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lOMoAR cPSD| 40799667
Mills 2008 - Globalization and Inequality
Advanced reading (Đại học Khoa học Xã hội và Nhân văn, Đại học Quốc gia Thành phố Hồ Chí Minh) lOMoAR cPSD| 40799667 European Sociological Review
VOLUME 25 NUMBER 1 2009 1–8 1
DOI:10.1093/esr/jcn046, available online at www.esr.oxfordjournals.org
Online publication 30 August 2008 Globalization and Inequality Melinda Mills
Globalization is increasingly linked to inequality, but with often divergent and polarized findings.
Some researchers show that globalization accentuates inequality both within and between
countries. Others maintain that these claims are patently incorrect, arguing that globalization D o
has disintegrated national borders and prompted economic integration, lifting millions out of w n l
poverty, and closing the inequality gap. This article presents a review of current research that o ade
links globalization to inequality. Core problems behind contra-dictory findings appear to rest in d fr
the operationalization of inequality and globalization, availability and quality of data, population- o m
weighted versus unweighted estimates; and, the method of income calibration to a common h ttp
currency in the study of income inequality. A theoretical model charts the mechanisms linking ://es
globalization to inequality, illustrating how it generates increased inequality within industrialized r. o x
nations and decreased inequality within developing economies. The article concludes with a fo rd
description of the papers in this special issue and situates them within the broader literature. j o u rn al s.org/ at Cornell Introduction
problems in the study of inequality. The second section U n i
then defines globalization and develops a theoretical v er s
The rise of globalization has been accompanied by the
model to chart the mechanisms that link it to inequality ity
debate of whether it comes at the cost of grow-ing
in industrialized and developing economies. The article L ib
inequality. Globalization is increasingly linked to
concludes with a description of the papers in this rar y
inequality, but with often divergent and polarized
special issue and situates them within the broader on
results. Critics of globalization have argued that it
literature on this topic. Each article is provocative and D e
accentuates inequality both within and between coun-
challenging in its own right, addressing the many sides cem
tries (Firebaugh, 2003; Wade, 2004). Although globa-
of this topic from different areas of the world and b er
lization may improve both the relative and absolute
equally different perspectives within sociology. 1 5 ,
incomes of individuals around the world, some findings 2 0 1
show that there are clear winners and losers. Others Has Inequality Grown? 4
maintain that these claims are patently incor-rect,
arguing that globalization has disintegrated national A Critical Examination
borders and prompted economic integration, lifting
millions out of poverty and closing the inequal-ity gap
A review of the literature on globalization and
(Dollar and Kraay, 2002). But which of these findings
inequality reveals that evidence is vigorously argued in
are correct? Does globalization lead to higher
all directions. Some researchers appear to convinc-ingly
inequality? Why are there so many divergent results?
argue that there has been a growth in inequality over
The aim of this introductory article is to present a
time (Wade, 2004) whereas others adamantly report
review of current research on globalization and inequal-
stability or even a reverse in the inequality trend over
ity. The first section engages in a critical summary of
time (Firebaugh and Goesling, 2004; Milanovic, 2005;
the central findings in this area of research, followed by
Sala-i-Martin, 2006). The core problem behind these
isolating key conceptual and methodological
seemingly contradictory findings appears to be
The Author 2008. Published by Oxford University Press. All rights reserved.
For permissions, please e-mail: journals.permissions@oxfordjournals.org lOMoAR cPSD| 40799667 2 MILLS
a methodological one, related to four key issues:
comparisons (Ravallion, 2003). The central difference
(i) the operationalization of inequality, (ii) availability
is whether the measures are calculated as household
and quality of data, (iii) population-weighted versus
consumption-based Gini indexes or using income-based
unweighted estimates; and, (iv) in the study of income
surveys. The difference is not trivial since con-
inequality, the technique used in the calibration of
sumption-based indices are both more commonly used
incomes into a common currency. These choices result
in developing economies (e.g. Asia, Africa, Central and
in different predictions about not only the direction of
Eastern Europe) and also produce estimates of lower
inequality, but also the onset of the timing of changes in
inequality. The reason that they are often applied in inequality trends.
