Sources of Global Inequality - Coursework Example

Global Inequality Name: Course: Institution: Date: Table of Contents INTRODUCTION 1 Sources of Global Inequality 3 Economic factors: 3 Social factors: 7 Political factors: 9 Importance of Global Equity 12 Measures Adopted to Solve Global Inequality 14 Conclusion 16 Reference: 17 INTRODUCTION Global inequalities have become one of the major challenges affecting business both in the domestic and international platform (Sitkin & Bowen, 2013). The issue of differences arises from different factors which include human rights violation, gender discrimination, and inadequate political and legal system. These factors give rise to income and development disparities between individuals in a society and trading countries (Firebaugh, 2003). The gap between the rich and the poor is widening, posing a threat to the development of economic, social and political pillars of both developed and developing nations (Fick, 2006). According to Oxfam report, 1% of the richest individuals controls more wealth compared to the rest of world’s population. The ability of the few to control the major proportion of resources enables them to have power and privilege to amass more wealth thus rich becomes richer while poor becomes poorer (Ranis, 1972). Therefore, it is important to eliminate inequality to solve problems of rising gap between rich and poor. The primary cause of variation arises from political pillar which deals with the formulation and implementation of policies that affects the distribution of resources. The political aspects concerning allocation of resources include political instability, policies affecting business environment and labour force. The assertion of Warren Buffet that he pays low taxes compared to lowest earners such as cleaners in the same office triggers a signal in loopholes within the tax system. The tax system is formulated and implemented by government legislatures and agencies. Therefore, the government fails to uphold tax principle of ensuring equity among all taxpayers. Further, Oxfam report brings out a shocking statistics that over $7.6 trillion is being hidden by the rich through tax havens provided by the tax authorities. Secondly, social involvement poses a significant threat to achieving equality in the society both domestic and globally. There exists discrimination in domestic and global platform concerning gender, age and persons with disabilities. The issue of inclusive social discrimination is mostly experienced the in developing countries (Fick, 2006). The culture in these countries discriminates women, youth or people with disability with the perception that they are not supposed to engage in certain activities which might be core in reducing inequalities and fostering equal distribution of resources. Lastly, the economic pillar has an impact in causing inequalities or promoting equality in both domestic and global community. The economic factors that contribute to disparities include resource endowment between individual, companies or countries, the prevalence of natural disasters and existing income gap between poor and wealthy (Song & Wu, 2015). Therefore, to tackling inequality requires reforms in the three pillars that support the society i.e. social, political and economic component. The government and international agencies play a significant role in solving domestic and global inequalities. The consequence of ever growing inequality is severe to economic growth and cohesion of both domestic and global community. Thus, push to solve this menace is necessary for enterprise and managers to evaluate since they are major players implementing most of the government policies (Sims, 2006). Also, these enterprises are biggest employers thus equality in the work place can serve as yardstick towards achieving equitable society. The report shows analysis on importance and policies adopted to foster equality in both government and enterprise level for the wellbeing of the global community. Sources of Global Inequality The global inequality arises from some factors that arise from both business and government functions. Therefore, evaluating these factors is important in policy development and implementation to achieve an inclusive and equal global society. These factors include; Economic factors: The financial soundness of a country plays an important role in perpetuating or eliminating global inequality. The international enterprises and government are the main actors in ensuring that global economic environment is favorable to all players. The players include trading countries, workforce, competitors and shareholders. As Firebaugh (2003) noted the countries’ economies classified based on the overall earnings. In this case, they are classified as either high, medium level, or low-income levels economies respectively. This implies that different nations have different capital investment abilities as well as different consumer purchasing powers. This is a key source of economic inequality. Also, the economic levels in society are classified based on the economic earning gaps between the levels of the society. As such, while as some could have a high or low per capita income, causing a variance and inequality in the purchasing power among different market consumers. For example, rich accessing better diet and health care than poor who cannot afford proper diet and health care. The developing countries have complained about lack of equal ground for their domestic companies to compete favorably with competitors in developed countries. The companies in developed countries have a comparative advantage than those in developing countries thus enabling them to charge consumer lower prices (Fick, 2006). The small cost of production of industries in developed countries results from economies of scale and use of capital intensive methods of production. Unlike industries in developing nation