International Trade Theory and Policy
by Steven M. Suranovic

Trade 125-4

Distributional Fairness

There is a widespread belief that people, be they white, black, Christian, Muslim, male, female, American or European, are inherently equal.  However, the economic and social circumstances among people is clearly not very equal. Some people are wealthy; many are not. Some are able to buy expensive jewelry, cars and homes; many others find it difficult to purchase enough food to feed their families. In a world of equals, people do not enjoy equal incomes, wealth or well-being.

To many people the unequal distribution of income, wealth and economic well-being in the world is unfair. People decry as unjust the fact that some people can fly away for a weekend vacation in the Caribbean, while others are begging for food on the streets of New York.  Many consider it inequitable that some countries enjoy an average standard of living that is many times greater that the average in other countries. What is even more distressing for some is that the disparities in income and wealth seem to be growing. The world’s rich are becoming richer and the poor are becoming, at least, relatively poorer.

Concerns about how wealth or income is distributed within a country or around the world will be referred to as distributional fairness. In its extreme form, distributional fairness implies egalitarianism; a complete equalization of income and wealth among peoples in the world.  Today, after failed attempts to impose more egalitarian socialist and communist regimes, most people are reluctant to advocate complete equality. However, there remains a strong sentiment that incomes and wealth should be more equally, rather than less equally, distributed.  Consequently, policies seen as increasing the disparities in income and wealth between peoples or countries are often judged to be unfair policies, while policies that reduce these inequalities are seen as fair.

In the debate over globalization, there is widespread concern that freer trade and the expansion of multinational firms throughout the world is making the rich richer and the poor poorer.  Globalization opponents often contrast the abysmally low wages of workers in less developed countries, and abject poverty, especially in Africa, with the high levels of compensation paid to CEOs and to sports stars for their endorsements.   They note that income inequality is widening throughout the world, as it is also in the US. They worry that the world is becoming increasingly divided between the “haves” and the “have nots” and that this might have dangerous implications for the future.  With respect to this concern, fairness in trade, or fair globalization would correspond to a narrowing of the income gaps between countries and between peoples.  Perhaps the rich would need to redistribute some of their wealth and income to the poor, or perhaps the poor would simply need to enjoy a greater percentage of the income gains that nations produce as their economies grow and expand. In either case, fairness means more equality in incomes and wealth.

International Trade Theory and Policy - Chapter 125-4: Last Updated on 8/2/01