Lesson Two - Social Inequality in Canada

2.3 Global Stratification and Inequality

(a) A family lives in this grass hut in Ethiopia. (b) Another family lives in a single-wide trailer in the trailer park in the United States. Both families are considered poor or lower class. With such differences in global stratification, what constitutes poverty? (Photo (a) courtesy of Canned Muffins/Flickr; photo (b) courtesy of Herb Neufeld/Flickr)

Global stratification compares the wealth, economic stability, status, and power of countries across the world. Global stratification highlights worldwide patterns of social inequality.

In the early years of civilization, hunter-gatherer and agrarian societies lived off the Earth, rarely interacting with other societies. When explorers began travelling, societies began trading goods as well as ideas and customs.

In the 19th century, the Industrial Revolution created unprecedented wealth in Western Europe and North America. Due to mechanical inventions and new means of production, people began working in factories — not only men, but women and children as well. By the late 19th and early 20th centuries, industrial technology had gradually raised the standard of living for many people in the United States and Europe.

The Industrial Revolution also saw the rise of vast inequalities between countries that were industrialized and those that were not. As some nations embraced technology and saw increased wealth and goods, others maintained their ways; as the gap widened, the nonindustrialized nations fell further behind. Some social researchers, such as Walt Rostow (1916-2003), suggest that the disparity also resulted from power differences. Applying a critical sociological perspective, he asserts that industrializing nations took advantage of the resources of traditional nations. As industrialized nations became rich, other nations became poor (Rostow, 1960).

Sociologists studying global stratification analyze economic comparisons between nations. Income, purchasing power, and wealth are used to calculate global stratification. Global stratification also compares the quality of life that a country’s population can have.

Poverty levels have been shown to vary greatly. The poor in wealthy countries like Canada or Europe are much better off than the poor in less-industrialized countries such as Mali or India. In 2002 the United Nations implemented the Millennium Project, an attempt to cut poverty worldwide by the year 2015. To reach the project’s goal, planners in 2006 estimated that industrialized nations must set aside 0.7 percent of their gross national income — the total value of the nation’s goods and services, plus or minus income received from and sent to other nations — to aid in developing countries (Landler & Sanger, 2009; Millennium Project, 2006). The project was successful in reaching its target of cutting extreme poverty by half — the number of people living on $1.25/day or less — but fell slightly short of halving the number of people suffering from hunger. Undernourishment in developing regions fell from 23.3% to 12.9% (United Nations, 2015).

Neoliberalism and Globalization

Luxury vacation resorts can contribute to a poorer country’s economy. This one, in Jamaica, attracts middle and upper-middle class people from wealthier nations. The resort is a source of income and provides jobs for local people. Just outside its borders, however, are poverty-stricken neighbourhoods. (Photo courtesy of gailf548/Flickr)

As we have seen earlier in this chapter, the growing inequality in Canada can be seen as a product in a shift in government policy from a welfare state model of redistribution of resources to a neoliberal model of free market distribution of resources. This transition does not take place in a vacuum, however. Just as global capitalism is an economic system characterized by constant change, so too is the relationship between global capitalism and national state policy. Throughout the 19th and first half of the 20th century, the role of the state in the wealthy Northern countries was typically limited to providing the legal mechanisms and enforcement to protect private property. Capitalism itself was for the most part regulated by competition until stock market crash of 1929 and the Great Depression of the 1930s. From then on, an awareness grew that the capacity for producing commodities had far exceeded the ability of people to buy them (Harvey, 1989). The economic model of Fordism, adopted in the wealthy Northern countries, offered a solution to the crisis by creating a system of intensive mass production (maximum use of machinery and minute divisions of labour), cheap products, high wages, and mass consumption. This system required a disciplined work force and labour peace, however, which is one reason why states began to take a different role in the economy.

The post-World War II labour-management compromise or “accord” involved the recognition and institutionalization of labour unions, the mediation of the state in capital/labour disputes, the use of taxes and Keynesian economic policy to address economic recessions, and the gradual roll out of social safety net provisions. This set of policies collectively became known as the welfare state. In a high wage/high consumption economy, the ability of individuals to continue to consume even when misfortune struck was paramount, so unemployment insurance, pensions, health care, and disability provisions were important components of the new accord. The accord also reaffirmed the rights of private property or capital to introduce new technology, to reorganize production as they saw fit, and to invest wherever they pleased. Therefore, it was not a system of economic democracy or socialism. Nevertheless, the claims of full employment, continued prosperity, and the creation of a “just society” appeared plausible within the confines of the capitalist economic system.

Pierre Trudeau (shown here in a photo from 1975) was elected leader of the Liberal Party at the 1968 convention ― “Canada must be a just society” (Image courtesy of Wikimedia Commons)

When Fordism and the welfare state system began to break down in the late 1960s and early 1970s, the relationship between the state and the economy began to change again. In step with the development of the post-Fordist economy of lean production, precarious employment, and niche market consumption, the state began to withdraw from its guarantee of providing universal social services and social security. Neoliberalism is the term used to define the new rationality of government, which abandons the interventionist model of the welfare state to emphasize the use of “free market” mechanisms to regulate society.

