Why is Socioeconomic Inequality so High in Latin America?
Why is Socioeconomic Inequality so High in Latin America?
One of the most prominent features of Latin American countries is their collective characteristic of extensive and pervasive socioeconomic inequality (Huber 2009). Latin America has been described as the most unequal region of the world (Gasparini & Lustig 2011). Inequality within the region is so extensive that even the country with the lowest income equality is still more unequally distributed than any Organization for Economic Cooperation and Development (OECD) nation, Eastern European country or most of Asia. Socioeconomic inequality is pervasive across many aspects of living in Latin America, including education, health, income and political power (Lustig 1995). In most Latin American countries, the wealthiest 10 per cent of people receive between of 40 and 47 per cent of total income, whilst the poorest 20 per cent receive only 2-4 per cent (see table below). (De Ferranti et al. 2004)
High inequality comes with major costs: poverty is increased and the impact of economic development on poverty reduction is decreased (De Ferranti et al. 2004). The socioeconomic inequality of Latin America can be attributed to several factors: integration in a globalized economy, the financial crises of the 1980’s, radical and liberal market-oriented reforms and interdependent flows due to migration and remittances. This essay will discuss these factors in regard to their influence on socioeconomic inequality in Latin America. Socioeconomic Inequalities in a Globalized Economy
The contemporary situation of high inequality that exists in Latin America cannot be explained without first identifying the historical predecessors that shaped the current state of inequality (De Ferranti et al. 2004). The origin of Latin America’s socioeconomic inequality lies in its colonial roots. The initial instillation of inequality was strongly due to the factor endowments founded by Europeans in Central and South America that have allowed the state of inequality to persist over the past 500 years (De Ferranti et al. 2004). Colonial powers fabricated institutions that delegated wealth arid power into the hands of a select few (Huber 2009). Several institutions such as the encomienda, mita and repartimiento were established in the Spanish American colonies such as Mexico and Peru, which aided the elite in obtaining and holding large blocs of land, natural resources and native slave labour (Cardosso & Faletto 1979). The encomienda was an institution that gave conquistadors the right to have Amerindian labourers. The mita was a system used in the mines, which involved forced labour. Furthermore the repartimiento was an institution that involved the forced sale of goods to Indians-which were typically overpriced (De Ferranti 2004). Institutions such as these set the benchmark for the continuation of future inequality. This resulted in an intense concentration of wealth and power, along with severe exploitation of indigenous and imported slave labour and political exclusion of the majority of the population that continued on through the independence period (Huber 2009).
In most Latin American countries land tenure arrangements are enduringly medieval in nature. The agricultural aristocrats hold the majority of social and political power, reinforcing the relevance of the notion of internal colonialism. Even as late as the 1980s, in Brazil less than 1% of landholdings were greater than 1000 hectares, yet they accounted for 43% of the land. Holdings of less than 10 hectares accounted for a mere 2.5% (Reynolds 1996).
Despite most colonies gaining independence by the 1820s (Bulmer-Thomas 2003) and modernization bringing about important changes, the socioeconomic structures formed by colonialism persisted into the 19th and...
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