Who are society's most vulnerable?
Let’s say, you look at the poorest, which in my view are the most vulnerable in society. In Latin America this is about 10% of the entire population of the area, which is about 80,000,000 living on $2.5 a day, which is the new poverty line derived by the World Bank. We know that among the poor children and women are often the most vulnerable. Also people in old age. These groups are vulnerable for a number of reasons: because they cannot access labour markets, because they are vulnerable and subject to discrimination or because they face barriers to entering markets. Children cannot work because they’re not strong enough. Women are often discriminated against, and the elderly, they don’t have the physical power to work. So these are, in my view, the most vulnerable.
But there’s another category that’s even bigger. It’s about 40% of the population of Latin America. Those living on above $4 a day but under $10 a day. They are not middle class; they are not considered to be poor but they are technically defined as vulnerable to poverty. Why? Because they’re really exposed to shocks like financial crises; they lose their jobs; they lose their small businesses; they are also really vulnerable to environmental shocks. They are also the ones who often live in the slums of big cities, which suffer from all sorts of risks like crime. And they are often exposed to flooding and fire and higher costs of transportation to go to the market place. This is perhaps the biggest group of people in Latin America who are very vulnerable.
Also, within this group young people are very vulnerable. Especially when you think about how one in every five people aged 15 and 25 doesn’t work or study in Latin America. So when you think about that, that's 20% of the young population who don’t have any justification for thinking about the future – they are demoralised. They are not working, and they are not studying, they are not doing anything. So these are the ones who are recruited by criminal organisations, like the drug cartels. This is a social issue, a very severe problem in Latin America.
Why does Latin America remain the most unequal in world?
It depends on how you look at it. Let's say you access the trajectory of inequality looking at income. So, income has been evolving over the last 20 years. Between 2000-2010, which is the decade that people talk about, the region saw a reduction in inequality, so there are things happening within the countries that have been pushing inequality down. But also, between the countries there was a process of economic convergence. So it seems like Latin American countries are converging, slowly, but they are converging to a point that they have similar levels of development. There are still important gaps, but over time they have been convergent. So the difference between, let’s say, Argentina and Bolivia, was much more substantial twenty years ago than now. So, I think the main driver of inequality has been within countries. Of course, inequalities of income don't always capture all dimensions of inequality, like health. Health inequalities are often greater than in income for a number of reasons: the way services are provided, and the quality of the services and also there are significant inequalities within the countries in terms of regional distribution.
How could the region's apparent shift away from Left-leaning populism effect inequality reduction?
The Left, the Centre, and the Right, they all embraced populist policies, which didn’t really lead to declining inequality, but inequality has been falling. Maybe the question is what are the drivers of inequality reduction over the last ten years and to what extent those policies respond to political ideology.
Based on some of the work I’ve been doing with some colleagues, there is no strong or clear correlation. So you find countries like Colombia, where the government is really Centre-Right, or have traditionally been Centre-Right. Or you have countries that were embracing really Centre-Right policies, like Bolivia before Evo, who introduced successful policies in the past. This is also the case in Mexico, where the PRI, a very populist party at the Centre, introduced progress.
So it is not unidirectional. It’s not like the Left is now moving to the Right, but also we observe some countries in the Centre moving to the Left. So, I don’t know the answer really. I suspect that now we know that inequality in the region has started to increase again. The decline stopped around the year 2012, partly because of the economic recession. There are a number of reasons why inequality has been falling in Latin America, but one of the reasons why it is now in reverse trend is, to a large extent, because some of the drivers of redistribution have been exhausted, and economies have stagnated for over five years. So, this reverse trend is in partly, a result of a decrease in appetite for natural resources in the international market.
What should be at the front of every policy-makers mind when trying to reduce poverty?
This is one of the most difficult questions. Because I guess every country will have to find different strategies. I find it very difficult to find a formula for the region. I sometimes think it will come down to the middle class, which has been growing substantially: Now about 45% of the population of Latin America is middle class, far from what it used to be 30 years ago. The middle class in Latin America will play a significant role in this transformation, as it has happened in other regions. If you think about the history of Britain, it was the middle class who actually transformed the country to a large extent.