these countries, as opposed to the income-based mea-
The classic and perhaps most obvious factor related
sures often used in developed economies, is attributed
to the divergent inequality findings is both a concep-
to the fact that the measurement of incomes is often
tual and data-related question: How is inequality
difficult in these contexts, due to higher levels of self- D
operationalized or measured? This is interrelated to the
employment in agriculture or business (IMF, 2007). o w
central research problem or motivation of the research,
Since consumption is also often self-reported, these n lo
but also to the second core issue, which is the
measures likewise suffer from typical methodological ade
availability and/or quality of data. The majority of the
problems such as differences in definitions of con- d fr
globalization and inequality literature has focused on
sumption; recall problems and variation in the length of o m
income inequality, often measured as a change in the
recall period, and other related factors. Income-based http
Gini coefficient (critically discussed in more detail
measures also suffer from similar data collection ://es
shortly) (Alderson and Nielson, 2002). Alternative
problems, including the fact that surveys are often not r. o
measures such as the mean logarithmic deviation of
entirely nationally representative and underreport the x fo
income (MLD) index of inequality are sometimes used
income of high-income groups, thereby under- rd jo
(Sala-i-Martin, 2006), but the Gini coefficient remains
estimating inequality. The operationalization of glob- u rn the dominant choice.
alization is another related issue, discussed in the next al s.o
Classic sociological approaches have characterized section. rg/
inequality as a multidimensional construct based on the
A third culprit of differences in estimates related to at C
stratifying factors of not only income, but also other
globalization and inequality is whether countries are o rn
social and cultural domains (Weber, 1958; Mills, 1963;
weighted by population size or treated merely as equal ell
Dahrendorf, 1979). Studies that deviate or expand upon
units in cross-national comparisons (Firebaugh, 1999). U n i
inequality beyond income are, however, rare. Sen Population-weighted studies report that income v er s
(1999) is an exception, maintaining that we need to
inequality has declined, due to the relatively high ity
examine inequality in personal freedoms. More
weight of China and India, where inequality has sharply L ib
recently, Goesling and Baker (2008) introduced a
declined over the past 20 years (Milanovic, 2005; Sala- rar y
multidimensional operationalization of inequality, by
i-Martin, 2006). These types of results provide a better on
examining not only income, but also health and
picture of global inequality as opposed to variations in D ecem
educational inequality across countries. Beyond the
cross-national differences. Unweighted results that treat
actual measure, there is also the question of whether
each country as equal are more useful to distinguish b er
inequality is studied as the unequal distribution of between cross-national differences related to 1 5 ,
income within or between countries (Alderson and
institutional effects such as national eco-nomic policy 201
Nielsen, 2002; Beckfield, 2006), or a combination of
or growth (Goesling and Baker, 2008). 4 both (Milanovic, 2005).
A final methodological problem that occurs when
A growing body of literature has focused on trends in
income is used as the central measure is the calibration
within-country income inequality. Here, the Gini index
of incomes to a common comparative currency. This in
is the most commonly used measure, which summarizes
turn produces divergent predictions about the timing or
the income distribution within a country (Ravallion,
onset of changes in inequality trends. Two central
2003). It illustrates the range between a perfectly equal
techniques used to calibrate incomes into a common
distribution (a Gini coefficient of 0) to the highest
currency across the countries are either via the
possible condition of inequality of
purchasing power parity (PPP) or unadjusted foreign
where one person would hold all of the income (a Gini
exchange rates. Studies that calibrate incomes using
coefficient of 1). Although the Gini measure is widely unadjusted foreign exchange rates, such as applied, there are some serious conceptual,
Korzeniewicz and Moran (2007), find that the decline
methodological, and definitional issues that make it
in inequality did not come about until the 1990s.
difficult to interpret when engaging in cross-national
Whereas those who use the PPP converters show lOMoAR cPSD| 40799667 GLOBALIZATION AND INEQUALITY 3
that population-weighted inequality started to decline
et al., 2008). Globalization can be defined as four
almost 10 years earlier in the early 1980s (Goesling and
interrelated structural shifts that roughly occurred since Baker, 2008).
