{"id":30465,"date":"2021-03-02T08:01:55","date_gmt":"2021-03-02T04:01:55","guid":{"rendered":"http:\/\/www.mauritiustimes.com\/mt\/?p=30465"},"modified":"2021-03-02T08:01:55","modified_gmt":"2021-03-02T04:01:55","slug":"latin-america-inequality-and-political-instability-have-lessons-for-the-rest-of-the-world","status":"publish","type":"post","link":"https:\/\/www.mauritiustimes.com\/mt\/latin-america-inequality-and-political-instability-have-lessons-for-the-rest-of-the-world\/","title":{"rendered":"Latin America: inequality and political instability have lessons for the rest of the world"},"content":{"rendered":"

\"\"<\/span><\/p>\n

 <\/p>\n

By Diego S\u00e1nchez-Ancochea<\/strong><\/span><\/p>\n

\"\"Everyday poverty: inequality has dogged Latin American countries such as Brazil for decades.\u00a0EPA-EFE\/Fabio Motta<\/span><\/span><\/span><\/p>\n

In a landmark speech about social mobility in 2013, the then US president, Barack Obama, warned against the problem of growing inequality in the starkest possible terms:<\/span><\/p>\n

The combined trends of increased inequality and decreasing mobility pose a fundamental threat to \u2026 our way of life.<\/span><\/em><\/p>\n

He was talking primarily about America, where the income share of the top 1% almost doubled between 1980 and 2015. But he could have been equally talking about Poland, the UK or a number of other wealthy countries as reflected in the graph below. COVID-19 has made things even worse. The pandemic has enabled the global elite to increase their wealth rapidly \u2013 in some cases by enormous amounts \u2013 at the same time as many workers lost their jobs.<\/span><\/p>\n

Income share of top 1% in wealthy countries, c1980 and c2015<\/span><\/strong><\/p>\n

\"\"<\/span><\/strong><\/p>\n

Wealth tends to concentrate in a few hands.<\/span>\u00a0S\u00e1nchez-Ancochea (2020)<\/span>,\u00a0Author provided<\/span><\/span><\/span><\/p>\n

Things could get much worse in years to come. To understand how and why, it\u2019s worth looking at Latin America, one of the most unequal regions of the world. This is evident when using the Gini coefficient (an indicator of income distribution that goes from 0 for the most equal situation to 1 for total inequality) as the following figure does. The differences between Latin America and Eastern Europe and Central Asia are particularly striking.<\/span><\/p>\n

Gini coefficient for the distribution of household consumption per capita in the global south (median per region), 2010<\/span><\/strong><\/p>\n

\"\"<\/span><\/strong><\/p>\n

Developing countries where wealth is distributed most unevenly.<\/span>\u00a0Alvarado F. and L. Gasparini,\u00a0<\/span>,\u00a0Author provided<\/span><\/span><\/span><\/p>\n

In my recently published book, The Costs of Inequality in Latin America, I show the social, political and economic effects of wealth and income concentration over the long run. For more than a century, Latin America has experienced a damaging combination of high inequality, poor economic performance and weak political institutions.<\/span><\/p>\n

This has contributed to persistent political volatility and social discontent. A small elite, which still controls a large share of land and wealth, has had limited incentives to increase productivity or invest in new sectors of the economy. Why would they move to risky sectors or spend in innovation when they are making large profits on activities with low competition? The elite have also refused to support high-quality public education for all.<\/span><\/p>\n

As a result, Latin American countries such as Brazil and Mexico have suffered from a lack of well-paid jobs to a much greater extent to the wealthier economies. During much of the 20th century, economic activity concentrated on large plantations and capital-intensive manufacturing activities that created limited formal employment. Most workers had low-paid jobs that did not provide access to social benefits.<\/span><\/p>\n

Failed reforms<\/span><\/strong><\/p>\n

The neoliberal package implemented across the region since the late 1980s has done little to help. The economic elite made of individuals (usually men) with large amounts of wealth, political connections \u2013 or both \u2013 benefited from the privatisation of public companies. Much has been written about the relocation of jobs from the US to Mexico, but the truth is that a large number of Mexicans still work in the informal sector and receive wages below the poverty line.<\/span><\/p>\n

\"\"<\/span><\/p>\n

Visible poverty: a homeless man begs on the streets of Mexico City.<\/span>\u00a0EPA-EFE\/Sashenka Gutierrez<\/span><\/span><\/span><\/p>\n

The lack of economic dynamism had much to do with the control of policymaking by the wealthiest 1%. They successfully pressured for low taxes \u2013 particularly on personal and corporate income. Most Latin American countries have never spent enough on public healthcare and education and have paid too much attention to programmes for the wealthy. Until the 2000s, support for universities and hospitals was high, while spending on pre-school education and rural health clinics was insufficient.<\/span><\/p>\n

Populism rules<\/span><\/strong><\/p>\n

Given all this, it is not surprising that citizens have repeatedly supported populist politicians. Leaders, including Juan Domingo Per\u00f3n in Argentina in the 1940s and 1950s or, more recently, Hugo Ch\u00e1vez in Venezuela, promised to provide good jobs and adequate social benefits not only to the poor but also to large segments of the excluded middle class. These leaders enthusiastically supported wealth redistribution, but their policies were often unsustainable and failed to truly confront the power of the top 1%.<\/span><\/p>\n

Over the long run, inequality has created a vicious circle. Large income gaps between the poor and the wealthy have been one of the drivers of violence, one of the reasons that Latin America is the region with the highest homicide rate in the world. The violence is concentrated in low-income neighbourhoods, creating anxiety and personal insecurity and discouraging inward investment, which might create jobs and improve services.<\/span><\/p>\n

One of the many vicious circles generated by inequality<\/span><\/strong><\/p>\n

\"\"<\/p>\n

The never-ending cycle of inequality.<\/span>\u00a0Diego Sanchez-Ancochea<\/span>,\u00a0Author provided<\/span><\/span><\/span><\/p>\n

Some of the same challenges of inequality are increasingly evident in other parts of the world. Donald Trump\u2019s election in the US and Brexit in the UK reflected growing dissatisfaction with the status quo among a large segment of the population who opposed the growing influence of the economic elite and what they saw as diminishing economic opportunities for people like them.<\/span><\/p>\n

What the Latin American experience shows is that things could easily become even worse in the future as income gaps consolidate and become harder to confront.<\/span><\/p>\n

Diego S\u00e1nchez-Ancochea<\/strong><\/span>
\nHead of the Oxford Department of InternationalDevelopment, <\/span>
\nUniversity of Oxford<\/span><\/p>\n

\n

* Published in print edition on 2 March 2021<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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