Inequality and poverty: The urgent need to change the model

By
Raúl Zibechi                                                                          Read Spanish Version

Taken
from Alai-Amlatina

The
global war for foodstuffs makes it clear that the social plans are
insufficient to palliate poverty and that only replacing the present
model can reduce the inequality that afflicts the region.

In
only six months, 10 million new poor have been created in Latin
America. Although the price of food in the region rose less than in
the rest of the world (15 percent, versus 68 percent), the number of
poor people rose from 190 million to 200 million in only six months,
according to Argentine sociologist Bernardo Kliksberg, an advisor to
the United Nations Development Program. (1)
But
this is only the beginning.

According
to Amartya Sen, Nobel laureate for economics with whom Kliksberg has
just co-authored the book First
the People,
for the past 30 years people have foreseen that hunger can come to
countries that are food producers. The current food crisis, the
direct descendant of the failed housing boom, negates any analysis
that attempts to deny the responsibility of that model in the
generation of poverty. Mainly when it is known that the region
produces enough foodstuffs to satisfy a population three times its
current size.

To
combat inequality

Latin
America is the region with the world’s most widespread inequality.
Even though a large number of South American countries have had
progressive and left-wing governments for several years, inequality
continues to grow, at least in the Southern Cone.

A
recent study by Brazil’s Institute for Applied Economics Research
reveals that 10 percent of the population holds 75.4 percent of the
wealth. The social policies of Lula’s administration, applied since
2003 to alleviate poverty, have slightly reduced inequality but not
enough for anyone to notice. Worse still is the fact that inequality
has reached the same levels that existed in the 18th Century. Marcio
Pochman, member of the Workers Party and director of the IAER, said
that the data demonstrate how "despite the changes in the
nation’s political regime and pattern of development, wealth remains
badly distributed among Brazilians." (2)

According
to Pochman, in Rio de Janeiro in the 18th Century, the 10 percent
wealthiest people held 68 percent of the wealth, while today they
hold 63 percent. Sao Paulo is ahead of other cities with 73.4 percent
of wealth concentration by the 10 percent wealthiest people. In the
opinion of the IAER’s director, "no country in the world managed
to end social inequalities without a true tax reform." He
explains that indirect taxes, such as VAT (value-added tax), that
predominate in the region, punish the poorest people. The 10 percent
poorest people in Brazil pay 44.5 percent more than the 10 percent
richest people, because the tax burden falls on 33 percent of the
income of poor people and only 22 percent of the income of the
wealthiest.

Conservative
governability

A
study by economist Claudio Lozano, of the Argentine Workers Central,
released in February 2008, reveals that in the past four years "out
of every 100 new pesos that were generated, the 30 percent wealthiest
people took 62." That is why, Lozano believes, after five years
of economic growth (with a GDP 36 percent greater than in 2001) the
poor continue to account for 30 percent of the population.

A
concentrating model (which Lozano calls "conservative
governability") is beginning to block the continuity of
expansion and prevents people from taking advantage of the good
opportunities that existed in the past five years. Worse yet, the
cycle of growth seems to be reaching an end, amid an inflationary
speculative trend. "Inflation acts as a corrective mechanism
that preserves the extraordinary profits of the concentrated
entrepreneurial group," Lozano states. At the same time, in
Argentina, inflation is fostered because "the rich consume a lot
and invest little and poorly." (3)

To
complete a brief panorama of three governments that emerged as a
consequence of the anti-neoliberal wave, the Uruguayan case is not
very different. The Tabaré Vázquez administration is
the only government that implemented an important tax reform, a
progressive reform that takes more from those who make more money but
does not tax capital. Thus, the data confirm the growth of inequality
even in the first three years of the progressive government.

The
Gini Index, which measures inequality, has been deteriorating in
Uruguay in the past 20 years, that is, from the installation of the
neoliberal model. And it deteriorates consistently, during periods of
crisis or growth, under rightist or leftist governments. In 1991, it
was 41.1; from there, it went to 45 in 2002, at the peak of the
economic-financial crisis. In 2005, when Tabaré Vázquez
took office, it dropped to 44.1, only to rise to 45.7 in 2007. (4)
Even
under a leftist government, and in a country that has the lowest
index of inequality in the continent, the 20 percent wealthiest
people continue to hoard the income at an ever faster pace. In 2001,
it held 46.4 percent; in 2002, 50.3 percent; and in 2007, after the
tax reform, 51.1 percent.

It
seems evident — as shown by a report by economists Verónica
Amarante and Andrea Vogorito — that "we cannot expect that the
policies of income transfer by themselves will solve" the
problems of poverty and indigence. The report refers to the social
plans that exist in Uruguay, but also in Brazil and Argentina, which
alleviated poverty until food speculation began to reverse the small
advances made in the past five years.

There
seems to be no doubt that what’s at issue here is the continuity of
the neoliberal model in its phase of appropriation of common goods
(mining, forestry, soy, sugar cane for biofuels). Until now, the
exclusion and poverty this model generates had been softened by
social plans, which, in the case of Brazil, cover 25 percent of the
population. But the voracity of capital demands a change of
direction. Tax reforms and social plans will continue to be necessary
instruments, but poverty and inequality will decrease significantly
only when the present model of accumulation through theft and
speculation is shelved and another model is implemented that is based
on endogenous growth.

Raúl
Zibechi, an Uruguayan journalist, is a docent and researcher at the
Franciscan Multiversity of Latin America. He advises several social
groups.

[1]
Cash, supplement of Página 12, June 15, 2008.

[2]
Folha de São Paulo, May 18, 2008.

[3]
Claudio Lozano, "A Look at the Current Situation. Change of
Government or Change of Era?" Educational Institute of the
Argentine Workers Central, May 2008.

[4]
"Poverty, Inequality and Income Transfers," Brecha, June
13, 2008.

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