which uses obsolete technology and labour intensive method of production thus leading to high production cost (Diener, Tay & Oishi, 2013). The development of free trade bloc between developed and developing nations will not work for the companies in countries with different economic status are not on common grounds. Therefore, the companies in developed country will prosper due to increased market since consumers will prefer cheap over expensive products. These leads to closure of firms in developing nations thus resulting in unemployment and decline in economic growth cost (Diener, Tay & Oishi, 2013). Consequently, the poor financial system in developing and developed nations poses an enormous challenge in fostering inequalities. For example, lack of due diligence in lending by banks or efficient money market can limit other firms or individuals to raising capital or meeting their daily expenses since only big firms can access funding but SME is considered not to qualify (Fick, 2006). Therefore, discrimination in financial market result to great global inequality which must draw the attention of financial market players and government bodies both in the domestic and global platform. Also, the endowment of resources can cause economic inequalities between trading countries thus causing unfair competition. These can affect countries with or without the same economic status. For example, wrangles on sugar cane exports and imports within Uganda and Kenya which are of the same trading bloc (COMESA) and economic status (middle income). The issue arises from the fact that Uganda can produce sugar cane cheaply ($180 per tonne) while Kenya produces the same with $500. Therefore, sugar companies in Kenya cannot compete favorably with those in Uganda (OCHIENG', 2015). On the other hand, COMESA policies allow custom free movement of products within member countries. The trading blocs’ favors countries with comparative advantage to flourish while economies of that disadvantage keep declining thus gap between rich and poor keeps increasing (Kerr, Leites & Wolf, 1978). Also, economic difference between countries leads to global labour inequalities. The proportion of skilled workers in a given country depends on education advancement which is directly proportional to the level of productivity and technological dynamics. According to Royal Economic Society (2011), it notes that total factor productivity (TFP) compared between rich and developing nation showed that most prosperous nation had high skilled labor and dynamic technological adoption. The developing country had little-skilled labour and adopted technology used in rich countries instead of tailoring to meet its immediate production needs. The report compared US and Ghana textile and manufacturing industry which showed that Ghana produced large quantities of textile than the US since it is labour intensive and require little use of technology. On the other hand, US produced large quantities of manufacturing products than Ghana since it requires skilled personnel and advanced technology. Comparing further showed that Ghana exports textile to the US for more processing and returned at a higher price and, on the other hand, US sells manufacturing products to Ghana (Royal Economic Society, 2011). Therefore, US benefits twice by selling finished textile products and manufacturing products to Ghana. These enable US economy to keep growing at a higher rate while Ghana economy stagnates or grow at a slower rate. The economic inequality between the two countries is caused by unequal distribution of skilled labour and technology which form major components of factors of production. The brain drains and poaches of employees has been recently on the verge where professional or bright students are taken by developed nation or performing workers in small or medium enterprises are poached by big businesses. The practice causes developing countries and SME not to grow or grow at a modest pace compared to developed countries and large enterprises. Though poach of the employee is legal, some large corporation takes advantage of SME in poaching productive employees by offering the large pay and allowances which he/she is unable to get in the current employment (Reuters, 2011). Therefore, the poach reduces the growth of SME, thus slow job creation within SME, who are the biggest employers thus resulting in increased income gap between the poor and rich since owners of this big corporation get richer by increased level of productivity. On the other hand, owners and worker force of SME earn little due to reduced productivity from the shift of key personnel in the organization. The brain drain affects the economy of developing countries negatively since skilled labour moves to developed country in search of the proper working environment and pay. According to Journal of the Royal Society of Medicine (2005), 175Million people lived outside their home country from which 65Million engaged in economic activities. The most common reason for migration involved such of employment due to a high rate of under or unemployment. For example, the article elaborates that US spends 13% of its GDP in health care while India spends 3%. The underinvestment shows the major reason for the movement of labour from developing into a developed nation. Also, statistics of 1995 showed 88% of medicine, and engineering graduates from China and 79% from India studying in the USA remained to work in USA (Royal Society of Medicine, 2005). Thus limiting the exchange of skills and knowledge from USA, India and China due to high retain of graduates in crucial sectors. The movements of labour lead to migration of skilled and knowledgeable individuals who are supposed to improve the economy and reduce global inequalities between developed and developing nation. Social factors: The Social Pillar in the domestic and world community is important in eliminating