the 1980s of: (i) internationalization of markets and
Although these measurement problems exist, there
declining importance of borders for economic
appears to be a general consensus about the trends in
transactions, (ii) tougher tax competition between
inequality. Among researchers using population-
countries, (iii) rising worldwide interconnectedness
weighted inequality measures, results show that there through new Information and Communication
has been a decline in income inequality across coun-
Technologies (ICTs), and (iv) the growing relevance
tries (Milanovic, 2005; Sala-i-Martin, 2006). Using and volatility of markets (Mills and Blossfeld,
population-weighted income inequality data from 138 2005). The mechanisms, which link these
countries from 1979 to 2000, Sala-i-Martin (2006), for
aspects of globalization to inequality, are outlined
example, showed that the level of income inequality in Figure 1.
across countries declined sharply over time. However, D
A central engine of globalization is the internation- o w
when income shares are examined by quintiles, we see
alization of markets and subsequent decline in the n lo
that income inequality has increased mainly in the
importance of national borders for all kinds of ade
middle- and high-income countries, and less so in the
economic transactions. This includes changes in laws, d fr
low-income countries (IMF, 2007). o
institutions, or practices that make various transactions m
There is also evidence that income inequality across
(in terms of commodities, labour, services, and capital) h ttp
countries far exceeds that of inequality within coun-
easier or less expensive across national borders, includ- ://es
tries and that it has grown across time (Korzeniewicz
ing trade. The growth of international regulatory insti- r. o
and Moran, 1997; Guille´n, 2001). As Goesling and
tutions and political agreements that facilitate capital x fo
Baker (2008, p. 184) state: ‘The world’s largest
flows have generally operated to liberalize and interna- rd jo
inequalities are not defined by race, class, or gender, but
tionalize financial markets, resulting in more financial u rn
by national borders’. Average incomes in the richest
openness (Fligstein, 2002). This includes the deregu- al s.o
countries in the world far exceed those in the poorest
lation of interest rates, privatization of government- rg/
countries, with estimates of incomes that are 40–50
owned banks and financial institutions, and the removal at C
times greater in these countries (Pritchett, 1997). This of credit controls. o rn
reflects the increasing divergence between countries
A second interrelated aspect of globalization is the ell
produced by globalization, not growing convergence U
rise in tougher tax competition, often accompanied by n i
(see also Mills et al., 2008). v
‘neoliberal’ globalization tendencies. The notion that er s
An additional area of study is within-country
capital and labour are increasingly mobile works as a ity L
inequality, which is highly dependent upon the nation
powerful threat for competition. Countries have mainly ibrar
under study. Examining the Gini coefficient of income
been affected in terms of a modification of the tax y
inequality, for example, Alderson and Nielsen (2002)
structure rather than through retrenchment of the on
demonstrate that globalization explains the longitudinal
welfare state (Massey, 2009). Central neo-liberal D ecem
trend of increasing inequality across 16 OECD
measures to enhance competition include the removal
countries. By examining the impact of glob-alization
or relaxation of government regulation of economic b er
measures such as direct investment outflow, North-
activities (deregulation), a shift towards the reliance on 1 5 ,
South trade and net migration rate over the period from
price mechanisms to coordinate economic activities 2 0 1
1967 to 1992, they find rising inequality within
(liberalization) and the transfer of ownership and 4
countries such as the United States, Australia, and
control over previously public ownership to private
Denmark and declining and then rising inequality in
entities (privatization). The core of these transforma-
countries such as Germany, Japan, Great Britain, and
tions has been to enhance efficiency, productivity and the Netherlands.
profitability while simultaneously allowing firms and
nations to be more competitive, flexible and react more
rapidly to change (Montanari, 2001).