Thus, neoliberalism is a set of policies in which the state reduces its role in providing public services, regulating industry, redistributing wealth, and protecting “the commons” — i.e., the collective property that exists for everyone to share (the environment, public and community facilities, airwaves, etc.). These policies are promoted by advocates as ways of addressing the “inefficiency of big government,” the “burden on the taxpayer,” the “need to cut red tape,” and the “culture of entitlement and welfare dependency.” In the place of “big” government, the virtues of the competitive marketplace are extolled. The market is said to promote more efficiency, lower costs, pragmatic decision making, non-favouritism, and a disciplined work ethic, etc.

Of course the facts often tell a different story. For example, government-funded health care in Canada costs far less per person than private health care in the United States (OECD, 2015). A country like Norway, which has a much higher rate of taxation than Canada, also has much lower unemployment, lower income inequality, lower inflation, better public services, a higher standard of living, and yet nevertheless has a globally competitive corporate sector with substantial state ownership and control (especially in the areas of oil and gas production, which is 80% owned by the Norwegian state) (Campbell, 2013). The policies of deregulation that caused the financial crisis of 2008, led even Alan Greenspan (b. 1926) the neoliberal economist and former Chairman of the United States Federal Reserve, to acknowledge that the model of free market “rationality” was flawed (CBC News, 2013). Since the financial crisis was a product of Greenspan’s tenure at the Federal Reserve, and a result of the neoliberal policy of tax cuts and market deregulation that he advocated, his acknowledgment of the failure of free market rationality is significant.

As we noted earlier in this chapter, while the policies of government within the capitalist state have been changing, they are not occurring in a vacuum; rather, they are unfolding in the context of the developments of global capitalism. From its origins, capitalism has been global in scope. Marx and Engels described globalization in 1848:

The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilized nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. (Marx & Engels, 1848/1977, p. 224)

The process of globalization intensified after World War II, and especially in the late 20th century with the introduction of new technologies that enabled vast volumes of capital and goods to circulate globally. The globalization of investment and production means that capital is increasingly able to shift production around the world to where labour costs are cheapest and profit greatest. In fact, as Ulrich Beck (1944-2015) put it, the effect of globalization has been to “conjure away distance” on a variety of different levels (2000, p. 20). He has argued that political actors no longer:

live and act in the self-enclosed spaces of national states and their respective national societies. Globalization means that borders become markedly less relevant to everyday behaviour in the various dimensions of economics, information, ecology, technology, cross-cultural conflict and civil society. (2000, p. 20)

The terrain on which corporate, political, environmental, and other types of decisions are made is no longer confined to the boundaries of the state, which diminishes the ability of national governments to independently control economic and foreign policy. Thus, globalization represents a weakening of the autonomy and power of states. Neoliberalism is not only an internal domestic response to the economic crises and fall in the rates of profit, which began in the late 1960s, but also is a response to the ever more competitive global market for capital. Neoliberal policy is presented as a way to attract increasingly fickle global capital by making entire countries more “competitive.” The result, as David Harvey (b. 1935) forcefully argues, has been to massively shift the balance of power to the economic elites of the global capitalist class (2005, pp. 16–19). As a result wealth has also been redistributed upwards.

The Man from U.N.C.L.E. (United Network Command for Law and Enforcement) was a 1960s TV show based on the idea of a secret world organization dedicated to policing the entire globe (Image courtesy of James Vaughan/Flickr)

The changing configuration of global capitalism and politics has been described by some as the reemergence of empire (Hardt & Negri, 2000). Rather than a sovereign state system of unique and independent nation-states, in many ways the global order is better described today as a single unit within which state sovereignty has been transferred to a higher entity (Negri, 2004, p. 59). Numerous trade agreements have harmonized economies and removed borders that restrict the flow of capital and goods, and in recent decades frequent global “police actions” and trade embargoes have been enacted by various “coalitions of the willing” to enforce peace or intervene in domestic policy (in, for example, Iraq, Yugoslavia, Somalia, Afghanistan, Iran, Libya, and Syria, etc.). Similarly, the Kyoto Protocol on climate change or the Ottawa Treaty on landmines are examples of global initiatives that blur the boundaries of nation states. Empire in this sense refers to a new supra-national, global form of sovereignty whose “territory” is the entire globe. Antonio Negri (b. 1933) makes the point that this is not the same as saying that the world is dominated and controlled by the United States; rather, power is exercised through a “network” of dominant nation-states, supranational institutions (e.g., the UN, IMF, WTO, G8, NATO, etc.) and major capitalist corporations (Hardt & Negri, 2000; Negri, 2004). Empire, rather than being a form of imperialism like that which dominated in the era of colonialism, is a new political form that has emerged in response to the dynamics of global capitalism.