Inequality in Latin America

...Poverty entails, too, emotional pressures—for example, of fear and worry...

...The rich are numerous...

...But if the serious problem of inequality—and the poverty it begets—is to be redressed, then, yes, we need to look at the management of the economy and the state...

...Who works, where, and with what remuneration...

...Moreover, the wealthy, as employers, are frequently demanding, miserly, and insensitive...

...For example, if income in Latin America were distributed as it is in the countries of Southeast Asia, poverty would be reduced by four-fifths...

...With continued economic growth, the expansion of education, and other good things, the distribution of income should improve...

...It was, as is said in Latin America, "un show...

...Most years the reports address a particular theme, some of them of narrow interest...

...But fiscal restraint and economic "liberalization" appear to have been oversold: many people, in and out of government, came to believe that these policies would be a panacea for all economic woes, including the poverty afflicting a third of Latin Americans...

...They are well educated, working as professionals and managers of companies (in which they may or may not have equity...

...The largest and most populous country—Brazil—has one of the widest income gaps in the world: the wealthiest 10 percent of the population amass almost 50 percent of national income, while the poorest 50 percent of the population scrape together little more than 10 percent...

...But as capital becomes more abundant, its returns fall vis-a-vis labor, helping to improve income distribution...

...These bald statistics are arrived at from an analysis of household surveys from fourteen countries accounting for more than 80 percent of the region's population...

...Sample sizes were large: in Peru, for example, 16,744 households were queried, providing data about 88,863 Peruvians...

...But comparisons with other regions lead to a similar conclusion...

...And when efforts are ambitious, they are usually driven by political calculation...

...The same four institutions promoted economic "liberalization," ending government intervention in the economy to leave markets "free...

...During the recession that battered Latin America in the 1980s, the worst since the 1930s, "international development organizations" had considerable leverage over policy design and implementation in Latin America...

...Similarly, the present low levels of schooling entail high returns for the few who are educated...

...He makes a forceful argument that liberal democracy and capitalism are only defensible if there is equal opportunity for all...

...For example, with only a year to go before standing for reelection as president of Peru—an opportunity made possible only by rewriting the constitution— Alberto Fujimori suddenly embarked upon a dramatic expansion of social spending...

...they are written by economists who favor a matter-offact style...

...Especially important, he suggests, is equality before the law and in education...

...What is missing from the analysis is an appreciation of the politics of inequality...

...Trade policy was also "liberalized," as were controls on foreign investment...

...But empirical studies have shown that when countries, like the Philippines, begin with inequality, after several decades of economic growth they remain highly inegalitarian...

...At the beginning of the twentieth century, Latin America was inegalitarian...

...Meeting the need for quality higher education are many new private universities, found throughout the major cities of the region...

...2 a day (corrected for differences of purchasing power of the different currencies...

...Poverty is profoundly threatening...

...the wealthiest 10 percent receive 40 percent...

...To be sure, throughout Latin America there are programs to aid the poor...

...Public opinion surveys suggest that Latin Americans are supportive of these reforms...

...Government spending represents about 20 percent of GDP...

...Finally, the burden of poverty is different, and greater, in Latin America, because the munificence of the few is a constant reminder that life could be more bountiful...

...Beaten down by debt and inflation, Latin American governments were receptive to a new paradigm...

...Mexico's Programa Nacional de Solidaridad has been similarly criticized...

...Still, the measurement of income from labor (and other data from the household surveys) provides insight into the Latin American rich...

...Since many government interventions, such as maintaining unprofitable state enterprises or offering subsidies to consumers, added to budget deficits, "liberalization" was seen as crucial to fiscal responsibility...

...The IDB suggests that "Low collection rates for income and other taxes in Latin America reflect the limited institutional capacity of public administration to enforce the law...

...The poor never make it to school or attend school only briefly...

...The IDB report highlights the importance of improving access to education for reducing inequality in Latin America...

...Throughout the 1990s, Latin American countries have enjoyed moderate rates of economic growth...

...DISSENT / Summer 1999 29 Cindy ReimanjimPAcT VISUALS 30 • DISSENT / Summer 1999...

...In any case, solutions do not leap from their analysis...

...ACTUALLY, income distribution in Latin America is even worse than calculated by the 1DB study...

...And the majority of Latin Americans appear to endorse at least the idea of these reforms...

...In contrast, nine out of ten families in the two highest income deciles live in cities...

...BUT THE IDB is an activist organization, committed to fostering "development...

...At the same time, the poor have their "weapons of the weak": false compliance, dissimulation, foot dragging, and sabotage...