inequality and promoting equity. Therefore, enterprises and managers are supposed to evaluate closely in making their day to day decision to develop an inclusive community. The global inequality resulting from social pillar arises from gender discrimination, age and disability (Australian Government, 2012). In the majority of developing countries, women are reduced to only domestic players who are engaged in cooking, raising children and taking care of other domestic chores. Also, other community views girl child has a source of wealth for pride price, thus limiting access to education which reduces women contribution to improving the wellbeing of the society. It can be noted that most African countries record high prevalence of primitive culture that demeans women, for example, communities like Maasai community in Kenya, Tanzania and Uganda still practice female genital mutilation (FGM), forming the basis of gender discrimination which limits them from engaging in productive activities in the society. The discrimination makes women vulnerable to poverty, unlike men who gets education and employment in most technical careers which pay well. According to the Guardian (2015), statistics shows that adult men earned comparatively high-income weekly compared to adult women in the Australian workforce. According to Australian government statistics, it can be noted that female is more than male by approximately 100,000 (Jericho, 2015). The disparity in earning between men and women in Australia results from women discrimination in the work place. According to Oxfam (2011), it is noted that out of 62 richest people in the world, 53 are male, and 9 are female while the population of the female is greater than that of the male. Also, the report shows that only 24 women hold CEO’s position of 500 large companies and CEO’s has gotten 54.6% salary increment from 2009 while other workers have barely gotten an increase (Pett, 2016). The statistics showed that most lower management entails a large proportion of women thus showing that they earn very little compared to men. The disparity resulted from discrimination by a culture which divided roles between men and women in the society. The women are given less productive roles than men thus leading to wealth inequalities. In 2014, ANZ Bank was taken to court due to discrimination of a pregnant woman over the pelvic test. The woman was later given fair treatment by the bank as a result of a court ruling that obliged them to provide a comfortable working environment (The Age, 2014). This is one of the many forms of global inequalities for women in work places. Also, discrimination of people with disabilities and terminal illness is prevalent in most nations globally. For example, most modes of transport in developing nations do not provide space for people with disabilities like wheelchairs for the cripple. Also, the majority of the building lacks ramp to be used by blind and cripple in place of the stair case. This limits their mobility thus reducing their economic productivity (Australian Government, 2012). During employment, the majority of employers limits the ability to disable to physical ability disregarding real ability of the individual. On the other hand, most enterprises have dismissed or failed to hire an individual with a terminal illness like cancer. They are of the opinion that these individuals are less productive since they spend most of the time in the hospital and less energetic due to medication. According to 2008 discussion paper released by the Australian government, 56% of submission complained of a lack of social inclusion as a barrier and employment received 34%. The government received 750 submission regarding the instance of discrimination of people with disability and terminal illness (Australian Government, 2012). Such discrimination in the work place and society result in inequality both in the domestic and global community. Therefore, enterprises and managers need to look into issues facing disable in dealing with global inequality which is a major cause of increased gap between poor and rich. Lastly, the aging structure of the population contributes greatly to global inequality. The young populations are always tasked with a bigger proportion of running economy. Therefore, a country with a high number of old population than youth like Japan spends a high amount on social welfare than development ventures which act as a burden on the few working individuals(Japan Statistics Bureau, 2015). This makes the country less competitive and experiences slow growth than the country which has a larger proportion of its population as a youth. Therefore, the age structure of the country determines the global equity on economic growth. Political factors: The political aspect of every country plays a crucial role in ensuring equitable distribution of resources both in the local and international platform. The major determining factors of political pillar entails sound constitution (the rule of law), ways of caring out Electoral and political processes, Democracy and public service delivery, transparency and accountability within government functions, Security, peace building and conflict management. The ways in which politics are carried out in developed and developing countries are different thus making it a major cause of both global and domestic inequality (Canis & Morrison, 2013). Therefore, global enterprises and managers need to evaluate political climate before settling on any given decision. The difference between economies of developed and developing nations majorly arises from issues concern political system of these countries. For example, In Australia, the three arms of government are independent and work in harmony as provided by the constitution thus making functions of the government work smoothly. Unlike developed countries where the executive arm of the government influences