Contemporary World:

Topic 3 The Distribution of Wealth

Intro & Background
Unit A: Historical Perspective
Unit B: Geographical Perspective
Unit C: Economic Dimension
Unit D: Political Dimension

1
2
 Intro & Background
● Disparities in World Wealth
Northern Hemisphere Nations Southern Hemisphere Nations

tend to be wealthy tend to have acceptable standard of

living for majority of population, have a
higher disparity between rich & poor,
higher percentage of poor
Widening gap between rich & poor, even in wealthiest nations since WWII
● Wealth: ______________________________________________________
______________________________________________________________
____________________________________________________________

● Wealth also influenced by natural resources & their exploitation, production of

goods, consumption & State ideology
● Wealth is commonly measured by GDP (Gross Domestic Product)
○ takes into account production, distribution & consumption of goods & services 3
Wealth Disparity in the US

4
● Global Distribution of Wealth
○ UN Member states pledged to reduce poverty by 2015
■ Creation of G20 & Fair Trade initiatives
■ Millennium Development Goal #1
■ Sustainable Development Goal #10

○ Anti-Globalists or Alterglobalists, argue that wealthy countries create

international organizations that are more concerned with their own interests
■ World Bank & International Monetary Fund (IMF)

5
6
● Differing opinions on reducing poverty & Global distribution of wealth:
○ Economic Liberalism (Neo-Conservatism) → Individualism
(Right-Wing economic ideology)
■ Leaving as much room as possible for individual initiative
■ Creating greater wealth can be applied to _________________
● By creating more wealth, a society can use part of this wealth to
finance public infrastructure and social programs
○ Interventionism → State’s intervention (Left-Wing ideology)
■ State should control Economic Development to ensure it is equitable
■ Economic development is generally inequitable, thus must be controlled

7
 Two opposing ideologies reducing world poverty

Left wing Right wing

State should redistribute vs Room for individual freedom
the wealth that is produced . must be maximized

Left wing Right wing

1. Encourage unrestricted free-trade between countries to increase the

exports of the most competitive industries

2. Encourage governments to financially support the country’s less

competitive businesses to prevent job loss

3. Ensure universal health care and education through taxation

4. Adopt international labor standards and encourage all countries to

enforce them

5. Reduce binding corporate rules to help businesses establish operations

in other countries where they can create jobs and wealth
8
 Borrowed from
Information is Beautiful
(2010)

9
With which ideology would this political cartoon be associated with?
What is the cartoon depicting about Wealth?
10
 Unit A: Historical Perspective
● 2 Competing & Opposing economic views shaped the 20th Century:
○ Capitalism: Private Enterprise, Individualism
& Pursuit of Profit
○ Socialism: Based on Equality, Collective Good
& Means of Production
● Evolution of Economics to Capitalism
○ 6th-16th Centuries AD → Feudalism
○ 17th-19th Centuries AD → Mercantilism
■ Mercantilism gave rise to Colonialism
■ 16th-19th Centuries AD → Colonialism
● Colonialism exploit natural & human resources
● Mother Countries did not develop infrastructure
of Colonies & only benefited from the wealth
11
 Capitalism
● Mercantilism → Capitalism
○ Capital = wealth (money, assets, etc.)
○ Leads to development of Capitalists
Bourgeoisie
● Capitalism: economic system based on
investment of capital, private enterprise, profit
○ Intersection of banking, entrepreneurs &
private investors → Risk Takers
○ Economic Liberalism → limited state
intervention
● Mid-19th-20th Centuries Industrial Revolution
→ further develops Capitalist Philosophy

12
● In Capitalism, workers receive a ________
in exchange for their labour
○ Owners & Investors own the means
(mechanisms) of production
○ Workers sell their labour for salary

● In Capitalism, profits are _____________

amongst owners & Investors
○ Profit as a reward for risking capital
○ Dangers?

