Global north-south income gap has grown since 1960, study says

The global north-south income gap has widened by 170% to 270% since 1960, according to a study by economists at the Institute of Environmental Science and Technology of the Autonomous University of Barcelona. The finding challenges the argument that poorer countries are broadly catching up with rich economies through capitalist growth, the authors say.

The study, by Jason Hickel and Dylan Sullivan, was published in New Political Economy under the title “The myth of catch-up development: trends in core-periphery inequality from 1960 to 2023.” ICTA-UAB said the research uses complete annual data for 173 countries, covering 99.9% of the world’s population.

In the study’s terms, the global north refers to advanced “core” economies, while the global south refers to developing “peripheral” economies. The authors frame the gap as a core-periphery divide in the world economy rather than a temporary stage of development.

How much has the global north-south income gap grown?

Hickel and Sullivan report that, depending on the currency conversion method used, core economies captured four to 10 times more income growth than peripheral economies from 1960 to 2023. They also find that the periphery’s income relative to the core rose by no more than 3 percentage points over that period.

The authors say China accounts for the limited relative improvement that did occur. Excluding China, the peripheral group’s relative position worsened, according to the study.

China is described by the researchers as an exception. The study says China is the only peripheral region to have made a meaningful relative gain, although its GDP per capita remains 22% to 38% of the core level.

What happened during the neoliberal era?

The study identifies the 1980s and 1990s as a period when core-periphery inequality intensified. The authors connect that period to market liberalization and structural adjustment programs imposed by the International Monetary Fund and the World Bank.

ICTA-UAB summarized four prolonged contractions in peripheral regions during that period:

• Latin America’s income fell 7% and returned to its previous level after 13 years.
• The Middle East and North Africa recorded a 25% decline and a 25-year recovery.
• Eastern Europe and Central Asia saw income drop 36%, followed by a 17-year recovery.
• Sub-Saharan Africa’s income fell 23% and took 36 years to recover.

By comparison, the authors say the Great Recession reduced income in the core by 4%, with the region recovering its pre-crisis income level within six years. Hickel and Sullivan write that the peripheral recessions tied to the rise of neoliberalism were, on average, six times deeper and lasted four times longer.

Why do the authors say catch-up is limited?

The study says the core has become a more exclusive group, even though some states have been reclassified as advanced economies by the IMF since 1980. ICTA-UAB said 18 relatively small states, including South Korea, Taiwan, Greece, Portugal and several Eastern European countries, moved into that category.

Hickel, an ICREA professor at ICTA-UAB, said those cases were concentrated in Southern Europe, East Asia and on the eastern border of the European Union. He argued their integration reflected U.S. geopolitical strategy during and after the Cold War.

The study says South Korea received more U.S. aid between 1953 and 1961 than the World Bank lent to all independent Third World countries combined. It also says Israel has received about $310 billion in U.S. economic and military aid since 1946, measured in constant 2022 dollars.

Sullivan, a Ph.D. candidate at ICTA-UAB and Macquarie University, said the conventional account that poor countries are merely behind richer ones is wrong. He argued that development in the global south would require less dependence on the “imperial core,” stronger sovereign industrial capacity, more South-South trade and reduced reliance on core currencies.

This story draws on original reporting from Phys.org.