Weekly Report - 14 October 2003
Leading the world in inequality
World Bank study examines deeply rooted patterns of inequality in the region and focuses on institutional reform as an answer.
Latin America and the Caribbean is one of the regions of the world with the greatest inequality — of incomes, access to basic services, voice, assets and opportunities. This is the summary offered by David de Ferranti, the World Bank's vice-president for the area, of a study the bank released on 8 October in Mexico city. `This inequality,' says de Ferranti, `slows the pace of poverty reduction, and undermines the development process itself.' The study has a go at identifying its causes and proposing solutions.
The problem, while hardly unknown, is dramatically presented in Inequality in Latin America and the Caribbean: Breaking with History? The richest tenth of the population of Latin America and the Caribbean, it notes, earn 48% of total income, while the poorest tenth earn only 1.6%. In industrialised countries, by contrast, the top tenth receive 29.1%, while the bottom tenth earn 2.5%. Using the Gini Index of inequality in the distribution of income and consumption, the study finds that Latin America and the Caribbean, from the 1970s to the 1990s, appeared nearly 10 points more unequal than Asia, 17.5 points more unequal than the 30 countries in the OECD, and 20.4 points more unequal than Eastern Europe.
Inequality in the region's least unequal country, Uruguay, is higher than in the most unequal country in Eastern Europe and the industrialised countries. On average, income inequality has tended to worsen slightly in the region, though experiences have varied. Some relatively equal countries, including Argentina, Uruguay and Venezuela, have experienced rises in inequality; Argentina dramatically so. By contrast Brazil, historically the most unequal country in the region, has experienced a modest, but significant improvement. Mexico may also have enjoyed a small improvement.
Ethnicity, the study says, is an enduring determinant of opportunities and welfare in Latin America: indigenous and Afro-descended people are `at a considerable disadvantage with respect to whites.' In seven countries surveyed (Brazil, Guyana, Guatemala, Bolivia, Chile, Mexico and Peru) the study found that indigenous people (men and women) earn 35% to 65% less than whites.
In contrast to those enduring gaps correlated to ethnic differences, Latin America has experienced progress in narrowing sex differentials in income and education. In much of the region, girls and young women are actually overtaking boys and young men in educational attainment.
Weight of history
The study suggests that the unequal distribution of resources that characterises the region today has deep historic roots: it follows a pattern set by specific traits of European colonisation of the region. Elites shaped institutions and policies to serve their interests first. For instance, most countries in the region did not achieve high levels of literacy until well into the 20th century. Low levels of support for basic education contrasted with generous financing for universities, where the children of the élite were trained.
Political institutions in the region, typically, have been weak. And while transitions to democracy have brought valuable gains, patterns of influence remain highly unequal, with traditions of clientelism and patronage often continuing despite national and local elections.
To address the deep historical roots of inequality in Latin America, and the powerful contemporary economic, political and social mechanisms that sustain it, the World Bank study proposes four broad areas for action by governments and civil society groups to build coalitions that might break this destructive pattern:
Latin America and the Caribbean is one of the regions of the world with the greatest inequality — of incomes, access to basic services, voice, assets and opportunities. This is the summary offered by David de Ferranti, the World Bank's vice-president for the area, of a study the bank released on 8 October in Mexico city. `This inequality,' says de Ferranti, `slows the pace of poverty reduction, and undermines the development process itself.' The study has a go at identifying its causes and proposing solutions.
The problem, while hardly unknown, is dramatically presented in Inequality in Latin America and the Caribbean: Breaking with History? The richest tenth of the population of Latin America and the Caribbean, it notes, earn 48% of total income, while the poorest tenth earn only 1.6%. In industrialised countries, by contrast, the top tenth receive 29.1%, while the bottom tenth earn 2.5%. Using the Gini Index of inequality in the distribution of income and consumption, the study finds that Latin America and the Caribbean, from the 1970s to the 1990s, appeared nearly 10 points more unequal than Asia, 17.5 points more unequal than the 30 countries in the OECD, and 20.4 points more unequal than Eastern Europe.
Inequality in the region's least unequal country, Uruguay, is higher than in the most unequal country in Eastern Europe and the industrialised countries. On average, income inequality has tended to worsen slightly in the region, though experiences have varied. Some relatively equal countries, including Argentina, Uruguay and Venezuela, have experienced rises in inequality; Argentina dramatically so. By contrast Brazil, historically the most unequal country in the region, has experienced a modest, but significant improvement. Mexico may also have enjoyed a small improvement.
Ethnicity, the study says, is an enduring determinant of opportunities and welfare in Latin America: indigenous and Afro-descended people are `at a considerable disadvantage with respect to whites.' In seven countries surveyed (Brazil, Guyana, Guatemala, Bolivia, Chile, Mexico and Peru) the study found that indigenous people (men and women) earn 35% to 65% less than whites.
In contrast to those enduring gaps correlated to ethnic differences, Latin America has experienced progress in narrowing sex differentials in income and education. In much of the region, girls and young women are actually overtaking boys and young men in educational attainment.
Weight of history
The study suggests that the unequal distribution of resources that characterises the region today has deep historic roots: it follows a pattern set by specific traits of European colonisation of the region. Elites shaped institutions and policies to serve their interests first. For instance, most countries in the region did not achieve high levels of literacy until well into the 20th century. Low levels of support for basic education contrasted with generous financing for universities, where the children of the élite were trained.
Political institutions in the region, typically, have been weak. And while transitions to democracy have brought valuable gains, patterns of influence remain highly unequal, with traditions of clientelism and patronage often continuing despite national and local elections.
To address the deep historical roots of inequality in Latin America, and the powerful contemporary economic, political and social mechanisms that sustain it, the World Bank study proposes four broad areas for action by governments and civil society groups to build coalitions that might break this destructive pattern:
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