled, better paid workers. Technology is the second most important factor in EMDCs. Although it is ranked only fourth in advanced economies, the skill premium factor which is as a direct result of technological advances, is the single most important driver of income inequality in advanced economies.
Globalisation, seen as more a reinforcer than a driver, is a fourth contributing factor. It creates circumstances that sometimes increase and sometimes decrease inequality. Trade liberalisation increases economic activity, generates economic growth, and decreases income inequality. Offshoring increases income inequality in the country outsourcing the manufacturing as it sheds jobs at the lower end of the salary spectrum, but the new jobs created in the offshore economy tend to decrease income inequality there. Although not fully understood, financial globalisation is thought to cause increased income inequality in both advanced and EMDC economies.
Many would expect education to appear on the list of the most influential factors, but the impact improving levels of education equality has on income inequality is dependent on a number of other variables that can dilute its impact. These variables include the size of the investment made in education, whether it is made by individuals or governments, and the level of return on the investment.
Although there are common themes in the sources of income inequality, there are no generalised lessons to be learned that can be taken from one successful attempt at addressing the issue and applying the same strategies uncritically elsewhere. Each country has its own unique mix of interrelated and intermingled factors and needs to be analysed and understood on its own merits.
Travis Kupp, a member of our Emerging Fellows program checks the sustainability of Asia’s economic growth in his second post for our EF blog. The views expressed are those of the author and not necessarily those of the APF or its other members.
What goes up must come down, or so they say. Asian economies have expanded over the last half-century, especially in the South and East, positioning the continent as the modern leader of global economic growth. Much of the rest of the continent has an imminent opportunity to benefit from this success in exchange for certain concessions. Regardless, the region must now discover how to make this position sustainable in two senses: maintaining its trajectory while weathering societal and political change and addressing the impacts of increased consumption on the environment. Contrary to popular belief, there exists no technological silver bullet to solve for this conundrum.
China is the posterchild of Asia’s economic potential. Since opening up to the world in the 1970s, its growing production and trade has lifted hundreds of millions out of poverty leading to a massive increase in standard of living and therefore, critically, consumption. India is on a similar course. In both countries, the rise in disposable income for these many millions has created an extremely attractive market for goods and services along with a favorable financial climate for entrepreneurship. A wealthier and better educated populace has led naturally to a rise in more skilled labor and associated jobs. Southeast Asia is set to reap the benefits of this shift as demand for its low-end manufacturing increases.
Asia’s growth has led to regional integration and a vast realignment of international economic alliances. If geo-economics is in fact war by other means, then China is rapidly becoming one of the most battle-hardened nations on earth. The state is simultaneously flexing its influence through the Belt and Road Initiative (BRI), so called “trade wars,” and other significant foreign investments while learning from its mistakes in each area. The BRI may project the benefits of East Asia’s growth more intensely into the Central and Western Asian nations. Then again, it could also entangle China in far-flung conflicts to protect its investments if it does not carefully manage its relationships, especially with its neighbor India.
The central importance of China to Asia’s economic hopes presents a major systemic risk. The rest of Asia, and much of the world, has become to varying degrees vulnerable to abrupt changes in the nation. Over the next decade, for instance, China needs to find a solution to its population’s declining birth rate and increased life expectancy. A more favorable policy toward immigrants could help mitigate this looming crisis but may require or introduce societal liberalization that could be politically destabilizing. Sudden regime change, however triggered, would create a significant hurdle to sustained economic growth across the region.
The deeper existential risk lies in the impact of growth on the environment. While modern technologies have made significant strides toward lessening the ills of industry, they are unlikely to keep pace with the increasing demand for goods. Environmental concerns only influence consumption patterns in wealthy nations to the extent that they are economically viable to the consumer and do not compromise standards of living. The question then becomes whether the ruling parties of Asian nation states are prepared to sacrifice their economic gains in the name of environmental stewardship. The broad multilateral cooperation required to effectively mitigate climate change and environmental degradation makes it is possible, and dangerously plausible, that continued development may ultimately win out.
Asian economic leadership has an uncertain future, but the outlook is not without hope. Even if the Chinese engine of Asia’s economic miracle stalls and internal and external political realignment ensues, it is possible that this could usher in a wave of more sustainable growth, in both senses of the word. New policies, rather than technologies, to address shifting demographics and a changing global climate are likely to be the key deciding factors of what future unfolds. Asia’s economy may have room to grow yet.
Martin Duys, a member of our Emerging Fellows program inspects the drivers of inequality among countries in his second blog post. The views expressed are those of the author and not necessarily those of the APF or its other members.
The factor that plays the most critical role in determining a person’s income is the country in which they live. It has more influence than the persons parents’ economic circumstances (the second most important factor) and far more than any effort they may make to improve their situation through education. Geography is more important than class, or level of education, in determining income.
Between-country inequality has never been as extreme as now. Just before the start of the industrial revolution, the average income in the wealthiest countries (at the time Holland and the United Kingdom) was roughly three times higher than the poorest. Described as analogous to the ‘Big Bang’ rates of economic growth and average incomes exploded in countries that industrialised. Now the difference in average income between the rich industrial nations and those that have failed to industrialise is a multiple of one hundred.