The Impact of Globalization on
World trade, trade integration, and financial openness Inequality
have significantly grown since the early 1980s (IMF,
2007). World trade has, in fact, grown five times from
Globalization represents a set of economic, political,
the 1980s to 2005 with trade openness increasing
and cultural processes that operate simultaneously and
particularly in the former Eastern bloc and developing
has suffered from similar operationalization problems
Asian countries (IMF, 2007, p. 33). Integration and
(Held et al., 1999; Guille´n, 2001; Raab
financial openness has also intensified, lOMoAR cPSD| 40799667 4 MILLS GLOBALIZATION
Internationalization of Increased competition New ICTs & increased Rising relevance and markets between nations interconnectedness volatility of markets INCREASES IN: Financial Trade Foreign Direct ICT capital Migration and openness Investment investment & use mobility of D workers o w n lo ad e
NATIONAL INSTITUTIONAL FILTERS d fr o m Education systems Employment & Welfare regime Migration restrictions h tt industrial relations p : / systems /es r. o x fo rd j o u rn
INDUSTRIALIZED COUNTRIES DEVELOPING ECONOMIES al s Deindustrialization  Industrialization .or g
Weaker bargaining position of labour / a
Capital flight/ international relocation of jobs  Capital arrival/new jobs t C o
Increased premium on higher skills for rn knowledge-based industries
Increased premium on lower skills for labour- ell
Shift from higher wages in industrial sector intensive industries U n
to lower wages in service sector
Increase in wages for lower-skilled workers iver
Rise in higher-skilled workers’ incomes
Reduction in higher-skilled workers’ incomes si ty L ibrar y INCREASE IN INEQUALITY DECREASE IN INEQUALITY o n D ecem
AGGREGATE OBSERVATIONS OF INEQUALITY b e r 1 5 , 201
Figure 1 Mechanisms linking globalization to inequality. (Source: Adapted from Mills and Blossfeld, 2005). 4
particularly between the advanced economies. Trade is
in competition with low-wage workers in the South
often used as a tangible measure of globalization, using
(Wood, 1994). However, some argue that this does not
measures such as international trade, and speci-fically
hold, as the net effect of imports on average wages
‘North-South’ trade (Krugman and Lawrence, 1993;
appears to be minimal (Krugman and Lawrence, 1993).
Wood, 1994; Burtless, 1995; Alderson and Nielsen,
In addition to trade, another measure often used to
2002). As Figure 1 illustrates, trade is one factor of
capture globalization is the level of foreign direct
globalization that has the potential to increase
investment (FDI) and how it in turn impacts the income
inequality in industrialized countries due to the fact that
distribution of countries (Bornschier, Chase-Dunn and
it reduces the average wage and enhances inequalities in
Rubinson, 1978; Firebaugh, 1992). More intensive
the relative wages between skilled and unskilled
competition and the softening of trade bar-riers opens
workers. It reduces wages in the North due to the fact
new markets for firms based in industri-alized
that these workers are suddenly
countries. Globalization prompts a ‘capital flight’ lOMoAR cPSD| 40799667 GLOBALIZATION AND INEQUALITY 5
of firms as they engage in FDI to replace domestic
between individuals (Castells, 2001). New ICTs allow
production (Gereffi, 2009). Firms in search of lower
people to share information in order to connect and
labour costs and/or more lenient tax systems or
create an instant common worldwide standard of
employment regulations invest abroad. As a result,
comparison. Although the introduction of technology is
there is a process of deindustrialization in the home
not unique in itself, recent ICTs have fundamentally
country that weakens the bargaining position of work-
altered the scope (widening reach of networks of social
ers and produces rising inequality. This deindustrial-
activity and power), intensity (regularized connec-
ization entails a shift away from typically higher wages
tions), velocity (speeding up of interactions and
in the manufacturing and industrial sector in more
processes), and impact (local impacts global) of
industrialized countries to be replaced by comparatively
transformations (Held et al., 1999).
