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Inequality is the Cause of Poverty in Latin America

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By Bernardo Kliksberg (for Safe Democracy)

Bernardo Kliksberg explains how inequality has become inherent in all aspects of Latin American society from income, health and nutrition, to education, access to credit, and the possibility for advancement. And while many economists claim that this inequality is only a necessary step in development, Kliksberg believes that it is the primary cause of poverty in Latin America and that with proactive government planning a solution can be found. Government, business, and society must all unite behind the ideal of social responsibility in order to do away with corruption in government and corporations, and support equal opportunities, healthcare and education for all citizens, democratization of credit, and aid to small business.


[2] Bernardo Kliksberg is one of the foremost world experts on the fight against poverty. From Washington he directs the Inter-American Initiative on Social Capital, Ethics, and Development sponsored by the IADB. He is a special advisor to the UN, UNESCO, UNICEF and other international organizations, as well as being the author of numerous books published worldwide, the most recent an international best seller “More Ethics, More Development”.

FROM WEALTH DISTRIBUTION TO HEALTHCARE, LATIN AMERICA IS THE MOST UNEQUAL REGION OF THE PLANET. While the top ten richest percent of the population controls about 48 percent of the wealth, the lowest ten percent has only 1.6 percent. This is a disparity between rich and poor of about 50 to 1. In Brazil the same difference is about 54 to 1, in Colombia 57 to 1, in Guatemala 63 to 1. In Italy, on the other hand, the numerical gap between rich and poor is only 14 to 1, in Spain 8 to 1, and in the Scandinavian countries 3 to 1.

But this is only on the surface. Inequality in Latin America affects everything from income, to access to habitat, to healthcare, education, and the possibility of obtaining credit. There are about six million small local and regional businesses in Latin America, to whom the financial system awards only five percent of the region’s credit. The other 95 percent goes to the few and yet much larger, multinational corporations.

[3] THE EDUCATION PROBLEM
Inequality in education is one of the gravest problems that Latin America faces today. Almost all children in Latin America go to elementary school, which represents a huge victory for democracy in the region. But of all of these students, only 4 out of every 10 finish high school. 60 percent are forced to drop out for socioeconomic reasons. It is impossible to go to school when you must work to help your family survive.

HEALTH
Inequity in health is also a major concern. In Canada only 8 mothers die for every 100,000 births, while in Latin America the rate is as high as 94 deaths per 100,000 births, and in Bolivia 230. In Sweden only 3 out of every 1,000 children die before reaching the age of five, in Latin America 33, in Bolivia 67.

Even worse, a shocking 20 percent of children in Latin America are malnourished. In Guatemala over 48 percent of children are not receiving proper nutrition, and many families find themselves living day to day on food that they must scavenge from the garbage and droppings of the wealthy.

Life expectancy in Latin America is also noticeably lower than that of much of the rest of the developed world. It is enough to compare the metro stations in the more prosperous parts of Latin American cities to those in the poorer areas to understand how inequality has affected health and life span.

While the majority of Canadians will live to the ripe old median age of 80.4 years old, Latin Americans live to be about 72.6, 8 years less. In Guatemala the life expectancy is only 68 years old, in Honduras 69, and in Bolivia it is the lowest of all at 65 years of age.

REFUSAL OF RIGHTS
A child born into a shantytown in Argentina, a favela in Brazil, or an indigenous population in Chiapas, Mexico, will find it very difficult to escape the poverty into which he has been born. Like his parents, 80 percent of the time, he will not complete his education, will be forced to work from a very early age for extremely low income, and will have almost no chances for development.

While the rich barricade themselves inside their marble palaces, the poor continue to get poorer.

Because many families are torn apart by socioeconomic stress, and many young couples decide against starting families due to economic uncertainty, the vicious cycle of poverty inherent in the Latin American system is destroying the most basic human rights of family and of life itself.

A solution must be found in order to defend human rights and provide for a decent standard of living in Latin America.

[4] INEQUALITY CAUSES POVERTY
Despite having such great economic potential, being one of the richest areas of the world in natural resources, energy sources, and fertile land, the inequality in Latin American society has caused a great deal of poverty.

The ties between inequality and poverty are quite clear.

When the Gini coefficient, the measure of inequality in the distribution of wealth, goes up by .001, the life expectancy of a population drops by .6 years. The same happens in the opposite sense: even if the domestic product of a country is increased, poverty does not recede so long as there is inequality.

Without a more equal distribution, wealth stays in the hands of the few, and the many are made to suffer.

Inequality generates poverty, hinders sustained economic growth, reduces the number of consumers, obstructs national savings, destroys society, and makes governing almost impossible. It is a problem that must be dealt with.

NECESSARY FOR PROGRESS?
89 percent of Latin Americans, when polled, said that they suffer from inequality in their nation and have begun to protest the injustice politically over the last few years.

Yet many more economists continue to profess the belief that inequality is inevitable for progress. But is the more than 40 percent of Mexico’s population that live below the poverty line a necessary phase for advancement? If so, then progress may not be worth it.

ARGENTINA
And what would these same economists say to Argentina, which in the 90’s took a giant leap away from equality under the Menem Administration?

Thanks to Menem’s governmental policies, 7 million people fell from the middle class to below the poverty line, the Gini coefficent rose from .42 in 1992 to .47 in 1997, poverty took off, and the society became polarized. In the 60’s in Argentina, less than 10 percent of the population was considered poor. In 2002, 58 percent were in poverty.

These massive changes in Argentinean society are not unavoidable results of economic progress, but are the logical product of the destructive state policies of savage privatization, disregard for small business and national commerce, concentration of credit, and other similar measures applied with high levels of economic orthodoxy and corruption.

The results were the creation of vicious cycles for large sectors of the population leading to suicide, the destruction of families, and bloody social suffering.

SOCIAL RESPONSIBILITY
Yet, Latin America is not doomed to poverty and inequality. The problems can be confronted and solved. If government is willing, a combination of affirmative policies should be introduced to open opportunities to the excluded, to democratize credit, to aid small business, and to provide for the long-term education and health of all citizens.

Leading countries in human development, economic competition, and technological progress, like Norway, Sweden, Finland, Canada, and Holland, all advocate a high level of equality among all their citizens. They are active and protectionist states with progressive fiscal systems and strong social consensus on the virtues of equality. These same steps should be taken in Latin America.

Government has a central responsibility in solving this crisis, yet private corporations must also put into practice the principles of corporate responsibility, and cooperation with civil society. All parts of society must unite to advocate equality.

Although a very modest Central American country with few natural resources, Costa Rica put the principles of equality and social responsibility into practice a few decades ago, systematically funding education and public health. Despite all adversity, it now has one of the best Gini coefficients in the region, as well as the lowest rate of poverty (half of the regional average).

A COLLECTIVE EFFORT
Equality is an ancient idea. Plato wrote that social disparity between rich and poor should be no greater than 3 to 1, and in the book of Prophets in the Old Testament it is written that all human beings are equal.

Societies that have applied this idea have been able to construct inclusive economies to lead the world in free markets and just societies.

The time has come for Latin America to unite in its common aim to rid the region of inequality, and begin a new era of economic and social prosperity for more than just the top ten percent.

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