Convergent Difficulties of Globalization

The global economy’s growth, with the addition of 3 billion people into the market, a fact that has so far brought along benefits such as the reduction of poverty and the access of at least 200 million people to the middle class status, is now being threatened by several factors: energy supplies exhaustion, food shortage and high prices, and a social inequality that is too large and visible. The solution is within our mind’s reach but cannot be implemented yet. Therefore, hard times and strong social tensions in diverse points of the planet approach.Inequality and poverty

As a sociologist, I am more and more convinced that in our concern for relieving poverty we are forgetting a variable as or more important in contemporary development: inequality.
Which is the common denominator of the following worldwide social calamities, in both the developed and developing world, in rich countries as well as in poor countries: adolescent girls pregnancy, early deaths, homicide, mental illnesses, deficient student formation, packed prisons, and drugs (whether refined cocaine or shantytowns crack)? All these social problems flourish in societies where there is a large ditch separating the rich from the poor.
In order to mitigate these evils, jails are built, doctors become specialized, social workers, education specialists and an army of sociologists participate, rehab clinics are set up, and large sums of money are allotted to the welfare ministries. This whole constellation of services increases and fattens the middle class without remedying the deep causes of poverty.
It would be cheaper and more satisfactory to attack those causes using good structural public policies, i.e. aimed at reducing the economic and social distance existing between the rich and the poor. There are obviously many alternative ways of achieving this goal, according to the cultural and ideological peculiarity of each society. Thus, in Sweden, for instance, inequality is alleviated through the tax system, while in Japan this is achieved by diminishing salary inequality, that is to say, through a direct intervention in the income system. The US does not use any of these two strategies, but even there inequality is somehow mitigated through employees’ participation programs in the ownership of the companies they work for. On the other hand, the American formula (restricted by the racial factor) has until recently been one that facilitates “starting point” opportunities in a competitive social system, whose destination is uneven but legitimate as it is based on one’s own effort. The roads are different; the aim is the same.

The Consequences of Inequality

In the last decades a huge number of studies that prove the link between illnesses or social misfortunes and income disparity have been conducted. In a few words, a population’s quality of life is directly associated with how many more times the rich collect than do the poor. For example, the 20 % of American citizens of highest income earn approximately nine times more money than do the 20 % least favored. By contrast, in Japan the 20 % of highest income citizens earn only three times more than do those who are in the lowest 20 %.
The effects of inequality are very important and do not only affect the poorer sectors; they have a toxic contamination aspect that influences society as a whole. For instance, a society’s health and longevity are related to income inequality.
Furthermore, the most unequal societies tend to have less social mobility. That is why the poor in rich but very unequal societies (with greater absolute wealth) feel worse –that is, more deprived- than do the poor in less rich but more egalitarian societies. For instance, in 1996 an African –American citizen who earned 26,522 dollars a year had a 66 year-old life expectancy while a Costa Rican citizen who earned only 6,410 dollars a year had a 75 year-old life expectancy. What is the use of being 20,000 dollars richer given that comparison?
We can learn an important lesson in order to direct public policies in the countries of the North as well as in those of the South. Any strategy tending to reduce, even a little, inequality, has a high yield in terms of the population’s quality of life, social welfare and hope. This conclusion that seems simple and innocent has a strong philosophical and global bearing. Let me explain myself.
The huge and accelerated economic growth in the emerging countries or markets, especially in Asia but not only in that continent, is taking and remains taking millions of people out of poverty. However, this accelerated economic growth has increased inequality in the whole planet and in almost every society, mature and emerging. If greater wealth does not come hand in hand with policies mitigating inequality, the social welfare –or if you prefer, the social peace- that is achieved on one end is lost on the other.
Halfway through the 19th Century, liberal aristocrat Alexis de Tocqueville reached the following conclusion when he sat down to reflect upon the causes of the French Revolution: it was not poverty that triggered the revolution, but the injustices produced by an uneven progress. Queen Marie Antoinette’s insolent provocation (“if they do not have bread, let them have brioche”) was enough for the people to take to the streets with weapons blunter than the cacerolazo (people banging saucepans as a sign of protest).

