From the Occupy movement to the demonstrations at the G20 Summit in June, frustration over longstanding and deepening inequality is boiling over. This makes a volume exploring the politics of persistent inequality in Latin America—long the world’s most unequal region—very timely.
In The Great Gap: Inequality and the Politics of Redistribution in Latin America, University of Miami political scientist Merike Blofield assembles a distinguished group of social scientists to look at why democracies tolerate high inequality. Blofield concludes that a “window of opportunity” may be opening for more redistributive policies as populist regimes in Venezuela and Bolivia offer a wake-up call to the region’s elite about the perils of not acting. This may help persuade the middle and upper classes to invest in a new social contract where more public expenditures target the “unincorporated” poor.
Readers may question Blofield’s optimism. The contributors to this volume blame the failure of Latin American governments to reduce high inequality over the past 20 years on entrenched, oblivious elites, and on International Monetary Fund-mandated reforms that have contributed to already regressive taxation and public spending policies. The result, Blofield notes, is that the region has “weak middle classes, exorbitant socioeconomic power in the very elite” and in most countries “a large unincorporated informal sector.” The elite escape taxation via capital flight and have captured key government agencies, preserving their monopolies and subsidizing their pensions and children’s education. At the same time, a significant fraction of the labor force operates in the large informal sector, evading taxes and thus not expecting much from government programs. Notably missing is a middle class that dutifully pays its taxes and expects good government in return.
Hence The Great Gap’s discouraging conclusion: inequality is perpetuated by a seemingly intractable “vicious cycle,” where “inequalities perpetuate inequalities” via “ the threat of capital flight, elite culture, media access and framing, campaign financing, agenda setting […] taxation and social policies.”
Even when they want to redistribute income, the power of elected officials is thwarted by globalization and the capture of government agencies and the media by “entrenched interests.” Political sociologist Elisa P. Reis of the Universidade Federal do Rio de Janeiro surveys a disconnected Brazilian elite that sees deep inequalities but does not feel responsible for them. Communications professor Sallie Hughes of the University of Miami and Paola Prado of Roger Williams University conclude that Latin America’s mass media “are controlled by a small elite that uses the media’s definitional power” to further interests and ideologies that help “maintain a status quo or social inequality.”
Apart from lower incomes, Latin America is set apart from OECD countries by a tax and expenditure system that largely fails to redistribute income. Professor James E. Mahon Jr. of Williams College blames failed tax reforms, an absence of progressive income taxes, and a tax system that relies too much on regressive sales or VAT taxes that perpetuates regional inequality. Regressive fiscal spending also tends to favor the rich.
This inequality of opportunity is documented in an analysis of personal mobility by Anna Crespo of the Inter-American Development Bank and Francisco H. G. Ferreira of The World Bank. They show how inequality is determined by circumstances beyond one’s control: family background—not just parents’ education, but also their social networks and cultural mores that can perpetuate stratification and limited mobility.
Given these formidable political and institutional obstacles, it is no surprise that 20 years of democracy have not sufficiently reduced persistently high inequality. But what about the dramatic swing to the Left that started in Venezuela at the end of the 1990s and spread in different degrees to Brazil, Argentina, Bolivia, and several other countries—most recently Peru?
Unfortunately, the more radical of these left-wing governments represent a crisis of democracy, not its triumph, argues sociologist Fernando Filgueira of the United Nations Economic Commission for Latin America and the Caribbean and his colleagues in a pivotal contribution. The “radical populist strategy” is itself an outcome of the failure of “conservative modernization” and carries “enormous risks and costs.” It concentrates power in the executive, thereby sparking “intense political confrontations.” Most important, “there are doubts about its political and economic viability in the medium term, beyond the boom of primary commodity prices.”
In her conclusion, Blofield summarizes the overwhelming evidence that the region’s high inequality has become proficient at reproducing inequality, a dynamic reinforced by a global capital market that punishes progressive governments.
Yet she ends on a surprisingly optimistic note. Pointing to the “wake-up call” that social upheaval gave European elites a century ago, Blofield sees a parallel in the radical regimes of Venezuela, Bolivia and Ecuador. Perhaps more important, she argues that the recent successful experiences of the left-wing governments of Uruguay, Chile and Brazil in reducing poverty “without changing the fundamental market orientation” of their economies shows that a new era of redistributive policies may help to finally reduce inequality. These social democratic governments show that it is possible to achieve redistribution with growth and without sacrificing democratic checks and balances.
Though progress through 2007 was modest, as Blofield notes, recent data shows inequality and poverty continuing to fall significantly in 14 of the region’s 18 large economies. Hopefully voters, leaders and technocrats will continue to defy history, global trends and powerful elites to continue narrowing the great gaps in opportunities and outcomes that have wasted the potential of many Latin Americans for so long. Blofield’s volume is itself a wake-up call that democracy is only as strong as the level of equality it can help to produce.