● In Capitalism, decisions based on

ownership
○ % owned = % of decision making
○ Ex. Stock market
13
 Capitalist Schools of Thought: Economic Liberalism vs Interventionism
● 2 Competing Capitalist schools of thought:
1) Keynes & Interventionism:
● British Economist John Maynard
Keynes
● Capitalism through better distribution
of wealth → collection of taxes
● State intervention in economy during
cycles of expansion & recession
2) Friedman & Economic Liberalism
● American Economist Milton Friedman
● Free Market system with minimal
state intervention
● Market Forces (Law of Supply &
Demand) → regulates economy
● Individual profit seeking 14
 Socialism
● Mid-19th - 20th centuries Industrial Revolution social &
economic conditions gave rise to Socialism
○ Reaction to excessive Capitalism
○ State controls the “Means of Production” →
“Redistribution of Wealth” to create ________________
○ Collective Good over individual wealth & profit
○ Private Enterprise is replaced by Nationalization
(______________________________________)
● Karl Marx
○ German political & economic philosopher
■ Militant Socialism → Marxism, leads to Communism
○ “Communist Manifesto” (with F. Engels) & “Das Kapital”
■ Economic view of history
■ Class Struggle (Proletariat (Laborers) vs. Capitalists
(Bourgeoisie))
● Proletariat revolution → Communism 15
16
17
 The Cold War 1945 - 1991
Capitalist & Democratic West led by USA vs. Communist & Authoritarian East led by USSR

● 1917 Russia becomes first Communist

country
○ 1922 Russia becomes Union of Socialist
Soviet Republics (USSR)
● 1949 China → Communist Revolution
Successful = China Communist State
● Communist States become Totalitarian States

● 1991 USSR collapses due to economic,

social, nationalist & political tensions
○ “Gorbachev Reforms”
■ Perestroika (openness)
& Glasnost (reform)
● China has adopted ___________ tendencies
● Few Communist States today: North Korea,
Vietnam, Laos & Cuba
18
 Decolonization & Nationalization
● 18th-19th centuries: Beginning of colonial
independence from Imperial Nations
○ Examples:
■ 1776 USA (from ____________)
■ 1804 Haiti (from ____________)
■ 1810 Mexico (from ____________)
■ 1822 Brazil (from ____________)
● Post-World War I European Powers weakened
○ Britain grants Dominions such as Canada & Australia control of foreign
affairs → 1931 Statute of Westminster
○ 1919 Egypt Independent
● 1945 Beginning of rapid Decolonization mostly in Africa, Asia & South America
○ World War II → Weakens European Colonial Powers of France, Britain, etc.
○ USA advocate independence & self-determination of all peoples
■ 1945 Creation of the United Nations 19
Decolonization in Africa & Asia post World War II
20
● Decolonization in Africa after 1945
● Problems led to economic, social &
political issues
○ Former Mother Countries define
borders
■ Based on economics
■ Ethnic separation
○ Ethnic Conflicts
○ Political Nepotism & Corruption
■ Economic Collusion with
former Colonizers
○ Economic dependence on Mother
Country
■ Massive Debt

21
● Nationalization of Resources
○ Post-independence former
colonies nationalize resources
to prevent foreign control and/or
the benefit of a select few
■ Ex. Suez Canal in Egypt

○ Decolonized often lacked the technical & capital abilities → develop

partnerships with foreign countries

22
 Unit B: Geographical Perspective (Wealth Distribution)
● Developing - Emerging - Developed nations
● What does being ‘wealthy’ mean?

● How do we know a nation is wealthy?

○ Monetary Wealth?
■ Economic indicator (GDP)
○ Overall well-being (Quality of life)?
■ Social indicator (HDI)
○ Human capital?
■ Workforce indicator (Share of the population in professional/trained
workforce)

● How do we know this wealth is distributed well?

