Income inequality in Latin America not persistent; poverty best tackled by development, less by redistribution
The analysis is important for those involved in the bioenergy sector in Latin America - a region with a large potential - because in ultimo, biofuels and biomass are agricultural commodities the production of which is intertwined with a large set of social and land ownership issues. Biofuels offer a major opportunity for development, but only if these social issues are addressed in-depth. The sector could become a catalyst for social change and justice, by putting land reform high on the agenda. On the other hand, it could just as well strengthen "the continuation of colonisation by other means", and worsen the existing conditions of inequality.
Frankema compares the income and possessions inequality in Latin American countries in the period from 1870 to 2000 in his thesis. With the help of historical-comparative and economic-qualitative methods, he demonstrates that the inequality in this period varied and thus disposes of the idea that the current income inequalities in Latin America are determined by the colonial past. Frankema: ‘It’s definitely not as is often claimed in the literature; it was so, it is so and it will always be so.’
Colonial roots
According to Frankema, although the political climate has the most influence on income differences, the roots of the income and possession inequality lie in the colonial past. Ethnic discrimination of Indian/African groups by descendents of the white colonists, and the associated unfair distribution of land, are remnants of the colonial time. One of the consequences of this inequality is poor education facilities for the poor, because the elite sends its children to private schools and has little interest in a good public education system. Without good education possibilities for the poor, social mobility in Latin America will remain limited.
Frankema in particular focuses on land issues, as former European colonies have a large and lucrative agricultural potential and large rural populations. Current land ownership structures too are strongly marked by colonial history, but in Latin America in particular, a post-colonial elite emerged that dominates agriculture until this very day:
Given the large weight of the rural sector in low developed countries, one would expect that the relation between land and income inequality would be strongest in Sub Saharan African countries. The empirical analysis [...] points out the opposite however. This surprising conclusion reveals an important difference between the colonial heritage of West and Central Africa versus Latin America.energy :: sustainability :: biomass :: bioenergy :: biofuels :: agriculture :: social justice :: colonialism :: globalisation :: land reform :: landless :: social inequality :: Latin America ::
Both regions are characterised by abundant endowments of land suitable to the production of cash crops. In Latin America a powerful landowning elite developed under three centuries of colonial rule. During the first wave of globalisation in the last quarter of the 19th century this elite was able to consolidate and probably even enhance its position, as the agricultural export sector expanded. West and Central African income inequality in the second half of the 20th century is based on a systematic squeeze of the rural majority population in favour of a small predatory urban elite. This type of inequality is rooted in the weak protection of property rights in unstable independent “states without nations”. Both regions carry the burden of “disproportional” levels of economic inequality. Those in power want to hold on to what they have and feel threatened by demands for accountability. Yet, the incentives shaping the attitude and actions of the elites in both regions differ fundamentally.
A landowning elite not only derives income from rent extraction, but also from the accumulation of capital and investments in agricultural enterprise. If landowners see opportunities to defend their stakes in economic development and are able to negotiate credible and sustainable protection of property rights, they may be willing to lift their bans on institutional change and a transfer of power to other social groups. They may also allow for the development of an urban class of entrepreneurs competing for (scarce) sources of cheap labour.
If the stakes of the elite are primarily vested in the consolidation of a predatory bureaucracy, the economic and political position of the elite are maximal overlapping. In this context a transfer of power or the development of new sectors poses such a severe threat to the distributive status quo, that the elites are willing to bear the very high costs of violent repression and armed conflicts. - Doctorandus Ewaut Frankema
Redistribution and economic decline
According to Frankema, social inequality is the leitmotif of Latin American politics. Both political and economic forces, both national and international, affect the extent of income inequality. Frankema makes clear that differences in income increased up to about 1920, then declined until in the 1970s they began to increase sharply again. In the period between 1920 and 1970, the increasing power of trades unions and left-wing political parties resulted in a redistribution:
The period after 1975 was a period of economic decline, caused by increasing international competition and a huge national debt. Frankema: ‘If factories have to close due to an economic crisis, it’s usually the poor who lose their jobs first. The inflation that struck Latin American countries hard in the 1980s also hit the poor the hardest. The rich with their money safely in Swiss bank accounts were not hit at all.’
Ending poverty
According to Frankema, poverty policy should be less about redistribution and more about development. If Latin American countries can put the past to rest by tackling ethnic discrimination and the inequality of land ownership, for example, then he thinks that it will be possible to tackle poverty issues in the region in a constructive way.
Frankema: ‘The redistribution of income via taxes is very nice in the short term, but is not effective enough in the long term. Before you can beat poverty in the long term you have to allow people to participate in the labour process, invest more in the quality of the public education system and ensure that the starting point for government policy is “equal opportunities for everyone”.’
Picture: child of a family of landless farmers in Brazil. The family has joined the Movimento Sem Terra (“The Landless Movement”), Latin America's largest social movement.
References:
Biopact: Income inequality in Latin America is not persistent - March 03, 2008.
Ewout Frankema, "The Colonial Origins of Inequality: Exploring the Causes and Consequences of Land Distribution" [*.pdf], Research Memorandum GD-81, Groningen Growth and Development Centre, July 2006.
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