Inequality: the Latin American disease.

Author:Gutierrez, Santiago
Position:BOARD OF ECONOMISTS LT
 
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How serious it is. How to alleviate it. Latin Trade's Board of Economists

Half of the 40 countries with the world's worst income distribution are in Latin America. That's what shows up in the Gini indexes collected or estimated by the World Bank. This indicates how far a society is from having equal income distribution.

Haiti has the third worst Gini index in the world, and this could be seen as a symptom of an aberrant and unsustainable condition. This global shaming list includes all the countries of the region that report a similarly dismal statistic although Argentina narrowly escaped falling into the same category (see the complete table at Latintrade.com).

Across the entire political spectrum, from the most socialist countries such as Venezuela, Bolivia, Ecuador, and Nicaragua, to the best friends of the market like Peru and Chile, a score of Latin American countries have managed their affairs so that a large part of their populations are left with a very small proportion of their country's incomes.

How serious is this situation? Latin Trade asked the members of its Board of Economists.

ETHICS, ECONOMICS AND POLITICS

Inequality is a serious problem for three reasons, according to Columbia University Professor and former Minister of Finance in Chile, Andres Velasco. For ethical reasons, because societies should not allow large differences between people to be perpetuated. For economic reasons, because countries that relegate groups of its population more or less permanently lose talent and productivity. For political reasons, because persistent inequality erodes the legitimacy of democracy and creates socially explosive situations.

The key, he added, is to identify "in a democratic society which disparities are tolerable and which are not," and then build minimum standards that enable everyone to have full lives and participate as equals in a society.

Andres Neumeyer, chief economist at Argentina's central bank, referred to one of those differences--poverty--as intolerable. "Inequality is not a problem, it's not bad (in itself)," he said, sounding a bit iconoclastic. But, he added, what is exceedingly bad is poverty and exclusion.

THE KEY: EMPLOYMENT

LT Board of economists agreed that access to formal, productive, decently paid work is the key to reducing poverty and inequality.

In fact, access to work is the main explanation of the difference between poor and rich in the region, said Andres Velasco. He cited the case of Chile, where...

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