Final dates! Join the tutor2u subject teams in London for a day of exam technique and revision at the cinema. Learn more

Study Notes

Does globalisation lead to rising income and wealth inequality?

AS, A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 11 Oct 2023

Does globalisation lead to rising income and wealth inequality?

Globalization has a complex and multifaceted relationship with income and wealth inequality. Its impact on inequality can vary depending on a range of factors, including the policies in place, the specific circumstances of individual countries, and the way globalization is managed. Here are some key points to consider:

  1. Positive Effects on Inequality:
    • Economic Growth: Globalization can stimulate economic growth by promoting trade, investment, and innovation. Increased economic activity has the potential to raise overall living standards and reduce poverty in many countries.
    • Consumer Benefits: Access to a global market can lead to lower prices for consumers, benefiting those with lower incomes. Globalization can make products and services more affordable, improving the standard of living for many.
    • Job Opportunities: Export-oriented industries can create job opportunities, especially in developing countries. These jobs can provide better income and working conditions than alternative employment options, such as subsistence farming or informal labor.
  2. Negative Effects on Inequality:
    • Income Disparities: Globalization can exacerbate income inequality in some countries. Skilled and educated workers in industries connected to the global economy may benefit more, while low-skilled workers in declining sectors may see stagnant wages or job loss.
    • Wealth Concentration: In some cases, globalization can contribute to wealth concentration. Those with the resources and access to global markets can accumulate wealth more quickly, while those without such access may struggle to keep up.
    • Tax Avoidance and Evasion: Wealthy individuals and corporations can exploit globalization to evade taxes by shifting income and assets to low-tax jurisdictions, further contributing to wealth inequality.
    • Race to the Bottom: In a competitive global environment, some countries may lower labor and environmental standards to attract foreign investment and remain competitive, which can lead to worse working conditions and environmental degradation.
  3. Institutional and Policy Factors: The extent to which globalization impacts inequality depends on how it is managed. Government policies, labor regulations, taxation, and social safety nets can either mitigate or exacerbate the inequality caused by globalization.
  4. Global Perspective: Globalization can also contribute to global income inequality by benefiting wealthier countries and individuals more than less developed ones. Developing countries often have a more difficult time fully participating in and benefiting from the global economy.

In summary, globalization's effect on income and wealth inequality is not universally positive or negative but depends on a variety of factors. While it has the potential to stimulate economic growth and improve living standards for many, it can also exacerbate inequality if not managed properly. Policymakers play a crucial role in ensuring that the benefits of globalization are broadly shared and that measures are in place to address any resulting inequalities.

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.