...The average Latin American over twenty-five years of age has only 4.8 years of education...

...Hence, per capita income is lower for poor families not only because earnings are less, but also because they have more individuals to support...

...No doubt, the challenge of meeting the needs of the poor is daunting...

...the political will to redress inequality hardly exists...

...And households are more likely to include additional adult dependents (such as grandparents...

...Why should another half century or even another century lead—by itself—to a reversal...

...Sometimes there is despair, humiliation, or rage...

...Illiteracy is being eradicated and the average number of years of schooling is slowly being increased...

...So international organizations now call for a "second generation" of reforms to address 28 DISSENT / Summer 1999 pressing social needs: education, health care, and income generation for the poor...

...In country after country, when there was a change of political regime —and sometimes even before—central bankers and finance ministers followed the prescriptions of the "international donor community...

...Other regions with similar levels of "development" have substantially less poverty...

...The household surveys measure only income from labor, not capital (such as rental properties and other kinds of investments...

...These latter measures were said to contribute handsomely to economic growth...

...The bankers and economists of the Inter-American Development Bank aren't really interested in explaining the causes of inequality in Latin America...

...But the real dynamism in Latin American education is in the growth of professional training for the sons and daughters of the elite...

...Most of the poor still live in the countryside...

...But they argue that Latin America has excess inequality...

...Data from these surveys were compared to data from earlier surveys, leading to the unhappy conclusion that inequality in Latin America worsened considerably in the 1980s and has remained stagnant at high levels in the 1990s...

...That interpretation has merit, but it needs to be complemented by an understanding of the political constraints produced by economic inequality...

...The social landscape is treacherous...

...Income inequality must be redressed...

...But the reports invariably contain a wealth of information...

...But it is hard to believe that abundance is a burden or that there is something pernicious about either tropical fruits or coffee...

...a class, not a clan, of tight-knit families...

...Families are small, with an average of just 1.4 children...

...By regional standards, Costa Rica and Uruguay have less inequity...

...The poor remain poor...

...Neither of the two explanations is pushed very far...

...Another explanation for Latin America's inequality —and by extension of the poverty of so many Latin Americans—is the region's endowment of natural resources...

...Per capita income levels of Eastern European countries are not appreciably different from those of Latin America, but only 7 percent of their population is poor...

...But it is also true that there isn't much empathy for the poor...

...The countries of Latin America suffer from extreme income inequality...

...There is a never-ending struggle—what James Scott has called "the small arms fire of class war...

...Resignation is not allowed...

...But despite occasional rhetoric to the contrary, little is being done to provide social services—education in particular— that might help the poor improve their position...

...Reading them can be tedious...

...Similarly, countries that rely upon large exports of primary commodities are also substantially more unequal than countries with lower primary commodity exports...

...The economists who wrote the study acknowledge that there is inequality everywhere...

...the poorest 30 percent of Latin Americans have an average of 6.3 members in their household...

...The surveys were done between 1994 and 1996...

...This line of reasoning sounds plausible...

...Many of today's professionals are children whose parents already enjoyed a comfortable status in agriculture, industry, commerce, or construction...

...My own scattered conversations with the poor lead me to believe that any attempt has to include more than a description of misery and wretchedness...

...The most inequitable countries, besides Brazil, are Chile, Guatemala, Ecuador, Mexico, Panama, and Paraguay...

...Those who have long held the reins of power in the economy and the state are not held accountable...

...And, poof, they worked: macro-economic stability (a euphemism for low rates of inflation) was attained throughout the region, even in countries, like Brazil, Bolivia, and Nicaragua, that had been wracked by hyper-inflation...

...Three-fourths of Latin Americans over twenty-five years of age have either no education or, more likely today, only a few years in a primary (elementary) school...

...For the overwhelming majority of Latin Americans, "economic issues" are immediate and family-centered...

...Nonetheless, income distribution has not improved...

...Twentythree percent of Latin Americans are "uneducated...

...Finally, comparisons with other parts of the world are facilitated by international data bases prepared by such organizations as the World Bank and the International Monetary Fund (IMF...

...That would seem to provide a twofold reason for doing nothing: the first implies waiting and the second resignation...

...The so-called "second generation reforms" are not forthcoming...

...The old statist model was thoroughly discredited in the 1980s...

...The scope of government is limited by difficulties in taxing those who have something that might be taxed...

...In the world's richest countries (which tend to have a more equitable distribution of income), government spending represents around 40 percent of gross domestic product (GDP...

