Globalization and the Global North–South Inequality Gap

Introduction

The Global North is loosely defined as more economically developed countries, while the Global South refers to less economically developed countries (Reuveny & Thompson, 2007). The North primarily comprises Western (First World) countries, while the South is mainly the Third World countries (Sofie, 2013). Irrespective of significant development gains worldwide, there is tangible evidence indicating a widening gap between the world's richest and poorest nations. For instance, in 1820, Western Europe's per capita income was three times higher than Africa's; by 2000, it was thirteen times higher (Kolb, 2018).

Globalization has political, social, and cultural origins; however, much attention is directed toward economic globalization and its consequences. Some scholars have defined economic globalization as the "integration of national economies into the international economy through trade, technological transfer, short-term capital flows, foreign investments, and international transfer of workers" (Bhagwati, 2004). Economists are primarily concerned with globalization's impacts on developing countries' societies and economies (Silbey, 2017). According to Bhagwati (2004), the merging of national economies into one global economy alleviates poverty, enhances economic growth, reduces the global North–South inequality gap, and helps address pollution and democratic deficits worldwide, as evidenced by trends in China and India (Ogunyomi et al., 2013).

Nevertheless, this view has faced opposition from scholars who claim that globalization has produced economic insecurity and has contributed substantially to growing inequality between the Global North and Global South. Marjit et al. (2004) and Bergh and Nilsson (2011) both argue that globalization has not only contributed to a wider gap between the Global North and Global South but has also increased inequality between the rich and the poor in over 95% of specific countries across the globe. As a result, the rich continue to get richer while the poor get poorer (Borjas & Ramey, 1994).

The widening inequality between the North and South can damage social cohesion and trust, contributing to conflicts and hindering investment (Kolb, 2018). Inequality can also result in poor public policy choices, thereby hampering poverty reduction (Fletcher & Weinstein, 2018). While anti-globalists have criticized globalization as a generator of inequality, others consider it an equalizer that expands the horizons of the poor. This study therefore seeks to evaluate whether globalization contributes to the widening gap between the Global North and the Global South. The knowledge gained will inform various policies that can bridge the inequality gap between the two groups (Borjas & Ramey, 1994). There remains no consensus on the contributions of globalization (Reuveny & Thompson, 2007), and the divergent and often contradictory claims surrounding it underscore its complexity (Kolb, 2018).

Literature Review

With international trade and the free movement of people and goods globally, poverty and privilege are no longer geographically isolated (Kacowicz, 2007). Although globalization is generally presumed to be important, there is limited clarity about precisely what it entails (Prasad et al., 2005). Scholte notes that despite many publications on globalization, the concept remains shallow and politically naïve (Ortiz-Ospina et al., 2018). According to Dreher and Gaston (2008) and Roser (2013), globalization has nonetheless been a persistent feature of history. Notably, most critics of globalization come from the North, not the South (Dabla-Norris et al., 2015). Some critics argue that the marginalization of Third World economies is a consequence of the Cold War's end rather than globalization itself. From a radical perspective, globalization can be said to deepen inequality among nations (Dreher & Gaston, 2008), while the so-called "Washington Consensus" regards globalization as a cure for poverty (Fletcher & Weinstein, 2018).

The widening gap between the Global North and Global South due to globalization is of considerable academic interest, and scholars have reached different conclusions. According to Zhou et al. (2011), after studying the effects of globalization on the inequality distribution of 60 countries, globalization can both minimize and increase income inequality between the Global North and Global South (Bhagwati, 2004). Bergh and Nilsson (2011) concluded that reforms oriented toward economic freedom appear to heighten inequality between the Global North and Global South (Dreher et al., 2008). However, their findings also suggest that legal, political, and monetary globalization does not significantly influence the North–South gap (Bergh & Nilsson, 2010). When Edwards (1997) evaluated the link between income distribution and trade policy by regressing the Gini coefficient over various trade openness indicators, he found a lack of evidence to relate globalization to any significant widening of the North–South gap (Bergh & Nilsson, 2010).

On the other hand, irrespective of the significant developmental gains that have helped many countries transition out of extreme poverty, there is adequate evidence to suggest that globalization simultaneously contributes to the widening gap between the Global North and Global South (Bergh & Nilsson, 2010). The per capita income difference between Africa and Western Europe, for example, has widened over the last century (Bhagwati, 2004). This is not to say that globalization has not benefited developing countries; however, as emerging economies experience relative growth through globalization, the trend appears to favor more developed countries disproportionately, resulting in a widening gap (Dreher et al., 2008).

Several other factors have also been identified as contributors to global North–South inequalities (Borjas & Ramey, 1994), including a country's industrial and economic sector composition, the education level and health status of citizens, access to markets and international trade relationships, and conflicts both within and between countries (Bergh & Nilsson, 2010).

Theoretical Approach

The realism theory of international relations serves as the guiding framework for this study. According to realism, nations act primarily to increase their power relative to other states (Galston, 2010). Key assumptions of realism include: first, that the state is the principal actor in international relations; second, that the state acts as a unitary actor (Bergh & Nilsson, 2010); third, that decision-makers are rational actors, since rational decision-making leads to the pursuit of national interest; and fourth, that states desire power to ensure self-preservation. This theoretical framework will guide the study's evaluation of whether states' drives to retain power could significantly undermine globalization's expected gains and thereby widen the North–South divide (Galston, 2010).

Conclusion

The data analysis through the various models presented above will guarantee a comprehensive and coherent comparison of each model's dependent and explanatory variables (Dreher et al., 2008). Hypothetically, the coefficients of the KOF index should positively relate to the Gini coefficient across all four models (Borjas & Ramey, 1994). According to the study's hypothesis, increased globalization would reduce inequality within the sampled countries (Zhou et al., 2011).

Furthermore, the study anticipates an inverse relationship between inequality and the education index across sampled countries (Atif et al., 2012). Education is used as a control variable; nevertheless, its estimates are expected to yield substantive results (Dreher et al., 2008). Ultimately, the study also hypothesizes a direct link between globalization and income inequality, suggesting that globalization leads to an increased gap between rich and emerging countries (Bhagwati, 2004).