12.1 Global inequality and poverty

Global inequality and poverty remain pressing issues in our interconnected world. Vast disparities in income, wealth, and access to resources persist between individuals and nations, shaped by complex historical, economic, and political factors.

Understanding the causes and consequences of inequality is crucial for developing effective solutions. From health disparities to limited social mobility, the impacts of inequality are far-reaching. Addressing these challenges requires comprehensive strategies that promote inclusive growth and equitable access to opportunities.

Defining global inequality

• Global inequality refers to the vast differences in income, wealth, and access to resources and opportunities that exist between individuals, communities, and countries worldwide
• It is a multidimensional issue that encompasses not only economic disparities but also social, political, and cultural inequalities that shape people's life chances and well-being
• Understanding global inequality is crucial for addressing issues of poverty, social justice, and sustainable development in an increasingly interconnected world

Measuring income disparities

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• Income inequality is often measured using the Gini coefficient, which ranges from 0 (perfect equality) to 1 (perfect inequality)
• Other measures include the income share of the top 10% or 1% of the population, the ratio of the highest to lowest income quintiles, and the Palma ratio (ratio of the richest 10% to the poorest 40%)
• These measures reveal stark differences between countries and regions, with some having much higher levels of income concentration than others (Scandinavia vs Latin America)

Wealth concentration

• Wealth inequality is even more pronounced than income inequality, as wealth accumulates over time and across generations
• The richest 1% of the global population owns nearly half of all wealth, while the bottom 50% holds less than 1% of total wealth
• Wealth concentration is driven by factors such as inheritance, capital gains, and access to financial markets and assets (real estate, stocks, bonds)
• The COVID-19 pandemic has further exacerbated wealth inequalities, with billionaires seeing their fortunes soar while millions have lost jobs and income

Access to resources and opportunities

• Inequality is not just about income and wealth but also about access to essential resources and opportunities that enable people to lead fulfilling lives
• This includes access to quality education, healthcare, housing, clean water and sanitation, and digital technologies
• Unequal access to these resources perpetuates cycles of disadvantage and limits social mobility, particularly for marginalized groups (women, ethnic minorities, people with disabilities)
• Addressing these inequalities requires a holistic approach that goes beyond economic measures to ensure equitable access to basic rights and services

Causes of global inequality

• Global inequality has deep historical roots and is shaped by a complex interplay of economic, political, and social factors that operate at local, national, and international levels
• Understanding the causes of inequality is essential for developing effective strategies to reduce disparities and promote greater social justice and inclusion
• While some level of inequality may be inevitable in any society, extreme and persistent inequalities are harmful to social cohesion, economic growth, and political stability

Historical factors and colonialism

• Many of today's global inequalities can be traced back to the legacy of colonialism and imperialism, which created unequal power relations and exploitative economic systems
• European colonization of the Americas, Africa, and Asia led to the extraction of resources, labor, and wealth from colonized regions to benefit the colonizing powers
• Colonial policies such as forced labor, land expropriation, and unequal trade terms created long-lasting disparities between the Global North and South
• The effects of colonialism continue to shape contemporary inequalities through issues such as unequal trade relations, debt, and political influence

Economic systems and policies

• The dominant economic systems and policies of the past century have contributed to the persistence and growth of global inequalities
• Neoliberal policies such as privatization, deregulation, and trade liberalization have often benefited multinational corporations and wealthy elites at the expense of workers and communities
• Structural adjustment programs imposed by international financial institutions on developing countries have led to austerity measures, reduced social spending, and increased poverty and inequality
• Tax policies that favor the wealthy and allow for tax evasion and avoidance have further concentrated wealth and income in the hands of a few

Political power imbalances

• Inequalities in political power and representation reinforce economic and social inequalities by shaping policies and institutions in ways that benefit the powerful
• Wealthy individuals and corporations have disproportionate influence over political processes through lobbying, campaign contributions, and revolving doors between government and industry
• Marginalized groups often face barriers to political participation and representation, such as voter suppression, gerrymandering, and lack of access to information and resources
• Corruption and lack of transparency in government further undermine accountability and exacerbate inequalities