■ Equality indicator (GINI Coefficient) 23
Gross Domestic Product (GDP)
● Gross Domestic Product (GDP)
= value of all goods and services
produced within a country’s
borders in a year.
○ Consumption + Investment
+ Government Spending +
(Exports - Imports)

● A nation’s GDP divided by its

total population = GDP per
capita
○ Avg wealth by person

● Cons: Doesn’t depict how wealth

is distributed within a country 24
Human Development Index
● Human Development Index (HDI) examines
Social & Economic Indicators of Quality of Life
○ Health
■ Measured by Life Expectancy
● Takes into account the access to
Healthcare, Lodging. Drinking
Water & Healthy Food, Hygiene
○ Income
■ Measured by GNI per capita
○ Education
■ Measured by Mean Years of Schooling
& Expected Years of Schooling

● HDI varies from 0 (Worst) - 1 (Best)

25
 Training: Workforce
● Highly Educated & Highly Trained
Workforce -> Increases the wealth of
a nation
○ Knowledge-based jobs
○ Transform natural products into
finished products
○ Innovation & Ingenuity

● Wealthier Countries invest into

Education, Research &
Development of these skilled
workforce
○ Skilled workers produce more
Wealth than Unskilled Workers
■ Remember brain drain? 26
 Distribution of Wealth within a Country
● Unequal distribution of wealth is not only
a Global phenomenon, but also effects
countries internally
○ Increasing gap between wealthiest &
poorest in developed nations since
1980s
● Gini Coefficient: Degree of income
inequality amongst country’s inhabitants
○ Ranges from 0 (complete income
quality) & 1 (complete income
inequality)
○ Gini Coefficient works best when
compared to GDP per Capita & HDI
○ National inequality can vary
Geographically (Italy) or Racially
(South Africa)
27
Unit D: Political Perspective (Distribution of Wealth)
● How can wealthy countries
help poor countries?
● Sept. 2000 United Nations
meeting, heads of states
adopted Millennium
Declaration
○ Eradicate Global
poverty & Social
injustice
○ By 2015 to decrease by
½ the amount of people
making less than $1 a
day, suffer from hunger
& don’t have access to
safe/clean drinking
water
○ Led to the 8 UN
Millenium Goals

28
29
Developed Nations Assistance to Developing Nations
● Governments of Developed Nations commit 0.7% of their GDP
to development assistance for Developing Nations

● 5 main sectors of Government Assistance to Emerging or Developing Nations:

1. Financial Assistance: Loans, grants or forgiveness of debt

2. Material Assistance: Sale or donation of equipment
3. Technical Assistance: Sending Professionals (doctors, engineers, teachers, etc)
4. Commercial Assistance: Buying products at a fair price.
5. Environmental Assistance: Helping acquie clean technologies
● CIDA: Canadian International Development Agency
founded in 1968, provides aid with regards to humanitarian needs, education, health,
gender equality & environment 30
Canada’s Development Assistance 2015 - 2016 31
Top 15 Recipients of Canadian
32
 Reducing Burden of External Debt
● Developed Nations’ movement to reduce or abolish debt of Developing countries
○ Debts often incurred for purposes other than Development
○ Africa most indebted according to World Bank (2006)
■ Uganda debt = 71% of GDP
■ Tanzania = 69% of GDP
■ Kenya = 42% of GDP
● Self-Serving Aid: Aid that is tied-in to political support or commerce

● Arguments For & Against cancellation of excessive debt of Developing

Nations?
○ For?
○ Against?

