inequality and hyper globalisation sample answer mindmap PDF

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Week 7 inequality and hyper globalisation sample answer mindmap...

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Week 7: How does increased globalisation help, or hinder, the evolution of income and wealth inequality? Discuss two measures of each type of inequality and their results.

Definitions: Globalisation: refers to the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, flow of international capital and wide and rapid spread of technologies. Income: The disproportionate distribution of total national income among households Wealth: an abundance of valuable possessions or money.

Note* The Gini & Lorenz can measure both income and wealth inequality. Using for wealth as there are loads of income inequality measurements

Key References: Robert Hunter Wade (2014) “Globalization brings large mutual benefits – not conflicting interests – in term of higher economic growth, widening opportunities, falling poverty and falling inequality.”

Globalisation – inequality

Measures of income:

Globalisation - The word globalization only became prominent in the 1990’s - Movement towards free market policies and mobile production after the 1980’s caused movement towards income convergence, less poverty, more equality. - “Never has there been less hunger, less disease or more prosperity. Developing countries are being lifted out of poverty at a faster rate than ever. We are living in a golden age.” Ravenhill P.307

Measures of wealth:

Poverty line:

Gini Coefficient Measuring proportion of wealth over total population 0 = equal income – perfect equality (20% of the population has 20% of wealth) 1 = one receives all income – Maximum inequality (one person has 100% of wealth South Africa had the world's highest Gini coefficient at 0.62

Lorenz Curve (See essay for curve – draw to demonstrate in the exam) A graph depicting the variance of the size distribution of wealth from perfect equality. The closer the line to the x axis (population) the higher the wealth inequality

Mean absolute deviation (MAD) - Compares each person’s income to the mean. Gives every person equal wit. Takes all income distances from the average income, adds them up and divides by total income. - Takes into account the entire distribution, unlike other measures which look at the top 10% compared to the bottom 20% and leaves out the middle.

- poverty line is the minimum level of income deemed adequate in a particular country to afford basic living standards e.g. clothes, shelter and food. - Those below this line are unable to afford basic living and therefore cannot afford to save and generate wealth

Q2. Discuss the hyper globalisation thesis and give the theoretical and empirical justifications for and against the thesis. Are there alternative explanations you are aware of from your reading? Key reference: Ravenhill Against Hyper-globalization thesis

1) Some countries are unable to attract FDI, other developing countries who have the ability to attract FDI, are unable to maximise the benefits for indigenous firms.

Definition: Hyper-globalization is a term used to describe the dramatic change in the size, scope and velocity of globalization that began in the late 1990s and that continues into the beginning of the 21st century.

For Hyper-globalization thesis 2) Business like to locate where western rules/common laws are in place i.e. Ireland, Australia etc., Difficult for countries who don’t adapt western rules

3) In developed countries, the gains from globalisation are not evenly distributed, this imbalance creates the possibility of a backlash against globalisation.

1) Increased M&A in developed countries, a way of investing and setting up in new areas to avail of new markets – the single currency increased M&A in Europe.

HyperGlobalisation

2) Rising importance of developing countries in these flows of external capital investments – 2008 crisis lead to increased FDI to developing countries

Discuss the Hyper globalisation thesis - Hyper globalists argue that true globalisation implies a harmonisation, across the world, of “the market” including price and interest rate convergence.

- Strong or hyper globalisers suggest that globalisation implies harmonisation of markets across international borders.

- The “weaker” globalists argue that globalisation simply means greater interconnectedness. This is sometimes referred to as internationalisation.

- Some believe that convergence is facilitated through the increasing importance of global governance structures (IMF, WTO, OECD)

Example: Czech Republic - embraced hyper globalisation and fought on the world market, or has it sought the protection of regionalisation, through integration into the EU. When they opened up to trade, there was a fear that land prices would increase due to the increased movement of people, G&S and capital (FDI)....