Causes and consequences of inequality between countries

Abstract

This paper examines the persistent inequality between countries, arguing that it stems from deeply rooted historical and structural factors that reinforce each other. Drawing on the Nobel Prize-winning research of Acemoglu, Johnson, and Robinson, the analysis shows how colonial powers created extractive institutions in regions with high mortality rates, leading to long-term poverty and weak governance, while more inclusive systems emerged elsewhere. These initial differences, reinforced by path dependence, continue to shape modern economic and political outcomes. The paper further explores how contemporary global systems, including unequal power in the IMF and World Bank, unfair trade rules, sovereign debt burdens, and technology gaps, reproduce and worsen inter-country inequality. Consequences include democratic erosion, political instability, brain drain, and intergenerational poverty traps. While policy responses such as institutional reform, debt relief, trade adjustments, and reparations are discussed, their implementation faces significant political obstacles. The paper concludes that without major shifts in global power and resource sharing, the gap between rich and poor nations is likely to persist or even widen.