International income imbalance
Introduction
The global economic landscape is constantly changing due to the rapid advancement of technology, globalisation and liberal trade policies. With this ever changing landscape comes a more interconnected and interdependent world, in which countries rely heavily on one another for economic prosperity. Despite the interconnected nature of the global economy, there is still a relatively large disparity in the incomes of many countries. In general, wealthier countries tend to consume more resources and produce more wealth, as opposed to poorer countries. This is known as income inequality, and is a significant issue, both internationally and domestically.
Background
Income inequality occurs when one group of people has significantly higher or lower incomes than the average. According to the Organisation for Economic Co-operation and Development (OECD), income inequality is the highest it has ever been in many countries and has been increasing over the past decades. The OECD estimates that the income of the richest 10% of the population is now nine times greater than the income of the poorest 10%, compared to seven times greater in the 1980s.
Income inequality has been recognised by many international organisations as a major cause of economic, social and political instability. It has been linked to poverty, economic growth, health and education outcomes, as well as social unrest.
Causes of income inequality
There are many factors that contribute to income inequality, both at home and abroad. These include:
• High unemployment: Economic stagnation leads to an increase in unemployment, which in turn leads to poverty and economic insecurity.
• Low wages: Wages in some countries tend to remain stagnant, meaning workers do not benefit from increasing economic growth. This widens the gap between those who are thriving and those who are struggling.
• Inequality of access to resources: Those with access to resources, such as education, healthcare, capital and land, naturally have an advantage in the global economy. This increases their income levels while leaving those without resources at a disadvantage.
• Gender inequality: Women are more likely to be underpaid or excluded from the workforce altogether, forcing them to turn to informal employment and subsistence activities to make ends meet.
• Tax systems that favour the rich: Tax systems that are regressive and benefit large multinational corporations disproportionately hurt the poor, leaving them with less access to resources and income.
Conclusion
Ultimately, the income inequality disparity between countries has the potential to negatively affect global economies and create a more unstable world. Despite new technologies, developing countries are still most affected by income inequality, as the richest countries spread their wealth to benefit from the resources and economic opportunities of poorer countries. It is important for countries to work together to reduce income inequality, both domestically and internationally. This can be done through implementing progressive taxation systems, providing education and healthcare, and encouraging employment opportunities. This would ultimately increase economic security and ensure that everyone has access to necessary resources.