legislative and judiciary arms which are supposed to be independent. The major cause of lack of independence mostly arises from loopholes, poor interpretation of constitution or elite taking advantage of illiterate who are the majority of developing nation. This limits the effectiveness of the government and causes political instability which affects country’s economy negatively. For example, Egypt was one of the stable and growing economies in Africa but due to political instability that has been an experience of political instability since the anti-government protest that started in 2011 against Hosni Mubarak, who had overstayed in power. After being overthrown, Egypt went into another political unrest in 2013 (Colling, 2013). It is clearly noted that lack of a proper constitution, electoral and political procedure, democracy and transparency and proper conflict resolution management can lead to economic crunch which affects citizens and companies greatly compared to those in countries with political stability (Canis & Morrison, 2013). Also, political instability results in increased refugees and destruction of property. The issue of refugee reduces country productivity since its citizens have fled to another country to seek refuge. Therefore, economic activities are brought to stand still until peace is restored. Consequently, political instability discourages domestic and foreign investments due to fear of destruction. For example, most investors withdrew its investment plans during 2007-2008 post-election violence in Kenya thus hampering economic growth and the creation of job opportunities (Wessels, 2013). These increase global inequality for countries compared to those with stable political climate and differences between the rich and poor within the same community. The changes in political administrations result in variations in the existing market political goodwill. In this case, if a nation has a positive political goodwill, it is likely to allow for reduced operational costs through reduced tariffs and taxes. However, a hostile political environment results in high operating costs. This results to global equity or inequity depending on the nature of the relationship between the trading nations. The government and relevant government bodies are entrusted in formulating laws and policies governing both domestic and global business environment. These laws and policies include those who govern business competition, tax and incorporation of a business. For example, some countries operate flat rate system for individual income tax. This method is considered regressive since the tax obligation is greater on those individual with low income than high-income earners. Thus, low-income earners have little or no savings thus getting trapped in poverty cycle while rich receive high income after tax (Song & Wu, 2015). On the other hand, lack of proper laws and policies regarding competition can lead to dumping of cheap goods to developing countries from developed nations thus leading to the closure of infant companies thus resulting unemployment and lower living standards. Lastly, slow and inadequate policies concerning incorporation of business can negatively affect the economic growth of a given country compared to those with efficient procedures and policies. Thus, political factor affects creation and distribution of resources in the country thus contributing to global inequalities. Therefore, it is important for the country to maintain a stable political climate which makes it attractive to both domestic and foreign investors. Increased investment results to economic growth and improved living standards of the community thus bridging the gap between poor and rich. Importance of Global Equity The elimination of global inequality is crucial, and it takes the effort of individual enterprise, government and global agencies that advocate for equality in the work place and community in general. Global equity has numerous merits that benefit society as a whole instead of inequality that makes another person live better at the cost of another person. These benefits include; The promotion of equity leads to improved living standards of individual in a given society since proper business environment results in the creation of the job. The proper business environment thrives in a region where the social, economic and political system works correctly. This encourages domestic and foreign investors to invest in the area thus creating job opportunities which earn the community a living thus improving their wellbeing. Also, global equity eliminates issues of a double job since one of the major concerns in global inequality in employment arises from the fact that an individual can hold more than two jobs while another person has no job (Kerr, Leites & Wolf, 1978). This increases the gap between the rich and poor. The global equity increases the cohesion of both domestic and global community. Fair and equal treatment of individuals in a community reduce instances of rebellion by individuals towards a section of individuals’ i.e. rich versus poor or country versus another country or business versus business or individual versus government. Lack of resistance fosters cohesion in the local and global platform which provides an excellent environment to conduct business. Also, cohesion improves the security of the region thus improving investment in a given region. This creates more job opportunities which breach the gap between poor and rich in global community. The promotion of global equity results to improved economic growth in individual countries. For example, reduction of global inequity dues to brain drain enhances country productivity since developing nation can tap skills and knowledge from its citizens instead of seeking employment abroad. The ability to retain skills and knowledge enables the country to adopt new technologies, new methods of production