Globalization and trade

• While globalization has brought economic growth and increased connectivity, it has also contributed to rising inequalities both within and between countries
• Trade liberalization and the expansion of global supply chains have led to the offshoring of jobs and the decline of manufacturing in many developed countries, contributing to job losses and stagnant wages for low-skilled workers
• Developing countries often face unfair trade terms and barriers to market access, limiting their ability to benefit from global trade and investment flows
• The rise of global tax competition and the use of tax havens have allowed multinational corporations to avoid paying taxes and contribute to the erosion of public revenues and social spending

Consequences of global inequality

• The consequences of global inequality are far-reaching and multidimensional, affecting individuals, communities, and societies in profound ways
• Inequality not only limits opportunities and well-being for those at the bottom but also has negative spillover effects on social cohesion, economic growth, and political stability
• Addressing the consequences of inequality requires a comprehensive approach that tackles the root causes and promotes greater equity and inclusion

Health and life expectancy

• Inequality has significant impacts on health outcomes, with those at the bottom of the socioeconomic ladder facing higher rates of disease, disability, and premature death
• Poverty and lack of access to healthcare, nutrition, and safe living conditions contribute to health disparities within and between countries
• Life expectancy varies widely across countries and regions, with people in low-income countries living on average 18 years less than those in high-income countries
• Health inequalities are also shaped by social determinants such as education, employment, housing, and environmental factors, which are often distributed unequally

Education and social mobility

• Education is a key driver of social mobility and a powerful tool for reducing inequalities, but access to quality education remains highly unequal across the world
• Children from disadvantaged backgrounds face barriers to educational attainment, such as lack of resources, inadequate facilities, and discrimination
• Unequal educational opportunities perpetuate intergenerational cycles of poverty and limit social mobility, as those with lower levels of education face limited job prospects and lower earnings
• Addressing educational inequalities requires investments in early childhood education, school infrastructure, teacher training, and targeted support for disadvantaged students

Crime and social unrest

• High levels of inequality are associated with higher rates of crime and social unrest, as those at the bottom of the socioeconomic ladder face limited opportunities and greater social exclusion
• Poverty, unemployment, and lack of access to basic services can fuel frustration and resentment, leading to increased violence and instability
• Inequality can also erode social cohesion and trust, making it harder for communities to work together to address common challenges and promote the common good
• Addressing the root causes of inequality, such as poverty, discrimination, and lack of access to education and employment, is essential for promoting social stability and reducing crime

Environmental degradation

• Inequality also has significant environmental consequences, as those at the bottom of the socioeconomic ladder are often the most vulnerable to the impacts of environmental degradation and climate change
• Poor communities are more likely to live in areas with high levels of pollution, lack access to clean water and sanitation, and face greater exposure to natural disasters and extreme weather events
• At the same time, the consumption patterns of the wealthy contribute disproportionately to environmental damage and greenhouse gas emissions, exacerbating global climate change
• Addressing environmental inequalities requires a just transition to a more sustainable and equitable economy that prioritizes the needs of vulnerable communities and ensures a fair distribution of the costs and benefits of environmental action

Poverty and its dimensions

• Poverty is a complex and multidimensional phenomenon that goes beyond just lack of income and encompasses deprivations in various aspects of well-being
• Understanding the different dimensions of poverty is crucial for developing effective strategies to reduce poverty and promote greater social and economic inclusion
• Poverty is not only a cause but also a consequence of inequality, as those living in poverty face greater barriers to accessing resources, opportunities, and political power

Absolute vs relative poverty

• Absolute poverty refers to a fixed standard of living below which individuals are unable to meet their basic needs for survival, such as food, shelter, and clothing
• Relative poverty, on the other hand, is defined in relation to the overall distribution of income or resources in a society and varies across contexts and time
• The international poverty line, currently set at $1.90 per day, is used to measure extreme poverty globally, while national poverty lines are used to assess relative poverty within countries
• Both absolute and relative poverty are important to consider in understanding the lived experiences of those living in poverty and the policies needed to address their needs

