Understanding Global Inequality and Underdevelopment
Inequality and Development
The most significant market failure impacting individuals is the increasing income inequality and persistent poverty. The State supports mechanisms to redistribute wealth and income within the country, such as establishing a progressive tax structure and a welfare state that provides certain services and goods for free to the majority of the population.
Global Inequalities
Inequalities exist within a state, which in most countries of the world have increased over recent years.
Disparities between countries are greater than those that occur within any single country.
The inequality between the richest and poorest countries is very large. Persistent poverty exists in much of the world, and global redistributive measures are not applied to improve the living conditions of the poorest people.
Underdevelopment
When traveling to a developing country, we recognize that it is poorer than our own and could be classified as underdeveloped, developing, or least developed.
Characteristics of the Poorest Countries
- Lower Income Per Capita: These countries have a very low per capita income.
- Strong Social Inequalities and Income Disparities: They often have significant internal disparities. The worst countries worldwide are predominantly in this group.
- Lower Productivity: Low technological levels, training deficiencies, inadequate nutrition, and poor health conditions are some of the factors behind this low productivity.
- Lower Life Expectancy: Many poor countries are severely affected by AIDS, which reduces life expectancy.
- High Rates of Unemployment and Underemployment: A large portion of the population is unemployed, and underemployment is common.
- Primary Sector Dominance: Most of the production in these countries comes from the primary sector.
- Strong Imbalances in Production Structure and Technology: These countries use the latest technology alongside obsolete craft techniques.
- External Dependence: Most of these countries are economically dependent on wealthier nations to maintain a minimum level of income.
- Limited Market: Imperfect information and market structure in these countries are very limited and deficient.
Causes of Underdevelopment
There are two main perspectives on the causes of underdevelopment:
- Those that place the responsibility of underdevelopment on the countries themselves, suggesting they cannot seize opportunities to improve.
- Those that believe external factors determine the disadvantaged living conditions in these countries.
Personal Responsibility
- Legal Security: For someone to start a business and increase a country’s production (e.g., employment generation), they need the certainty of being able to appropriate the money they make.
- Political and Physical Security: Investments require a guarantee that the environment is stable and that changes of government and riots will not threaten business stability to encourage people to invest in the medium and long term.