The International Political Economy and Inequality


Globalization has embraced the high integration of national economies in terms of investments, trade, ideology, finance, and market liberalization. Integration of economies has created an international community that form the global political economy. The international political economy (IPE) explores the politics that shape the global economy and how the global economy shapes politics. This field deal with the relationships between individuals, public policy and governments. It is also critical in understanding the structures, power and hierarchies that regulate finance and trade and economic nationalism. However, it is greatly impacted by inequality. Inequality is defined as the condition of being equal, especially in rights, status, and opportunities. Some of the key inequality includes gender, income gap, social class and health care. The inequality creates slower economic growth, especially between countries with average incomes. According to Phillips (2017), statistics on modern global inequality are dramatic and has created global poverty. Regardless of global policies focusing on poverty alleviation, neoliberal policies also exist that further broaden inequality internationally and domestically. Unfortunately, the inequality in developing countries is largest though this doesn’t mean it does not exist in developed countries like the USA and UK. Lockwood (2021) suggests that the conventional assumption that neoliberal policies and free trade reduce inequality is wrong as the policies are slowly implemented, thus increasing global inequality. At the same time, global inequality has created many challenges in the global economy, including migration, environmental degradation, terrorism and, transnational crime. According to Dabla-Norris et al. (2015), international inequality remains high and ranges from 0.55 to 0.70. The inequality reflects sizeable per capita income disparities across nations. Among the causes of inequality in financial globalization, which facilitates efficient international capital allocation and creates global risk-sharing. Besides, it increases the international flow of finances through foreign direct investment (FDI), thus further increasing income inequality in both emerging and advanced market economies. Therefore this study will explore how inequality significance has changed over the past five decades in the global political economy from the perspective of the economy.


Significance of Inequality

The significance of inequality in the international political economy was lowest in the 1970s. By the 1970s, there was an increase in economic inequality in most Western countries, as per the international non-governmental organization Oxfam (De-Zwart, 2019). The study also noted that the top twenty-six richest individual in the world was much wealthier than the poorest fifty per cent of the global population. The inequality was much influenced by 18th-century capitalism, where private actors own and control property, thus controlling the demand and supply of products (De-Zwart, 2019). Most individuals during these periods were motivated to make more profit, thus creating a great disparity in income and wealth. The disparity soared in recent years, including the 1970s. According to Siddiqui (2019), there was great discrimination against people of colour and women by the 1970s, thus increasing poverty globally. Therefore, due to poverty and the need for equality, people of colour created a driving wave of union organizing. The global political economy did not promote economic equality at the period, thus making the poor occupy movements and protested against the greed of the "one per cent" population who owned global wealth and occupied the political sector. Moreover, the political class also enacted few policies that minimize inequality since it was not an objective within the political sector. Besides, inequality was increasing due to the increasing specialization and trade. Moreover, this time was characterized by an increase in the volume and value of trade between regions and nations. The trade created economic growth while increasing poverty in other regions, thus greatly heightening economic inequality. Countries could import cheaper steel and other products from other parts of the world, leading to a decline in domestic production and creating a fall in income and employment. Therefore, the trade increased structural unemployment and wages were on the decline, increasing economic inequality. For example, in a country like the UK, de-industrialization during this period led to much higher long-term unemployment rates (Phillips, 2017). At the same time, the United States national income increased to 11%. Besides, in the United States, the poverty level also fell from about 22% in the early 1970s to a low of 11% in the mid-1970s.

By 1980, the significance of inequality in the international political economy was at its mid-level. During the 1980s, there was more evenly distributed income among the global population. The distribution of income came to light in the context of ILO’s World Employment Programs. Therefore, within two years, there was a great step towards redistribution from growth, and it became a core mission by the ILO (Milanovic, 2011). The study also reveals that, in the 1980s, the World Bank conducted a significant study in wealth redistribution and generalized strategies for linking growth with redistribution. In the past years, the World Bank gave little attention to the distribution of income. Therefore the world inequality level started to decrease and reverse by the 1980s with the increase in social democracy in the global north. Similarly, during this period, the world adopted a strategy where wealthy people were more taxed than poor people to help pay for new government benefits and programs (Milanovic, 2011; Cribb et al., 2013). At the same time, the global community created economic policies, which resulted in the widening of the distribution of gains in the global north. The cuts of tax from the poor by the 1980s directly boosted the net incomes of the poor, thus increasing the equality level among the rest of the population. Moreover, during this period, there was an increase in educational investments and anti-discrimination policies. The investment in education in most countries, including the UK and the US, was one of the critical components contributing to increasing equality globally (Bartels, 2016). Most developed countries invested in early childhood programs like Head Start, thus increasing economic mobility and productivity. Mayer (2001) states that by the 1980s, there was an increase in high school graduates due to an increase in persons getting GED studies in the United States. Also, enrollment to college increased. Besides, there was an increase significantly in anti-discriminatory policies. Countries realized that racial segregation led to poverty among disadvantaged groups and reduced intergenerational upward mobility of finances. The isolation of low-income households created poverty; thus, addressing the issue boosted economic mobility for all people. However, low and middle countries like China have high economic inequality globally (Dabla-Norris et al., 2015). However, these countries were starting to catch up with the high-income countries- convergence. At the same time, economic disparity globally led to increased children mortality. Most of these children died before they had their fifth birthday. Likewise, by the 1980s, the poverty level was becoming a social problem that affected economic inequality.

