Jorge Castaneda, writing in today's New York Times, offers a view of "What Latin America Can Teach Us" in in terms of income inequality. He observes that just as income inequality has been on the dramatic rise in the U.S., Latin America, thanks to a growing middle class, has seen a significant decrease in inequality. This is especially true in Brazil, where programs such as Bolsa Familia have elevated families from abject poverty to consuming lower middle class. Inequality is still very high, much higher than the U.S., but the inequality measurement the Gini index has been declining steadily. And we can see it in the growing consumer market for cars, refrigerators, and other hallmarks of entering the global middle class.
The UN Economic Commission for Latin America (ECLAC) recently released its annual poverty figures. They show that 30.4% of Latin Americans live below their national poverty lines, a steady decline for a peak of 48.4% in 1990. With rapidly growing GDPs in Brazil, Mexico, Peru, and elsewhere, and with the ongoing success of conditional cash transfer programs, the future looks good for the region in terms of equality. Yet, deeper investments in the quality of education and healthcare will be needed to keep these trends moving in a positive direction.
Castaneda argues that the effects of extreme inequality are felt for decades or generations. This is especially clear in terms of nutrition and education, areas that contribute centrally to human capital but that take a long time to show the rewards of investment, or the setbacks from neglect. The US should, therefore, be worried about rising inequality and its effects on social solidarity as well as economic competitiveness and productivity.
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There is a correlation between public policies and increase in the income inequality. Implementation of minimum wage rate, deregulation, as well as anti-crisis measures deepen the income gap. This was proved by many of the historical examples.
ReplyDeleteExample of Latin America with the higher governmental interference making the inequality lower, is indeed interesting one. However, I think the reason beyond income inequality decrease in those countries is in the nature of state itself rather than in the efficiency of public policies.