A Precarious Global Development

In the last 20 years millions of people have come out of poverty and have achieved a modest position amid the middle social strata. Yet how safe is the position these new middle strata have gained?
To answer this question it is useful to refer to the Middle Class Safety Index, created by the Heller School for Social Policy and Management of Brandeis University, Massachusetts. This index combines 5 economic variables, as follows: the capital goods a family owns, the level of education, the housing cost, the family shopping basket budget, and medical expenses. According to the combined range of those variables, a family or a group of families, that is, a social sector, can be classified as “safe”, “marginal” or “at risk”.
In the US, Brandeis researchers applied the Index to the ethnic groups that have most recently achieved a middle class status: the middle Afro-American strata and the Hispanics or Latinos who are in a comparable social position. Results show how precarious their situation is. According to the research team director, Professor Thomas Shapiro, “the financial health eludes most of the Afro-American and Latino middle classes. The great progress they have made at school, at work, and income-wise, are being eroded by the lack of capitalization (or indebtedness level) that undermines the financial security of Hispanic and Afro-American middle class families.”
What is it that destabilizes these groups that are so precariously located in a middle class position? According to this study, the causes are two: the lack of savings and the housing costs.
Only 2 % of Afro-American families and 8 % of Hispanic families have savings that allow them to survive nine months should they lose their main source of income.
We can conclude that in the US the groups that have recently reached the middle class are at risk. Only a shove in any of the above-mentioned items –a mortgage crisis, a serious illness, the loss of a source of income in favor of another country with cheaper labor- would suffice for a middle class family of this type to drop in status. As an antidote to this precariousness, experts recommend educational re-training at a lower cost than current tuition charges, a higher level of savings, the reduction of personal debt, and universal and cheaper health insurance.
If in a “mature” developed society as the US the newest mid strata find themselves in a precarious and unstable economic situation, would this also happen –although for different reasons- to the millions of people that have recently reached the middle class of the great emerging countries as a consequence of the new Asian economic drive? Let us have a look.
We do not have a “security index” for the great emerging countries middle classes although it is pressing to generate one similar to the one used by Brandeis team yet with different variables. In that index the “financial bicycle” and the private indebtedness now affecting the American middle class will have much less bearing while the family shopping basket, in particular food, will be much more important. For the time being we can tell what follows, which is very disturbing.

An Exhausting Growth Process

The economic growth of China and India, which has taken more than 200 million people out of poverty, entails contradictory movements, especially two. On the one hand, the new middle strata arrive with consumption requirements that are closer to those of developed countries, for instance, a higher consumption of meat and a traditional diet based on more abundant and better quality grain. That demand exerts great pressure on food prices. Meanwhile, the industrial development of those same countries makes them voracious consumers of raw material -and mainly of energy-, with the subsequent increase in prices, which in turn accelerates the inflation in the cost of food. On top of this all, the crazy global race for augmenting energy supplies has led to encouraging –in some cases through subsidies- the production of biological fuels, and this reduces the agricultural production of food in favor of growing bio fuels. The result: a considerable and constant increase in the price of basic food that affects the welfare and even the biological survival of the poorest, but that also exerts a huge pressure on the family basket of the new mid strata, to the point of making them go more than one flight down the social ladder.
This current globalization crisis can undo in a short span of time, the benefits that were until now believed to be secured, and globally trigger a vicious circle of social tensions and protectionism. Many are already the countries where governments impose restrictions on food exports and try to increase the deductions and taxes on commodities with the object of compensating, from the stance of power, the foreseeable social tension that is approaching. These measures are understandable but counterproductive. A vicious circle is thus generated within the process itself of global economic development. We are facing a planetary crisis of neo-Malthusian nature.
A Malthusian crisis is a return to the conditions in the subsistence sphere that English mathematician Thomas Malthus (1766-1834) predicted as a result of a population growth that exceeds agricultural production. The present day discussion on development sustainability indicates that we have not come out of the Malthusian trap.

The Rational Exit and its Obstacles

The solution begins with a coordination of public policies on the part of all the governments, as the system is interdependent and global. But it is precisely that coordination –owing to the absence of a worldwide government- the most difficult tool to forge as the remains of sovereignty the different states count on are enough to block any intent of a joint sacrifice or international solidarity.
Global leadership is nowadays in the hands of about 6,000 people –that is to say, one person for each million inhabitants on Earth- of which around half are multibillionaires1. The group gets together periodically in forums such as Davos. The ensemble can be described as a global power elite, a super class, or –using an old Soviet term- a Nomenklatura, that is, a list of permanent and temporary leaders, of their “sherpas” and dolphins. For the moment no global and coordinated solution for the major planetary problems has emerged from any of their meetings.
The solution will arrive with the adoption of difficult yet rational policies among the smartest leaders with greatest capacity for action. We are witnessing the end of an era in which energy and food were cheap goods. From now on they will be more expensive and scarce goods. In a few years we will experience the global shortage of a good until now public and free: water.
I strongly fear that the true motivation will come with the seriousness of the crisis itself, and with one or another catalyzing catastrophe. Hard times approach. Our countries of the South are not in a bad shape to face them if governments do not get distracted with adventures or carried away by the so well-known exports “tail wind”. We cannot afford the so Latin “keep on going” while the going is good. Here, as elsewhere, the three guiding principles must be: less inequality, more solidarity and better leadership.

Leave a comment