October 2024

28Oct

Skyrocketing Income Inequality

Mainstream trade theories might claim that trade growth narrows economic gaps, but the numbers tell a different story. From 1950 to 2022, per capita GDP in low-income countries (LICs) rose by 42%, while high-income countries (HICs) surged by 385%—and that’s just scratching the surface. Accounting for within-country inequality, things look even worse: in 2022, the poorest 50% of people globally took home only 10% of total income, while the richest 10% pocketed around 44%. Even starker, the richest 1% earned nearly as much as the entire bottom half combined. Since 1950, the richest 10% saw income growth 19.6 times greater than the bottom 50%, and the richest 1% saw growth 48.2 times larger. Inequality hasn’t just grown; it’s skyrocketed.

Based on: UNU-WIDER (2023) World Income Inequality Database (WIID) Companion dataset (wiidcountry and/or wiidglobal). Version 28 November 2023. https://doi.org/10.35188/UNU-WIDER/WIIDcomp-281123

23Oct

How price gaps drive resource drains

Global North countries tend to drain resources from the rest of the world—a process called ecological unequal exchange. Also, the more a country is drained, the less it gets paid, measured in value-added per ton (unless the drained country is a global North country). So why do these imbalances persist? Shouldn’t prices eventually adjust, as mainstream economics suggests? This study shows the global monetary system is largely to blame. Global North countries have higher “price levels,” which reflect differences in the value of currencies—more precisely, differences between market exchange (ME) rates, and Purchasing Power Parity (PPP) exchange rates which compare currencies based on living costs. Economists expect these two rates to align in competitive markets. However, for global South countries, the ME rate is persistently lower than the PPP rate (e.g., 1$:74₹ and 1$:23₹ for India in 2021), and the price level (ME divided by PPP rate) is therefore lower too. This graph shows that the North-South price level gap is linked to ecological unequal exchange. Higher price levels correlate with higher value-added per resource exported as well as with greater net-imports of resources. While some correlations, like those for land and energy imports, aren’t statistically significant, the patterns are strong for labour, raw materials, and the overall monetary value of resources. This suggests that ecological unequal exchange represent the combination of material and monetary imbalances between North and South.

Source: Olk, C. (2024). How much a dollar cost: Currency hierarchy as a driver of ecologically unequal exchange. World Development, 180, 106649.

17Oct

Decent living gaps

In recent years, defining “decent living standards” (DLS)—the basics for human well-being—has gained attention. This study examines the shortfalls in providing decent health, shelter, nutrition, socialisation, and mobility worldwide. The gaps are stark: in sub-Saharan Africa, over 60% of people fail to meet DLS levels on more than half of the basic needs, like housing, sanitation, and water access. South and Pacific Asia face similar issues, with additional struggles in clean cooking and heating. This study also reveals that in all countries of the global South, DLS shortfalls far outstrip income poverty rates, even at slightly more realistic poverty thresholds.

Source: Kikstra, J. S., Mastrucci, A., Min, J., Riahi, K., & Rao, N. D. (2021). Decent living gaps and energy needs around the world. Environmental Research Letters, 16(9), 095006.

12Oct

European Green Deal’s ecological spillovers

The European Green Deal’s (EGD) push to cut carbon emissions and restore ecosystems is NOT green. Not only will it contribute to the global rush on limited metals, but it could also trigger major environmental damage outside the EU. By 2030, the EGD’s agriculture and forestry goals would increase demand for 23.9 million hectares of farmland outside the EU (on top of existing land claims outside the EU). This would lead to a staggering rise in CO2 emissions—about 758.9 million tons—equivalent to 245% of the EGD’s carbon reduction target for land use and forestry sectors (310 MtCO2e). If that wasn’t bad enough, it could cause the loss of 3.86 million species abundance (on top of existing outsourcing of extinction footprints). All of this will undermine the gains from the EGD’s policies on deforestation-free imports and biofuels. Such resource drains and environmental strains that high-income countries outsource to the rest of the world are part of a long (neo-)colonial history of ecological unequal exchange.

Source: Zhong, H., Li, Y., Ding, J., Bruckner, B., Feng, K., Sun, L., … & Hubacek, K. (2024). Global spillover effects of the European Green Deal and plausible mitigation options. Nature Sustainability, 1-11.

7Oct

Drained and underpaid

Capitalism’s ecologically destructive path fuels inequality in who bears the brunt of resource extraction, environmental damage, and blame. Research on Ecological Unequal Exchange (EUE) has highlighted this issue. But why exactly is EUE unequal? First, the system’s relentless demand for resources by wealthy regions leaves the rest deprived, turning EUE into an environmental zero-sum game. Second, the local environmental damage caused by extraction is unfairly concentrated in specific areas, deepening the inequality. Third, the global South is not just drained of natural resources but also underpaid, reinforcing long-term uneven development. We can illustrate this by measuring the average monetary compensation per resource exported. Specifically, we divide the Trade in Value Added (TiVA, i.e., value added by all production steps within a country) in exports by the resources used in those exports. For example, one study shows that high-income countries capture 11 times greater compensation per ton of raw material in exports compared to low-income countries. The graphs shared here support this by plotting per capita net imports of resources against TiVA per resource exported, demonstrating that the more a country is drained of resources through trade, the more underpaid it tends to be in the process.

Source: Olk, C. (2024). How much a dollar cost: Currency hierarchy as a driver of ecologically unequal exchange. World Development, 180, 106649.