Furthermore, the importance of inequality in the international political economy was highest in the 1990s and reached its peak from 2000 to the present. In the 1990s, incomes increased at almost every level, and the net worth of families rose to 24% (Marginson, 2018). By 1995, the World Trade Organization (WTO) was created to facilitate and regulates international trade between countries (Allee et al., 2017). Global governments use this organization to revise, enforce and establish policies that govern global trade. Today, the WTO has become the largest global economic organization and has about 164 member states. This indicates the increase in the significance of inequality and the need to create global economic equality. The organization provides negotiating framework for trade agreements to minimize or eliminate tariffs, restrictions and quotas, and ultimately poverty level. Besides, the organization also created an independent dispute resolution which enforces adherence to trade agreements and solving disputes. Over the years, the organization focus on lowering trade barriers and increased trade among member countries, thus limiting poverty. Likewise, it provides states with a fair and constructive outlet for dealing with disputes over trade issues. At the same time, due to easing trade tariffs and restrictions, there was a rapid increase in globalization since the 1990s. Globalization has created employment and has facilitated the movement of labour, thus reductions in poverty in the global economy. Though trade is not enough to alleviate poverty, it has created faster economic growth and faster poverty reduction than the latter (Bergh & Nilsson, 2014). The study also reveals that over the last 20 years, most countries in Asia, including India, China, and other countries in East Asia, experienced fast economic growth, and there was a great reduction in the poverty rate. At the same time, there has been a great development in Latin America, the former Soviet Union, Africa, and Central and Eastern Europe. Other than trade, rapid growth was also created by the ILO, which promotes rights at work, enhance social protection, and strengthen dialogue related to work. Bergh and Nilsson (2014) also state that world income inequality and poverty fell over the past two decades for the first time in history.

Since 2000, there has been significant interest in inequality in the global political economy. Global government and non-governmental organizations have been focusing on minimizing income inequality and boosting economic growth. Some of the strategies that governments have adopted include the promotion of education and education policies. These policies, including free education, have promoted and increased the number of graduates worldwide, thus promoting equal access to education and reducing inequality. Moreover, countries worldwide have created well-designed labour market policies, which are critical in reducing inequality. There is a relatively high minimum wage, which helps distribute income and reducing unemployment and global poverty. Moreover, due to increased job policies, job protection reforms have made permanent positive changes to eliminating poverty. Likewise, the impact of world trade and other regional trade organizations has helped remove product market regulations, thus reducing labour income inequality and boosting employment. Moreover, due to the need to promote equality and eliminate poverty, countries have created policies to foster immigration and fight all forms of discrimination to reduce inequality. This step has also helped redistributive the impact of cash transfers, thus redistribute income mainly over the life-cycle other than across individuals. Moreover, to indicate the increasing significance of equality globally, the United Nations came up with the Sustainable Development Goals (SDG) 2030 Agenda (Diaz‐Sarachaga et al., 2018). The goal number one objective is to eliminate poverty. The objective seeks to eliminate all kinds of poverty, which remain the most critical challenge facing humanity. Diaz‐Sarachaga et al. (2018) state that many individuals live in extreme poverty since 1990. Moreover, many others struggle to meet their basic human needs, thus showing that inequality is still high. As of 2015, more than 736 million individuals were living under one dollar per day. However, the rapid development of nations like China and India has lifted millions out of poverty (Boluk et al., 2019). However, women remain to be disadvantaged in terms of wages, property and, education. Regardless of rapid development in Asia, there is still low progress in South Asia and sub-Saharan Africa, where more than 80% live in extreme poverty. Therefore the SDGs are commitment eliminating all forms of poverty by 2030.

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The international political economy (IPE) explores politics and politics and how they shape each other. However, the international political economy is greatly impacted by inequality. Some inequality that affects the economy includes gender, income gap, social class and health care. Global inequality has created many challenges in the global economy, including migration, environmental degradation, terrorism and, transnational crime. Inequality has fetched critical significance in the global political economy since 1970. The significance of inequality in the international political economy was lowest in the 1970s. During these periods, there was the idea of capitalism that impacted wealth distribution. Besides, inequality was increasing due to the increasing specialization and trade. Additionally, by 1980, the significance of inequality reached its mid-level. Income distribution increases significantly due to the ILO’s World Employment Programs. Besides, wealth distribution caught the attention of the World Bank, and education was greatly improved. Moreover, countries focused on education and racial segregation, thus reducing inequality. Likewise, from 1900 and 2000 to the present, the significance of inequality reached its peak. Thus was promoted by the WTO, which minimizes or eliminate tariffs. Also, countries like India, China, and other countries in East Asia, experienced fast economic growth, and there was a great reduction in the poverty rate. From 2000 to the present, the world has taken inequality seriously, and the united nation is also willing to eliminate poverty by 2030 through its Sustainable Development Goals (SDG) 2030 Agenda


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