Inequality is Declining in Latin American and Sub-Saharan Countries

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Policy measures and increased Chinese demand for minerals have respectively led to a narrowing of inequality in Latin America and sub- Saharan Africa, while inequality has risen in the former Soviet countries and Asia

Story Transcript

JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.

There’s a new report out titled Humanity Divided: Confronting Inequality in Developing Countries. Its main thesis is that inequality is growing worldwide, and it sets out recommendations on how to tackle it.

Now joining us is one of the coauthors of the report, Stephanie Seguino. She’s a professor of economics at the University of Vermont and a research scholar at the PERI institute at the University of Massachusetts Amherst.

Hi, Stephanie. Thank you so much for joining us.

STEPHANIE SEGUINO, PROF. ECONOMICS, UNIV. VERMONT: Thank you for having me.

DESVARIEUX: So, Stephanie, in your report you discuss the growth of inequality worldwide. First of all, can you explain a bit of your process? And how did you reach your conclusion?

SEGUINO: Sure. So the process focuses primarily–the report focuses primarily on developing countries. But also we did an analysis of developed countries as well. And the primary indicator of inequality that we use is the GINI coefficient. So that measures the dispersion of income, household income, several measures before taxes and after taxes. And we compare this to what existed in 1990 and how that GINI coefficient has changed by 2010.

DESVARIEUX: So, Stephanie, can you speak to specific examples where you’re seeing a great rise in income inequality? And why does that even matter?

SEGUINO: Sure. Well, first of all, what was interesting about the report is that there is a rise in inequality in developed countries and developing countries. But there were also instances of falling inequality. So it’s to suggest that actually something can be done. It’s not inevitable that inequality increases during this period of time.

We found that the greatest increases in inequality were primarily in the former Soviet countries, the so-called Commonwealth of Independent States, as well as in Asia. So in Asia particularly, which is the most rapidly growing region, we’ve also seen the really stark increase in inequality, a 25 percent increase in inequality measured as the GINI coefficient. And if we look at the population covered by the developing countries in which inequality has increased, it’s roughly 75 percent of the population in developing countries that live in countries where inequality has increased.

DESVARIEUX: So let’s talk about those countries where we saw a decline. Which ones specifically?

SEGUINO: Well, in Latin America, a fairly significant percentage–three-quarters of Latin American countries–have seen a decline in inequality. And one of the reasons that that is significant is that this is also a region that had very high inequality in 1990. So it’s very significant that during this period in which countries are experiencing this, widening gaps, the Latin American countries have been able to overcome that, or at least to some extent. They’ve been able to bring down those gaps to some extent.

The other region of the world in which we see declining inequality is Sub-Saharan Africa.

DESVARIEUX: Those would not be the two regions where I would think that you would see this. Can you speak to which specific Latin American countries and which Sub-Saharan countries are you talking about here?

SEGUINO: Sure. So in Latin America, the countries like Brazil, which had very high inequality, Argentina, for example. Some countries did not see a decline, such as Chile, for example. So in Sub-Saharan Africa, it was just really–just a wide variety of countries had an increase–sorry–a decrease in inequality.

And I think, you know, the difference between the two–the reasons that inequality fell in these two regions differed. In Latin America, the reason–the decline in inequality was largely policy-driven. It was largely a function of policies like raising the minimum wage, and conditional cash transfer programs that targeted the poor, and particularly affected women and female-headed households. In Sub-Saharan Africa, a lot of it has to do with the commodity boom that results from the growth of China and the increased demand for these minerals and so forth that are produced in Sub-Saharan Africa, whose prices have been driven up because of the strong demand from China.

DESVARIEUX: Okay. And there are some that would argue, Stephanie, that growing inequality is natural in a capitalistic society. So how do you respond to those that say reform will never address, really, the structural nature of inequality?

SEGUINO: Well, I think that’s true, that capitalism is a system that produces and reproduces inequality. And that’s the reason that deregulation and a reduced role of the state, which is what we’ve observed over the last 20 years, has contributed to the growth of inequality.

If you look at the period between 1929 and roughly 1973 in Europe and the United States, what we’ve seen is declining inequality. And that largely had to do with a labor-corporate compact. It had to do with regulation of businesses that made them accountable to the local communities in which they worked, and the rules limited their bargaining power.

But what’s happened since 1973, really, is that although workers are immobile, firms are free to roam the globe for places to produce the highest profits, or they’re able to outsource. And that’s really, you know, in my view, the crux of what has happened, along with financial deregulation that’s caused a whole host of other problems.

And so there’s nothing inevitable about inequality. I would say maybe it is inevitable that you have inequality if you have unregulated capitalism. But if you’re willing to regulate, if you’re willing to intervene in targeted ways, then inequality can be reduced.

DESVARIEUX: Alright. Stephanie Seguino, professor of economics at the University of Vermont, thank you for your very, very interesting report.

SEGUINO: Thank you.

DESVARIEUX: And thank you for joining us on The Real News Network.

End

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