Financialization, Crises and the Changes in the Global Income Inequality, 1820-2010

This paper discusses the global income inequality and stratification of the world economy from 1820 to 2012 with a focus on the transformations that take place during periods of financialization and hegemonic transitions. We argue that in periods of financial expansion and hegemonic transitions, intensification of economic crises, inter-state competition and emergence of new developmental strategies transform existing structures of world-income hierarchy.  Hence, historical development of world income hierarchy and between-income inequalities cannot be explained merely by the orthodox interpretations of the modernization, dependency and world-systems theories. Through a combination of quantitative and historical-comparative analysis, we discuss the continuities and ruptures observed in patterns of global income inequality in reference to existing theoretical frameworks provided by modernization, dependency and world-systems theories. Our analysis suggests that (1) global income inequality moved from a bimodal to trimodal distribution during the British-led financial expansion period and (2) this tri-modal distribution has been going through another transformation in the contemporary era of financialization. By analyzing the transformation of the global income inequality from 1820 to 2012, changes in the position of individual states/regions within global income hierarchy across time, and conducting a historical-comparative analysis of both periods of financialization, we discuss the prospects and limits of the existing theoretical-conceptual frameworks.  Our analysis (1) highlights the transformative role of systemic crises, inter-state rivalries and emergence of alternative “developmental” patterns during periods of financialization and hegemonic crisis, and (2) calls for a new conceptual theoretical framework for explaining dynamics of global income inequality which pays equal attention to continuities and ruptures.