Absolute income gains versus global income distribution
These days, almost everywhere, we all talk about globalization of economy, probably having a notion that growth in economy through globalization, will help in reduction of poverty around the country. But, we do not know in the background that what has happened in other countries that are almost globalized.
I would like now here to share some of the truths regarding globalization of economy which an average citizen of a country may not be even aware-off.
A study was conducted with respect to global income between the period 1988 – 2008. Some of the facts which came to light are very frightening. It was indicated in the study that 44% of the absolute gain (real wealth generated) had gone in to the hands of the richest 5% of the people around the globe. Around 1/5 that is 20% of the real wealth generated got accu- mulated in the top 1% rich giants around the globe.
In contrast to above, so call “Emerging Global Middle Class” could receive only 2-4% of the absolute gain.
Now, imagine how it has happened with respect to distribution of real wealth around the earth. If we analyze, you will find that there is an enormous gaps in the real income that exist between the top, the median and the bottom of the global income distribution.
In 2008, the average per capita disposable (after tax) income of the global top 1% was just over $71,000 per year, income at the median level was around $1,400 and the people who were the poorest had the annual income under $450.
We must not forget that the globalization alone will not solve the problems of poor countries as more integration of economies creates lot of pressure on the poor countries to generate and enhance the exports. With the very high export also, the real gain in terms of currency, is not much due to the value of the currency with respect to the value of currency of the country to which Export has been made.
It is to be noted for example that the real income growth due to globalization was greater in urban China and Indonesia than rural China and Indonesia; this explains that the urbanrural gap remains wide open. Incidentally, there is already a large gap in both the countries which kept on widening.
Therefore, we must not take the global-view as it is when it comes to globalization/integration of economies as everything is not that rosy.