lower average wages in service sector jobs, thereby
New ICTs and technology have sometimes been
resulting in increased inequality (Alderson and Nielson,
included within the definition of globalization or as a
2002). Conversely, globalization appears to decrease D
parallel force. One way to measure the impact of ICTs o w
the level of inequality in many developing economies
is by examining the intensification of ICT capital n lo
via the growth in industrialization, new employment
investment within countries, such as higher national ade
possibilities, and increase in wages for lower-skilled
expenditures on computer hardware and software, and d fr
labour-intensive workers, accompanied by a subsequent
telecommunications equipment (Jorgenson and Vu, o m
reduction in the wages of higher-skilled workers. These
2005). Others have measured it by examining the level h ttp
factors operate together to decrease the level of
of socio-technical interconnectedness via measures such ://es
inequality within these countries. The contrasting
as the number of Internet hosts and users per capita and r. o
impacts of inequality are therefore a key reason why
other related communication technology availability x fo
results differ according to whether countries are rd
and usage within a society (Raab et al., 2008). ICTs, jo
population-weighted or treated as equal units. u
together with liberalized and internatio-nalized financial rn al
It is also not only firms that are mobile. We are
transactions, create a financial ‘super-market’ for global s.o
witnessing a growing number of migrant workers, par-
business-to-business transaction and stock exchanges, rg/
ticularly in light of more lenient mobility regulations in
cross-border banking, and finance that stretch across the at C
areas such as the European Union (Feld, 2005).
world on a real-time basis (Greenspan, 1997; Castells, o rn
Different countries have diverse levels of migrants,
2001). New technol-ogy has also prompted a wave of ell
which likewise contribute to the level of inequality
automation, char-acterized by flexible, and accelerated U n i
within each society. Borjas (2000) points to migration
production processes. It not only increases production, v er s
in the United States as a central factor contributing to
but also results in a shift from the demand for lower- ity
inequality. Borjas (2000) argues that immigration is
skilled workers to a more highly qualified knowledge- L ib
related to inequality in this context due to the fact that
based labour force (Brown and Campbell, 2002). rar y
both rises in immigration and inequality coincide with on
one another, and that there is not only a bifur-cation of
A final feature of globalization is the rise in both the D ecem
low and highly skilled migrants, but also a growth of
relevance, but also simultaneously, the volatility of
lower-skilled immigrants. Alderson and Nielson (2002,
markets. Market prices and their transformations b er
p. 1256) argue that ‘the combination of a high
increasingly convey information and set the standard 1 5 ,
immigration rate with an immigrant population
for the global demand of various goods, services and 2 0 1
characterized by low average skills and high skills
assets, and the relative costs of producing and offering 4
variance has been seen as a certain recipe for increased
them (Useem, 1996). Yet these markets are becoming
inequality’. This can be related to Grusky’s (2001)
ever more dynamic and unpredictable. Competition
work on income disparities as a function of race, class,
forces firms to operate in a state of perpetual innovation
and gender and Massey’s (2009) argument in this
and flexibility, which in turn heightens the instability of
volume that the realignment of the U.S. political
markets (Streeck, 1987). New ICTs likewise accelerate
economy and tax system is traced to racism in this
market transactions (Castells, 1996). This in turn makes country.
long-term developments of globalizing markets
A third aspect of globalization is the rising world-
inherently harder to predict. Global prices are also more
wide interconnectedness through the information and
liable to fluctuations because worldwide supply,
communication technology (ICTs) revolution, such as
demand, or both are becoming increasingly susceptible
microcomputers, the Internet, new satellite systems and
to random disrup-tions caused somewhere on the globe
fiber-optic cables. These accelerate the liberal-ization of
(for example, major scientific discoveries, technical
financial transactions and communication inventions, lOMoAR cPSD| 40799667 6 MILLS
new consumer fashions, major political upsets such as
Beck and Beck-Gernsheim propose a new theory of
wars and revolutions, economic upsets, and so on).
the ‘global generation’. In comparison to previous
Globalization is often presented as a blanket force
generations, they contend that this group departs from
impacting all nations in a similar manner. But countries
‘collective action to engage in individualist reaction’. It
have very different starting points and varying tendencies
is a generation at odds with itself and at its very heart
to accept or resist globalization, thereby influencing the
by definition ‘unpolitical’. They offer the critique of
level of within and between country inequalities (Sassen,
methodological nationalism and argue that the current
1996). National specific institutions, such as employment
global generation of youth is increasingly not limited to
and industrial relations systems, education systems, the
the borders of its own nation state. This generation, they
degree of decommodification from the welfare regime and
argue, takes on a transnational iden-tity, characterized
migration restrictions all operate as ‘filters’ of these
by growing diversity. Here, the authors enter the heated
globalization pressures (Mills et al., 2008). We know that
debate of migration and the human right to mobility.