33
34
 Aid from International Organizations
● UN: Only international organization in which developing nations have a vote
& can communicate their needs
○ Several UN organizations that work to reduce Poverty
■ UNICEF
■ UNDP
■ WHO
● Non-Governmental Organizations (NGOs): public interest organizations not linked to
any government or international organizations.
○ Range from environmentalism to human rights
○ ex. OXFAM
■ Independent & don’t take national interests into account
■ Based on Principles of aid, development, social justice & ethical values
■ Hard to get financing & influence policy-makers
■ Have consultant status on limited UN councils 35
 Other Forms of Economic Aid
● Aid From Multinationals
○ Donate to local charities & organizations
○ Open business operations in developing nations -> create jobs
■ Quality of jobs & pay may not be of great quality
● Philanthropy
○ Wealthy individuals that donate money and time to
address major problems in developing nations
○ Ex. In 2000, Bill Gates donated 95% of his wealth
to issues of health & education in developing world
● Artists & Distribution of Wealth
○ Various artists & celebrities raise money & performances
for charity & economic aid

36
Unit C: Economic Perspective (Distribution of Wealth)
● Capitalist Economies: More Goods & Services produces -> Greater amount of Wealth
= Higher ___________
○ Producing Goods requires:
■ Natural Resources
■ Energy (High Consumption)
■ Technical Expertise
■ Capital Investment ($)
○ Producing Services requires:
■ Skilled Workforce
■ Capital Investment ($)

● Unequal Distribution of World’s Wealth -> Inequalities in Global availability of Natural

Resources, Access to Energy, Level of Education, Concentration of Capital ($)

37
Natural Resources, Resource Development & Access to Capital ($)
● Nation’s Wealth is determined by their ability to develop ____________ into
________________ for consumption
○ Least Developed Nations have Natural Resources, but often lack Capital ($).
Expertise, Technology
○ Developed Nations may lack abundant Natural Resources, but have Capital ($),
Expertise & Technology
■ Technologically Advanced -> High Value Added Products
○ Emerging Nations utilize large National Corporations to develop Natural
Resources & Finished Products of Low Added Value

● A Nation’s Energy Resources need production facilities to be developed

○ Developed & Emerging Nations need Energy for production
○ Petroleum, Natural Gas, Uranium, Electricity 38
 International Trade
● Contemporary Economy = Economic Neo-Liberalism and Globalization Policies
○ Act under the policy of ________________: Limited state regulations (policies,
laws) & economy is regulated by the Market’s Supply & Demand
○ Free Trade exists in many countries
■ Trade policy that does not restrict imports or exports
■ A country can not be an ____________ (100% self-sufficient, no foreign-trade)
○ International Trade regulated by regional trade Treaties
■ NAFTA
■ EU
■ APEC
■ WTO
● World Trade Organization (WTO): organization of Nations
○ Free Trade, Reduce Barriers to Global Trade
○ Settle Trade Disputes -> Judicial Body
39
● Fair Trade: Movement in Developed Nations to purchase products directly from producers in
Developing Nations
○ More Money to Producers
○ Eliminates 3rd party Multinational Corporations
○ Improve production & Working conditions in poorer nations
○ Social Justice & challenges North-South trade relations
■ 2006, Fair Trade = $2 Billion dollars
■ 1.5 million underprivileged workers (80% of these workers are women)

● Protectionism: Countries take protectionist measure to stimulate their economies, protect their
markets and/or protect producers & workers from foreign competition
○ Taxes on foreign products & duties
○ Subsidies on local products (ex. Farming, Quebec & Canada Subsidies to Bombardier)

● 2008 - 2009 Economic Crisis

○ Decrease spending of Developed Nations
○ Demands from Developed Nations of products from Emerging & Less developed Nations
drops -> _______________ poorer nations
40
Fair Trade Benefits 41
42
 Large Economic Blocs
● Close economic relations between countries inspire nations to group together to form
Economic Blocs to foster economic development
○ Based on Interests and Geography

● Example of an Economic Blocs

○ G8 (Group of 8): comprised of the most economically,
politically & militarily advanced nations
■ Members: Germany, France, UK, Canada,
USA, Japan, Italy, Russia (suspended) &
EU (Non Enumerated)
■ 13% of World Population, but have 57.8% of Global GDP
■ Meet once a year
○ Emerging Nations have resulted in creation of G20

43