“Chile has but one great enemy, and its name is inequality. Only together can we take it on.”
With those words, Michelle Bachelet returned to the presidency of Chile this week. The Socialist leader has vowed to put inequality at the top of her agenda. In doing so, she is hardly alone among Latin American leaders.
Latin America has long been one of the most unequal areas of the globe. But during the past decade, the region has witnessed a remarkable turnaround. Economic populism has swept the continent, leading to the election of left-of-center political parties that have implemented anti-equality agendas. Their efforts have borne fruit. During a decade when economic inequality grew by leaps and bounds in the rest of the world, it declined significantly in Latin America.
Last year, the World Bank reported that the region’s Gini coefficient, a statistic that measures inequality, decreased from 58 in 1996 to 52 in 2011. During the 2000s, Gini coefficients declined in thirteen of seventeen individual Latin American countries as well. In that same decade, rate of extreme poverty (people surviving on less than $2.50 a day) was cut by 25 percent to 13 percent. Those at the bottom 40 percent of the income scale also made impressive gains—their average income rose by 5 percent, as opposed to 3 percent on average for the population as a whole.
What’s the secret of Latin America’s success? Partial credit is due to the healthy economic growth the region saw over the past decade—about 4 percent on average—spurred by a strong worldwide demand for the region’s commodities. But of course, just because growth occurs, there’s no guarantee it will be equitably shared. For example, in the US between 1975 and 2009, GDP per capita growth was 1.9 percent, but growth in median household incomes was only 0.5 percent. Moreover, there is mounting evidence that equality itself helps drive growth, and inequality puts the brakes on it.
More than growth, what’s really made the crucial difference have been politics and policy. This UN study of the regions’ economy, as well as this paper, which takes a close look at Argentina, Brazil and Mexico, point to some of the policies that have been particularly effective in fighting inequality. The findings include the following: