Knowledge and Global Inequality

This paper seeks to explain the nature and basis of inter-country income inequality in the contemporary global capitalist economy. It characterises the current structure of the world economy as a combination of knowledge monopolies, which also become monopsonies, largely located in the headquarter economies of the global North, with producer companies largely based on commoditised knowledge in the supplier economies of the global South.

Thanks to Raphie Kaplinksy, Arjun Appadurai, Nitin Desai, Rehman Sobhan, Will Milberg, and John Pickles for their comments, questions, and encouragement. Thanks also to students, including Hunter Thomas of Bucknell University, who asked pointed questions on early presentations of this analysis. As always, remain indebted to Govind Kelkar.

Global inequality can be looked at in a number of ways. This paper looks at the difference in per capita gross domestic product (GDP) between countries as the measure of inequality. We try to explain this through the manner in which the knowledge of production, or technological knowledge, has been created and used in the global capitalist world from about the 1970s till now, that is, in the age of global value chains (GVCs).

The current structure of the world economy is a combination of knowledge monopolies, usually protected by intellectual property rights (IPRs), which also become monopsonies, headquartered largely in the global North (which we will also refer to as headquarter economies) and producer companies, using the commoditised knowledge of production, largely based in the global South (which we will also refer to as supplier or contract manufacturing economies). This structure produces a hierarchy of profit rates. This hierarchy of profit rates, along with the distribution of knowledge between monopolised and commoditised production segments, both recreate the very unequal distribution of income from globalised production in GVCs and make it difficult for countries to overcome the existing distribution of labour and income within GVCs. This results in the geographic difference between the knowledge-protected lead firms in headquarter economies and the firms with commoditised knowledge in supplier countries.