Some of the richest countries in the Northern economies such as United States and Britain have per capita incomes that are 20 times higher than their Southern counterparts such as South Asia and Sub-Saharan Africa. Globalization has led to economic growth, higher employment rates, increased wages and market competitiveness between the Northern and Southern Economies ( Krugman, 1979). However, the gap in per capita incomes between the global north and the global south still remains huge.
The Northern economies have been considered to be highly innovative due to economic policies that protect highly imaginative employees and investors who are able to identify business opportunities that lead to a higher earning potential. For example; copyrights, patents and Intellectual property rights have led to the advances in sciences that have led to the protected inventions. The people who own such protected knowledge have been able to generate income through royalties paid by foreign companies. This has created a capitalist economy that has favored the industrialization of innovative manufacturing companies based in the Global North.
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One explanation for the higher per capita income witnesses in the Northern economies can be attributed to the level of skilled workforce found in the Northern economies. Although the migrants from the Southern countries are often more productive than their Northern counterparts, the income ratio of employees working in the Global North is significantly higher compared to the ones in Southern economies. For example, the migrants who come from the Southern countries into countries such as the United States often earn 55% higher than what they earn in their home countries ( Olson, 1996). However, the Northern economies value the highly specialized skills and technologies that enhance the production process. This has led to a higher earning potential for the Northern based employees.
The Northern economies that have a higher population density such as Singapore that has 4,185 people per square meter are able to generate a higher per capita income that is 10 times larger than the Poorer Southern counterparts. For example, countries like Japan, China or Zurich do not have rich deposits of minerals and precious stones compared to their population density. However, these rich Northern economies are more efficient at utilizing their scarce natural resources through superior technological inventions and production techniques which has led to the production of high value products and services which has created a high export potential to the global south.
I would not magically redistribute the world’s economies so that everyone received the same amount of income. The idea of an equal per capita income for everyone will force the more innovative Global North to continue working smart in order to regain their competitive advantage against their Southern counterparts. I would however recommend that the Global South should utilize more innovative technologies, skills, policies and resources in order to improve their production processes. This would lead to a rapid economic growth of the Southern economies, a reduced trade monopoly and wage differences between the Northern and the Southern economies.
References
Krugman, P. (1979). A model of innovation, technology transfer, and the world distribution of income. Journal of political economy , 87 (2), 253-266.
Olson, M. (1996). Distinguished lecture on economics in government: big bills left on the
sidewalk: why some nations are rich, and others poor. Journal of economic perspectives , 10 (2), 3-24.