there are distinct national variations of occupational
They also ponder the frag-mented identities of young D o w
structures and industries, patterns of labour-capital
Germans with an immi-grant background and depart n lo
negotiations, strike frequencies and collective agreements
from nation-bound generational constructs to build a ade
on wages, job security, labour conditions, and work hours
more transnational generational concept of the ‘global d fr
(Streeck, 1992; Soskice, 1993). Globalization operates to generation’. o m
disperse and fragment these national structures, and via the
The contribution by Gereffi is a strong representa- h ttp
threat of compe-tition, pose increased demands and
tion of the economic approach within this field of ://es
flexibility on the domestic labour force (Beck and Beck-
research and highlights the experiences of the emerg- r. o Gernsheim, 2009).
ing economies of China and Mexico. Although both x fo rd
countries engaged in export-oriented development jou Diverse approaches to
strategies in response to globalization, they experienced rn al
very different outcomes. Mexico took on the ultimate s
‘Globalization and Inequality’ .o
neo-liberal globalization model, characterized by FDI, rg/
privatization and financial openness. This was in con- at C
The papers in this special issue are intentionally diverse
trast to China who even in the light of high levels of o rn
and provocative, covering disparate theoretical and
foreign capital inflows and exports, still managed to ell
empirical approaches towards the topic of globaliza-
maintain a strong state-level approach. Gereffi con- U n i
tion, and inequality in addition to coverage in different
cludes by reflecting on why China has been so suc- v er s
areas of world. We start with the extreme example of
cessful in the U.S. market in comparison to Mexico, ity
the within-country inequality of the U.S. (Massey) and
which he largely attributes to supply-chain cities. L ib
then move to a discussion of intergenerational or age- rar
The final article by Buchholz and colleagues y
based inequality in Germany (Beck and Beck-
examines the impact of globalization on life course and on
Gernsheim). The focus then shifts to between country
employment careers inequalities across industria-lized D ecem
levels of inequality and diverse interpretations of
societies. It summarizes the results of a large research
globalization in Mexico and China (Gereffi). We then project (GLOBALIFE: Life Courses in the b er
conclude with an overarching paper that explores both
Globalization Process) that used micro-level panel and 1 5 ,
within and between-country inequality across the life
retrospective survey data across a variety of countries to 2 0 1
course of individuals in a variety of modern societies
examine inequalities across all phases of the life course. 4
(Buchholz et al., 2009).
They found that more highly-skilled mid-career men
The seminal contribution by Massey addresses the
were the most protected groups from the forces of
resurgence of income inequality in the United States. In
globalization, with young adults being the most
this study of arguably one of the most unequal societies
‘exposed’ and thus encountering the most difficulties.
in the world, Massey demonstrates how globalization
They conclude that globalization does not reduce, but
has resulted in extreme within-country inequality. He
rather strengthens existing social inequality struc-tures,
positions these key differences in relation to the unique which remains highly controlled by national
institutional filter within this country that exposes
institutional structures of social inequality.
individuals at the bottom of the socioeconomic
This brief review of globalization and inequality
hierarchy more overtly to globalization. Massey traces
demonstrated the importance of understanding the oper-
this inequality to America’s legacy of racism, where the
ationalization of concepts, choice of data, population-
political system aids the already wealthy to further
weighted or unweighted analyses, and the method of enhance their position.
income calibration in interpreting the seemingly lOMoAR cPSD| 40799667 GLOBALIZATION AND INEQUALITY 7
contrasting results in this area of research. Via a conceptual
modern societies. European Sociological Review,
model, this article also highlighted the potentially 25, in press.
divergent inequality outcomes in industrial versus
Burtless, G. (1995). International trade and the rise in developing economies that emerge because of earnings inequality. Journal of Economic globalization. Although globalization remains an
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