Rural vs urban poverty

• Poverty takes different forms in rural and urban areas, shaped by distinct economic, social, and environmental contexts
• Rural poverty is often characterized by lack of access to land, infrastructure, and basic services, as well as dependence on agriculture and vulnerability to climate shocks and natural disasters
• Urban poverty, on the other hand, is associated with informal settlements, overcrowding, and lack of access to safe housing, water, and sanitation, as well as exposure to crime and violence
• Strategies to address rural and urban poverty need to be tailored to the specific challenges and opportunities of each context, such as investments in rural infrastructure and agricultural productivity, and slum upgrading and affordable housing in cities

Feminization of poverty

• The feminization of poverty refers to the disproportionate concentration of poverty among women and the ways in which gender inequalities shape the experience of poverty
• Women face greater barriers to economic opportunities and resources, such as unequal access to education, employment, credit, and property rights, as well as the burden of unpaid care work
• Female-headed households are more likely to be poor, as women often face discrimination in the labor market and have lower earnings than men
• Addressing the feminization of poverty requires gender-responsive policies and programs that tackle the root causes of gender inequality and empower women economically and socially

Intergenerational poverty

• Intergenerational poverty refers to the transmission of poverty from one generation to the next, as children born into poor families face greater barriers to social and economic mobility
• Poverty in childhood can have long-lasting effects on health, education, and future earnings, perpetuating cycles of disadvantage across generations
• Factors such as lack of access to quality education, poor nutrition and health, and exposure to stress and adversity can limit children's cognitive and social development and their ability to break out of poverty
• Breaking the cycle of intergenerational poverty requires investments in early childhood development, education, and social protection, as well as policies that promote greater equality of opportunity and social mobility

Factors perpetuating poverty

• Poverty is not only a result of individual circumstances but also of structural and systemic factors that create and perpetuate inequalities and limit opportunities for those at the bottom
• Understanding the factors that perpetuate poverty is essential for developing effective strategies to reduce poverty and promote greater social and economic inclusion
• Addressing these factors requires a comprehensive approach that tackles the root causes of poverty and inequality and promotes greater access to resources, opportunities, and political power

Lack of access to resources

• Lack of access to resources such as land, credit, and technology is a major factor perpetuating poverty, particularly in rural areas where agriculture is the main source of livelihood
• Unequal distribution of land and insecure land tenure can limit smallholder farmers' ability to invest in their land and increase productivity, trapping them in cycles of low yields and low incomes
• Lack of access to financial services and credit can prevent poor households from investing in productive activities, smoothing consumption, and managing risks and shocks
• Limited access to technology and infrastructure, such as irrigation, roads, and electricity, can also constrain agricultural productivity and market access, perpetuating rural poverty

Discrimination and marginalization

• Discrimination and marginalization based on factors such as race, ethnicity, gender, disability, and sexual orientation can create barriers to education, employment, and social services, perpetuating poverty and inequality
• Marginalized groups often face stigma, prejudice, and exclusion, which can limit their opportunities and voice in society and reinforce their disadvantaged position
• Discrimination in the labor market can lead to lower wages, job insecurity, and limited career advancement for marginalized groups, trapping them in low-paying and precarious jobs
• Addressing discrimination and promoting greater social inclusion requires policies and programs that challenge stereotypes, promote diversity and equality, and ensure equal access to resources and opportunities for all

Inadequate social safety nets

• Inadequate social safety nets can leave poor and vulnerable households exposed to risks and shocks, such as illness, job loss, and natural disasters, which can push them further into poverty
• Lack of access to social protection programs, such as health insurance, unemployment benefits, and social assistance, can limit poor households' ability to cope with adversity and invest in their human capital
• Inadequate coverage and low benefit levels of social protection programs can also limit their effectiveness in reducing poverty and promoting greater social and economic security
• Strengthening social safety nets requires investments in social protection systems that are comprehensive, adequate, and accessible to all, particularly the most vulnerable and marginalized groups