and producing a range of products that allows country to create employment opportunities for its citizens. The elimination of global inequality enhanced the mobility of factors of production between countries both developed and developing. The equality in global community encourages the movement of factors of production such as capital, labour and technology since they can experience equal business environment regardless of country’s economic status or the size of the corporation. This promotes the creation of business opportunities and reduction of cost since companies can produce in the region where its raw materials occur. For example, most of Ghana textile raw materials are taken to the US for final processing (Royal Economic Society, 2011). But as a result of global equity, these industries can be brought to Ghana thus reducing the cost of its final product in Ghana and also creating employment opportunities instead of concentrating employment in developed nations alone. It is important to note that global equity is important in reducing inequities caused by increasing the gap between the poor and rich. According to Oxfam (2011), statistics shows that wealth of 62 rich individuals increased by 44% but the same number of bottom poor dropped by 41% thus echoing the worrying trend of rich becoming richer and poor becoming poorer. The increased gap will result in social issues in future to high spending on health care and enforcement of law and order. Therefore, global equality is important in creating an enabling environment for individuals to live and engage in economic activities. Measures Adopted to Solve Global Inequality The creation of a proper political system in the country is important in ensuring that resources are distributed equitably. The sound political system provides equality in tax collection, smooth and efficient incorporation of businesses and attractive business environment for foreign investment. The United Nation (UN) has increased its concerns in ensuring the electoral and political process runs smoothly. For example, during elections, UN sends its delegates to member countries carrying out elections to oversee and ensure that elections are free and fair. This has reduced the instance of election violence which negatively affects economic environment thus causing individuals to flourish due to increased business opportunities which result from the stable political environment. Recently, European Union funded Kenyan electoral body which was faced with deficit finance. The move was aimed at eliminating discrepancy of some parties which questions free and fairness of the process since few voters will be registered due to understaffing of registration clerks. The grievance can cause political unrest if not solved at an early state. The stable and working political system ensures that all countries experience almost the same economic growth thus eliminating increasing gap between poor and rich or developed and developing nations. The countries globally are working towards achieving socially inclusive society. The women are being engaged in various economic activities. Also, girl child has received significant support from governmental and non-governmental bodies in ensuring that they get accessed to quality education and protect them from a primitive culture such as FGM. Also, developed countries such as the USA have increased efforts to ensure participation of youths in African countries in both leadership and business. For example, President Obama launched Young African Leadership Initiative (YALI) which ensures that youth obtains proper leadership skills. This enables youth to bring in fresh blood in government and business leadership thus improving productivity. Rwandan is among the fastest growing economies in Africa after the genocide that resulted from ethnic violence. The secret behind its success is the inclusion of women in economic activities. For example in 2004 elections, women represented 49% of the legislative seats. Also, the world has made the international day for disability to look into progress and issues affecting a person with a disability. These have reduced the instance of discrimination and improved individuals’ sense of belonging in a given society. The increase of investors moving from developed to developing is one of the measures employed by trading blocs to ensure that individuals benefit from its natural resources. The investors create employment opportunities and reduce the cost of finished products. The harmonization of country’s business related laws by creation international organizations such as international criminal court, World Bank, International Monetary Fund and trading bloc. This international agency ensures that individuals, countries or business receive equal attention irrespective of status or size thus eliminating global inequality and promoting equality. Conclusion In conclusion, it can be noted that global inequality is not an individual’s problem. It affects both the rich and poor in the society. For example, increased poverty level results to increased insecurity which targets the wealthy community. The proper function of the social, economic and political structure is crucial in eliminating inequality which is one of the main causes of rising unequal distribution of wealth. The successful countries who have enhanced equality of its citizens have concentrated more on the following factors. Firstly, ensuring workers receive a living wage and reduce the gap on executive rewards. Secondly, promoting women right and involvement in economic activities. Thirdly, ensure influence of elite is in check to avoid misuse of power. Fourthly, ensure that tax burden is shared equally (taxing according to the ability to pay), and lastly, spending public funds progressively to curb inequalities. Reference: Australian Government,. (2012). 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