From the second half of the twentieth century other factors have also contributed to driving between-country income inequality. The political and institutional instability experienced in some countries after decolonisation caused economic stagnation and in some cases, decline. In the Soviet Block and other socialist countries, socialism failed to lift income levels significantly.
There are factors driving a decrease in between-country inequality. Sustained economic growth since the 1980s in China and India has had an enormous impact. In China alone, the number of people whose incomes have doubled is ten times that in the United States over the same period.
In gross terms, the gap between rich and poor countries continues to grow. China's economy would need to grow by eighteen per cent to generate the same value created by a one percentage point increase in the GDP of the United States. This is an almost impossible task for any economy no matter how ‘on fire’ it is.
An assumption of neoclassical economics has been that globalisation would improve levels of between-country inequality. Poor countries with cheaper labour forces would attract more foreign direct investment (FDI), because corporations looking to increase returns by lowering production costs would invest. The result would be increased local income levels and decreased inequality. Emerging countries would also ‘slip-stream’ on the technological advances of richer countries by copying their innovations and avoiding the need for expensive research and development. They would also be able to avoid adopting dead-end technologies that proved unsuccessful or were quickly superseded by superior technologies. Unfortunately, these assumptions have not been borne out by reality.
In what is termed the “Lucas paradox” FDI has not flowed as expected from high-income to low-income countries. Instead, it has to tended to flow from high-income countries to other high-income countries, and even from low-income to high-income countries. Technology adoption by developing countries has not been an equaliser as expected. Royalty payments for new technologies tend to flow from the poorer adopting countries to the more affluent countries that own the intellectual property.
The failure of the focus is shifting to include institutional and cultural considerations. The goal is to create an environment fertile for innovation, technology, and economic growth. Whether this new approach improves levels of between-country inequality remains to be seen.
Martin Duys, a member of our Emerging Fellows program initiates publishing a series of blog posts aimed at identifying the impacts of inequality on the world order by 2050. This is his first post in our EF blog inspecting inequality through the lens of security. The views expressed are those of the author and not necessarily those of the APF or its other members.
In 2013 Barack Obama described inequality as the “defining challenge of our time”. In 2014 Thomas Pikkety’s academic tome, “Capital in the Twenty-First Century” was translated into English and became a bestseller. In the same year Oxfam published a report claiming that the net worth of the world’s eighty-five richest people was equivalent to that of the poorest fifty percent of the global population. In 2015, in response, the World Economic Forum declared inequality, alongside climate change, as the challenge for its annual meeting in Davos. Inequality is clearly an issue on the global agenda, but is it one that could potentially lead to instability, conflict, or perhaps even war?
Income inequality is generally expressed by using an index of some kind to describe the manner in which income is distributed across a population. The Gini coefficient is the best-known example but can be difficult to understand. Comparing the share of total income earned by the top segment of a population (the top one percent, or the top ten percent) with that of the bottom fifty percent is more intuitively understandable.
Global income inequality has been steadily increasing for the past two hundred years. Only in the past thirty-five years with the rapid economic growth of countries in the Near and Far East has the trend begun to reverse. Between-country inequality has been decreasing recently, but where people are born is still the single largest factor determining their economic prospects, far more than any individual effort on their part. In-country inequality has been on the rise in most countries since the nineteen-eighties, especially in those countries that have followed a strategy of lower taxes and smaller government in order to encourage economic growth.
The trend reversal in levels of between-country inequality could be a source of increased security concern in the medium to long term. As the economies of countries such as India and China continue to grow their share of the global economy, the balance of power between nations will continue to visibly shift. Will it be possible for China to overtake the United States as the dominant world economy without their falling into what Graham Allison describes as the Thucydides Trap? An almost inevitable war between a previously dominant power and the new one.
One of the obvious consequences of between-country inequality is economic migration from poorer to wealthier countries. The effects of uncontrolled migration on the internal political climates of the destination countries have been only too obvious resulting in increased levels of nationalism and xenophobia. Whether in Germany, the United States, the United Kingdom, or South Africa the response to the presence of newcomers by locals is in many ways consistent and comparable.
There is evidence that high levels of in-country inequality may dampen economic growth prospects, but a clear symptom of in-country inequality is the rapid growth of the private security industry. It is estimated that more than fifty percent of the world’s population lives in countries where there are more people employed by the private security industry than by the national police service.
Some argue that that, although the share of the economic pie accruing to the upper echelons has been increasing, this doesn’t reflect the dramatic improvement in the lives of the lowest echelons brought about by the parallel decrease in levels of absolute poverty. The increase in stability and security that results from a general reduction in absolute poverty far outweighs any potential destabilisation caused by rising inequality.
Some level of inequality can also be seen as a motivating factor that encourages individuals to strive towards achieving the economic rewards that could result from further education, or career advancement.
The issue of inequality is very much on the agenda globally. There are some recent examples of security related issues where inequality has been a contributing factor. The Occupy movement after the 2008 global financial crisis had its roots in issues of inequality, as did the protests in Chile in 2019. The role that inequality plays in contributing to future issues of security will depend largely on whether levels of inequality continue to increase, or whether there is genuine movement from discussion to action on the issue.