Debt and financial exclusion

• Debt and financial exclusion can trap poor households in cycles of poverty and vulnerability, as they struggle to meet basic needs and cope with shocks and emergencies
• High levels of household debt, often incurred to cover basic expenses or cope with shocks, can limit poor households' ability to save, invest, and improve their economic situation
• Lack of access to formal financial services, such as savings accounts, credit, and insurance, can force poor households to rely on informal and often exploitative sources of finance, such as moneylenders and pawnshops
• Over-indebtedness and financial stress can also have negative impacts on mental health and well-being, further perpetuating poverty and disadvantage
• Addressing debt and financial exclusion requires policies and programs that promote financial inclusion, such as expanding access to affordable and appropriate financial services, improving financial literacy, and regulating predatory lending practices

Strategies for reducing inequality

• Reducing inequality requires a comprehensive and multifaceted approach that addresses the root causes of inequality and promotes greater social and economic inclusion
• Effective strategies need to be tailored to the specific contexts and challenges of different countries and regions, taking into account their political, economic, and social realities
• Reducing inequality is not only a moral imperative but also a key driver of sustainable development, as it can promote social cohesion, economic growth, and political stability

Redistributive policies and taxation

• Redistributive policies and taxation are powerful tools for reducing income and wealth inequality and promoting greater social and economic equity
• Progressive taxation, where higher income earners pay a higher share of their income in taxes, can help to redistribute resources from the top to the bottom of the income distribution
• Wealth taxes, such as taxes on inheritance, property, and capital gains, can also help to reduce wealth concentration and promote greater equality of opportunity
• Social transfers, such as cash transfers, subsidies, and in-kind benefits, can provide a safety net for the poor and vulnerable and help to reduce poverty and inequality
• Designing effective redistributive policies requires careful consideration of the trade-offs between efficiency and equity, as well as the political and administrative feasibility of different policy options

Investments in human capital

• Investments in human capital, particularly in education and health, are key to reducing inequality and promoting greater social and economic inclusion
• Ensuring access to quality education for all, from early childhood to tertiary education, can help to level the playing field and provide equal opportunities for all children to develop their skills and reach their full potential
• Investing in health systems that provide universal access to essential health services can help to reduce health inequalities and improve overall population health and well-being
• Promoting lifelong learning and skills development, particularly for disadvantaged and marginalized groups, can help to improve employability and earnings potential and reduce labor market inequalities
• Effective investments in human capital require sustained and targeted public spending, as well as policies and programs that promote equity and inclusion in education and health systems

Inclusive economic growth

• Promoting inclusive economic growth that benefits all segments of society, particularly the poor and disadvantaged, is essential for reducing inequality and promoting shared prosperity
• This requires policies and investments that create decent jobs and livelihoods, particularly in labor-intensive sectors such as agriculture, manufacturing, and services
• Supporting small and medium enterprises, particularly those owned by women and marginalized groups, can help to promote entrepreneurship and economic empowerment and reduce income and wealth inequalities
• Investing in infrastructure, such as roads, electricity, and digital connectivity, can help to reduce spatial inequalities and promote economic integration and market access for disadvantaged regions and communities
• Ensuring that economic growth is environmentally sustainable and socially inclusive requires policies and regulations that promote responsible business practices, protect workers' rights, and ensure a fair distribution of the benefits and costs of growth

International aid and development

• International aid and development cooperation can play an important role in reducing global inequalities and supporting sustainable development in low- and middle-income countries
• Official development assistance (ODA) can provide critical resources for investing in human capital, infrastructure, and social protection systems in developing countries, helping to reduce poverty and inequality
• Aid can also support capacity building and technical assistance to strengthen institutions and policies for inclusive and sustainable development
• However, aid effectiveness depends on factors such as country ownership, alignment with national priorities, and coordination among donors and partners
• Ensuring that aid is transparent, accountable, and focused on results requires ongoing efforts to improve aid quality and effectiveness, as well as greater policy coherence and coordination among donors and partners

Challenges in addressing inequality

• Addressing inequality is a complex and challenging task that requires sustained political will, resources, and collaboration among different stakeholders and sectors
• There are several key challenges that need to be overcome in order to effectively reduce inequality and promote greater social and economic inclusion
• Understanding these challenges is essential for developing realistic and effective strategies for reducing inequality and promoting sustainable development

Political will and vested interests

• Reducing inequality often requires challenging the status quo and redistributing power and resources from the top to the bottom of the income and wealth distribution
• This can face resistance from powerful vested interests, such as