Increasing Poverty in a Globalised World
Marshall Plans and Morgenthau Plans as Mechanisms of Polarisation of World Incomes
During the 1990s, a majority of the world's nations have experienced falling real wages—in many cases real wages have declined both rapidly and considerably. In some of the former communist countries a human crisis of large proportions is evolving. In most Latin American countries real wages peaked sometime in the late 1970s or early 1980s, and have fallen since then. In several African countries it is no longer possible to talk about a state as such; the problem of failed states is growing. Many institutions that used to be handled by the nation-state, like the educational systems, have broken down in these nations, and different areas of what used to be a nation are ruled over by different warlords.
This is a type of political structure that a few years ago was thought of as belonging to a medieval past. If there is something called progress and modernisation, globalisation has—particularly for many small and medium-size nations—brought with it the opposite: many are experiencing retrogression and primitivisation. Poverty and disease increase sharply in Sub-Saharan Africa, and we see a creeping Africanisation in parts of Latin America.
These events profoundly challenge the present world economic order and the standard textbook economics on which this order rests. This is because the increasingly globalised economy seems to produce opposite effects of what standard economic theory predicts. Instead of a convergence of world income (towards factor-price equalisation), we find that a group of rich nations show a tendency to converge, another convergence group of poor countries gathers at the bottom of the scale.
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