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Book Review
Globalisation and income inequalities
V. S. SAMBANDAN
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The main finding of the study conducted by the ILO is that globalisation has resulted in the widening of income inequality across and within countries
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WORLD OF WORK 2008: Pub. by International Institute for Labour Studies, Geneva and Academic Foundation, 4772/23 Bharat Ram Road (23 Ansari Road) Daryaganj,
New Delhi-110002. Rs. 995.
The world is now going through its severest economic downturn since the Great Depression of the 1930s and, as the International Labour Organisation makes it clear in its publication under review, the roots of the crisis go back to 1990s, when economies across the world changed track.
The report goes into the details of how this global phenomenon has affected various countries and looks at key contemporary issues such as income inequalities, tax and social security measures, and labour relations.
The report prepared by the International Institute for Labour Studies — a research body established by the ILO in 1960 — analyses global employment through the prism of inequality. The result, as the ILO Director-General, Juan Somavia, sums up in his preface, is “a comprehensive overview of the key factors underlying unbalanced income developments.”
The six chapters go beyond examining the trends in employment and income. They analyse the domestic and global factors in employment and the rising income inequality in over 70 developing and developed countries, and assess the importance of formulating policies that address the growing income inequality.
Income inequality
The main finding of the study is that globalisation has resulted in the widening of income inequality across and within countries. Although the economic expansion since the 1990s was accompanied by “substantial economic development across most regions,” there were variations in labour market performance between and within countries. Moreover, the increase in employment also occurred, according to the report, alongside a redistribution of income “away from labour.”
Its research found that in 51 out of 73 countries, for which data were available, the share of wages in national income declined over the past two decades. This meant that workers gained less from economic growth. The rich-poor gap has also widened, post-globalisation, as nearly two-thirds of the countries experienced an increase in income inequalities between 1990 and 2005. Yet another finding, which is important from the diagnostic perspective, is that this rich-poor gap is not only widening, but it is doing so at an increasing pace.
Financial globalisation, the report makes it clear, “has not lived up to its promises.” Although it could improve the allocation of savings and investment, and thereby support growth, its benefits “have been slow to emerge even in countries” that were early liberalisers.
The other adverse fallout of financial globalisation is that it “seems to have eroded the bargaining power of employees,” which contributed to “the decline in the wage share over and above any effect resulting from trade integration or sectoral change.”
Note of caution
The report envisages a situation in which the continuing global economic slowdown, coupled with rising food prices, will accentuate income inequality and affect the employment opportunities of low-income groups disproportionately, calling for cautious policy-making.
Although in line with the economic thinking since the advent of globalisation, the report argues that income inequalities could be a good thing as it rewards work quality, talent, and innovation. It strikes a serious note of caution that “there are instances where income inequality reaches excessive levels, in that it represents a danger to social stability while also going against economic efficiency considerations.”
With its analysis of the effect of financial globalisation on income inequalities, the 162-page document shows the way to other areas in which the ILO and social scientists can further contribute to the understanding of the socio-economic fallout of globalisation.
Like all reports from multilateral institutions that study and explain global economic situations, this also contains useful tables, graphs, and appendices that highlight specifics, which interested readers, students and social scientists in general, and economists in particular, would find useful.
An index of subjects would have been of immense help to readers, particularly because the scope of the issues covered is wide.
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