...The households of the poor are large...

...Fujimori profited politically by having the media portray him, wearing a poncho, visiting remote Andean communities to inaugurate schools or other "public works...

...Issues of authority and power are slighted...

...Government spending was slashed and, to a lesser extent, taxes were raised...

...Thus, although the World Bank and the IMF judge per capita incomes in Latin America to be high enough to warrant the region's being labeled "middle-income," a third of the population barely subsists...

...The authors' logic is curious...

...The political manipulation of social spending, much of it financed by the sale of state assets, was blatant...

...Especially compelling is the 1998-1999 report, a monumental study of inequality in Latin America, entailing a staggering amount of work...

...FORREST D. COLBURN is completing a book about Latin America at "the end of history...

...Why is Latin America so inequitable...

...It takes a constant toll on one's equilibrium and frequently, too, on family ties...

...International development organizations make a well-reasoned case for social reform in Latin America...

...The upper class of Latin America has a remarkable gift for self-preservation and has been quick to realize that in our era the most valuable —and the safest—capital is human capital...

...No doubt, government and economic elites are distracted by the continuing struggle to maintain macro-economic stability...

...If Latin America had the income distribution suited to its level of development by international standards, the incidence of poverty 26 DISSENT / Summer 1999 would be half of what it actually is today...

...In explaining the causes of inequality, they look to distant, impersonal, exogenous variables: the "stage of development" and natural resource endowment...

...One explanation is that Latin America is at an early stage of economic development where, for example, a scarcity of capital leads to high returns, which are a cause of income inequality...

...Left unexamined in the report is the daily life of the poor...

...And redress is to come from the state: "Income distribution in Latin American countries will depend heavily on government in the next century...

...Only in Brazil, Chile, and Venezuela do more than half of all households of the poorest 30 percent live in urban areas...

...The income level of more than 150 million Latin Americans— roughly one-third of the population—is under U.S...

...The urban slums of the poor can be even more depressing —and dangerous—than the forsaken rural settlements, but, it is notable that the majority of the poor continue to live in the countryside...

...The IDB report not only goes to unprecedented lengths to measure inequality rigorously but also documents its deadly implication: widespread poverty...

...For example, at least four out of five think that government has a responsibility to "reduce the differences between the rich and the poor...

...But the report is especially useful because it addresses issues that have been overshadowed by a flurry of attention to the region's financial markets: the stability of currencies, the interest rates set by central banks, the movement of capital, debt-repayment schedules, and, above all, the rise and fall of stock markets...

...Admittedly, the communist history of Eastern Europe strains the comparison...

...There were four powerful institutions, all based in Washington, D.C.: the World Bank, the IMF, the IDB, and the United States Agency for International Development (AID...

...The poor have more children, an average of 3.3...

...A philosophical endorsement of ambitious government efforts to provide redress for the poor comes from an essay by Mario Vargas Llosa titled "America Latina y la opcithi liberal...

...It is true that slowly the poor are becoming better educated...

...Here is a story the report doesn't tell...

...The authors of the Development Bank study offer two theories, but neither is persuasive...

...Wives tend to work, and to earn a good income...

...The poor have poor educations...

...An even higher percentage of Latin Americans thinks that government ought to accept responsibility for "providing health care to the sick" as well as "a decent standard of living" for old people and the unemployed...

...a Herculean effort is necessary and no government has an abundance of political capital...

...And $2 is the meager sum regarded as the minimum needed to cover basic consumption needs...

...But evidence is marshaled to show that countries with large amounts of agricultural land per capita are substantially more unequal than countries with little land per capita...

...This explanation is surprising...

...In contrast, Latin America, with the world's worst distribution of income, is also the region where governments are smallest...

...After a century of economic growth, it is still inegaliDISSENT / Summer 1999 27 tarian...

...Mostly, remuneration is low...

...For the region at large: the wealthiest 5 percent of the population receive 25 percent of national income...

...This outcome also fits the experience of Latin America...

...In what came to be known as the "Washington Consensus," there was a pitch for Latin American governments to attain macro-economic stability, reining in the government deficits that had fueled inflation...

...Income tax rates in Latin America are the lowest in the world...

...By contrast, the poorest 30 percent of the population receive only 7.5 percent of total income, less than anywhere else in the world...

...But how can one convey a sense for what it means to be poor for 150 million people...

...They are good, they are expensive, and they are most definitely not agencies of equality...

...Latin America's severe income inequality is connected to its level of development and to the characteristics of its natural resource endowment...

...But most often they pale before the challenge...