Income Inequality Is Increasing Everywhere… Except Latin America

Income inequality—wherein the rich get richer and poor poorer, relatively speaking—is increasing almost everywhere.  Even in the Asian ‘tiger’ economies of China and India, the gap is growing.

A recent report by the Conference Board of Canada confirms that the condition exists here as well.  The report notes that, after reaching a peak in the late 1990s, “even though higher commodity demand and prices helped Canada’s economy grow faster from 2000 to 2010 than most of its peers, including the United States, income inequality did not decline.”

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Les Chatfield photo

It seems the only general exceptions to this noxious trend are parts of southern Africa, and, interestingly, Latin America.  A 2012 study by the World Bank, as reported in the Guardian, offers some explanation: “For decades, Latin America was notorious for some of the widest income gaps in the world, but a combination of favourable economic conditions and interventionist policies by left-leaning governments in Brazil and other countries has brought it more closely in line with international norms.”

So as the income gap has been expanding in nearly all parts of the world, Central and South America have been tacking steadily into the winds of ‘free market forces’ which have been growing income disparity across the planet.

As usual, however, that’s not the end of the story.  Because while these two opposing trends have been underway, overall poverty in the world has been on the decrease.  Millions of people have in recent years been lifted up out of poverty, especially in countries like China and India.  In Brazil too, the last decade is reported to have seen 20 million people escape poverty.

And income inequality in many Latin American countries, including Brazil, is still high.  It’s just that it’s been getting better, whereas in the more ‘developed’ countries, the gap between rich and poor has widened in recent years.  Of the 16 countries which the Conference Board has designated as Canada’s peers, just five of them have seen income disparity shrink since the mid 90s.  If those 17 countries are ranked from lowest to highest growth in inequality, Canada comes 12th highest.  The U.S. ranks highest of all.  Between 1980 and 2007, the income of the richest 1% of Americans rose 197%.

In the States, there is of course heated debate as to why the gap has been growing so steadily.  In today’s world of what Al Gore calls “robosourcing,” where technology is displacing many low-skilled workers, the changes are often attributed to what have been traditionally—and fatalistically—labeled “market forces.”  Other, more progressive economists like Paul Klugman challenge that view, instead pointing to the decline of unions, stagnating minimum wage rates, deregulation, and government policies that favor the wealthy.

There is less debate as to why the gap has been expanding in India and China, where it’s generally recognized that the typical income level for those working in urban industries has been fast outpacing the average income of those who remain at work in rural, agricultural areas.

But if we consider the example of Latin America, where numerous decidedly “left leaning” governments have held power in recent times, the explanation as to growing North American income inequality coming from Klugman and his cohorts would seem to be more convincing.  Leaders like Evo Morales in Bolivia and the late Hugo Chavez in Venzuela, whatever your view of them, have not been shy about enacting programs of genuine income redistribution.  And their policies would seem to be at least part of the reason why revenue disparity has been improving in Latin America, while deteriorating elsewhere.

So as I’ve commented on elsewhere in this blog, the problems of a jobless recovery from the great recession of 2008, along with stagnating median incomes seem crucial for countries everywhere these days.  While it flies in the face of free market, anti-government views which seem to have held so much sway for so many years in the U.S. and Canada, the evidence emanating from Latin America would suggest that maybe it’s time we recognized that a more, not less interventionist government role is what increased economic fairness may require.

 

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