Canada is a wealthy nation in a world of increasing inequality.

Background

Absolute and relative poverty are measured in different ways. Often, a country's gross national product (GNP) is used to determine its standing relative to other countries. In 1990, in response to the inadequacy of using GNP as a measurement, the United Nations created the Human Development Index . It uses three measures to rank a country's level of development: health, education, and income.

Several different terms have been used to describe poor countries. The term ‘Third World', very popular in the past, is viewed by some as a derogatory descriptor. Other terms, like ‘developing countries' or ‘underdeveloped countries' are also widely used, but are sometimes criticized for their focus on development, as it is understood in the West (where it is closely connected to the idea of industrialization). This discussion guide will refer to poor countries as ‘the global south' in an attempt for a more neutral expression.

What causes global inequality?

The question of what causes global inequality is complex and controversial. This discussion guide summarizes the main arguments put forth by experts but please remember that there is considerable disagreement about which are the most important causes.

1. Negative legacies of colonialism

Those who single out colonialism as a key factor emphasize the negative consequences of European exploitation of their colonies' human labour and resources. While this contributed to increased wealth in what we now consider the developed world, the colonized countries in Africa, Central and South America, and Asia lost vital human and natural resources without gaining the benefits of a growing economy. When these colonies gained their independence, they entered the global market on an unequal footing with richer countries.

2. Debt

Many countries in the global south, having suffered the negative economic and political consequences of war and colonialism, turned to banks and governments in the developed world for loans. In many cases these loans were used to finance projects that did not contribute to alleviating poverty. The money was often squandered due to corruption and civil wars. Interest rates on loans quickly increased to unmanageable amounts and many countries in the global south were trapped in debt. Paying off this debt load consumes money that could be spent on social services, education and infrastructure.

3. Unequal trade

Most developed countries spend considerable public funds in subsidizing their agricultural sector, increasing the incomes of farmers to ensure profitability and subsidizing the market price of agricultural products. The countries of the Organization for Economic Cooperation and Development (OECD)  collectively spend $1 billion per day to subsidize their agricultural sectors.  Because poor countries are unable to match these subsides, it is very hard for them to compete. If agriculture in the developed world was not subsidized in this way, poor countries would have better prospects of gaining greater world market share for their agricultural goods. Instead, for many poor countries cheap labour becomes their principal comparative advantage. This means that labour laws must remain flexible and workers poorly paid in order for the country to have any ability to sell its goods in the global market.

Also, to protect domestic industries many developed countries charge extra fees on imports from the global south, or limit the amount of imports they will allow into the country. For instance, partly in order to ensure that there is still a clothing industry in the US, the US restricts the level of clothing imports from China. These sorts of restrictions also hinder poor countries from competing in the global market.

In 2001 the World Trade Organization (WTO) negotiations in Doha, Qatar established the Doha Development Agenda . This was an attempt to make it easier for poor countries to build their capacity to compete with richer countries in the global market. These were positive adjustments, but most observers still feel more change is necessary in order to make trade fair. With the suspension of negotiations in 2006, further advancements have been difficult.

4. Neoliberal Economic Policies

International institutions like the World Bank and IMF have also provided loans to the global south. These loans were granted with what was called ‘conditionality', meaning that in order to qualify for loans countries had to agree to certain economic arrangements. These arrangements, previously called Structural Adjustment Programs, usually required countries to remove restrictions to trade and to cut funding to public services such as education and health care. Some people argue that these programs actually made global inequality worse by limiting peoples' access to essential services, and by further disadvantaging countries in the global south compared to their developed counterparts, who are still able to control their trade.

5. Corruption and capital flight

Another set of arguments about global inequality focuses on the role of corruption. According to this view, countries in the global south are poor because corrupt and greedy leaders have stolen much of the wealth generated by these countries. Some estimates put the amount stolen by elites in Africa alone at $148 billion per year.  A related issue is capital flight - the trend for money to leave countries characterized by instability or safety concerns. This means that even wealth that is generated in poor countries may not stay there, but will be invested in developed countries that seem to pose less risk to investors. Moreover, where risks are high, foreign investors are likely to demand very high rates of return and to minimize their long-term investments in ‘host' countries.

6. Natural causes

Political and economic factors are not the only possible causes of inequality - environmental factors also play a significant role. One element of this is scarcity: many countries in the global south have inadequate water supply or arable land. In addition, poverty has contributed to forests being cut down, which has contributed significantly to water shortages and soil erosion. Moreover, it is projected that climate change will have considerable more serious ecological repercussions for the global south than for the north. This means that those countries that can least afford to deal with these environmental effects will be the worst affected.

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