Inequality in the Americas:
An International Perspective
Andrés Solimano,
President, CIGLOB.
Presentation: Institute of the Americas
University College of London
October 7th, 2015
Agenda
A. Global Picture: Inequality and social structure in 21st century
capitalism.
B. Latin America and North America: conflicting inequality
trends?
C. Growing wealth concentration at the top: in the Americas and
in European austerity countries
C. Interpretation.
D. What can be done to reduce inequality?
2
A. Global Picture I: Inequality
• Rise of inequality (Gini) in US, UK, Russia, China following neoliberal
polices and transition to capitalism.
• Decline in (labor) income inequality in Latin America starting from a
high level BUT high income and wealth concentration at the top.
• Differences in Gini coefficients within the OECD (USA Chile, Mexico,
Turkey on the high side).
• The problem of wealth concentration at the top.
•
GDP per capita Convergence in big developing countries: China and
India but not in all the developing world.
3
Global Picture II: A Polarizing Social
Structure?
• Strenghtening of Economic Elites and the Super Rich
Income and wealth concentration at the top, boosted by
privatization, lower top income tax rates, high CEO
compensation.
• The fragmentation of the Middle Class: Divide between
upper middle class and lower middle class.
• Weakening of the traditional working class due to
outsourcing and de-localization of firms, de-unionization,
labor saving technical progress, immigration.
4
Economic elites: Top 1 % income shares in
English speaking countries, 1913-2013
5
Inequality harms the middle class (Gini
and 3rd to 9th deciles income share)
6
A working class squeeze? Declining
labor shares
7
Raising inequality in the USA and UK (Gini
coefficients)
50
United Kingdom
United States
45
40
35
30
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
1958
1956
1954
1952
1950
25
Source: All the Ginis database (2013)
8
Rising inequality in Russia and China: Gini
coefficients
50
40
Russia
30
20
10
0
Source: 1988-2009: "All the Ginis Database" (2013), 2010-2012: IBGE (2014)
9
B. Inequality in Latin America
• Latin America has higher inequality of income and
wealth than the OECD and the world average.
• The An ineffectual tax state? Economic elites block
redistribution (moderate overall tax revenues as share
of GDP and tilted to indirect taxation).
• Similar Gini coefficients for gross income and
disposable income.
10
Inequality in the Americas: An International Perspective
Comparing Latin America, OECD, World
2008-2010 (Gini for Gross and disposable income)
Gini coefficients for Income and Wealth (OECD and World, 2008-2010)
OECD
Latin America
World
Gross income
Disposable Income
Wealth
46.8
31.6
71.7
53
49
-
-
39.8
81.6
Source: Credit Suisse (2013), OECD Stats and WDI (World Bank)
11
Total tax revenue in LAC and OECD(% of GDP)
40.0
35.0
34.3
33.6
32.2
32.7
33.3
32.8
33.7
34.1
30.0
25.0
20.1
20.0
15.0
19.5
19.8
20.5
21.2
21.3
17.0
14.4
10.0
5.0
0.0
1990
2000
2008
2009
LAC (20)
2010
2011
2012
2013
OECD (34)
Source: OECD Stats
12
Gini coefficients after and before taxes and transfers
Gini coefficients before and after T&T
70
60
50
58.1
53.6
53.2
2.6
2.9
40
30
51.0
34.5
34.2
3.1
3.1
49.9
50.8
12.0
11.9
49.3
56.8
50.6
26.9
46.8
47.2
15.9
16.3
26.8
20.5
21.3
28.8
29.3
31.2
30.0
30.9
31.0
2009
2011
2009
2011
2009
2011
50.3
20
38.9
37.9
31.4
31.1
2009
2011
10
0
2009
2011
Chile
Korea
2009
USA
After T&T
Source: OECD Stats
2011
Germany
Ireland
OECD
Difference
13
A complex story of inequality in the Americas
• Chile, Mexico, Turkey and the US among the
most unequal within the OCED.
• Top income shares from tax-files information
have increased in USA, Argentina, Colombia,
Chile.
• Declining Gini in LAC in last 10 years
(household surveys).
14
Gini coefficient USA, CAN and LAC
Gini Coefficient
55
50
45
40
35
30
25
20
1997
1998
1999
2000
2002
2004
2005
LAC
USA
CAN
2007
2008
2010
2012
Source: USA, CAN: “All the Ginis database” (Milanovic), LAC: ECLAC
15
Inequality within the OECD
0.50
30
S90/S10 income decile share (right scale)
0.45
25
0.40
20
0.35
15
0.30
10
0.25
5
0.20
0
Source: OECD (2011), Divided we stand: Why inequality keeps rising, OECD Publishing.
16
S90/S10 income decile share
Gini coefficient
Gini coefficient (↗)
Top 1 percent's income share in the Americas
30
Canada
Argentina
25
United States
Colombia
20
15
10
5
1913
1916
1919
1922
1925
1928
1931
1934
1937
1940
1943
1946
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
0
Source: World Top Income Database (2015)
17
GDP and Income Inequality (1950-2011)
Source: The data on real GDP per capita (log) is from Penn World Tables 8.1 and Gini
coefficients are from SWIID (2014).
18
The income share of the top 1 percent : Chile
Top 1% in Chile: Different estimates
Author
Year
2010
2005-2010
López et. al
(2013)
Fairfield &
Jorrat (2014)
Method
Income declared to SII
Income declared to SII (adjusted to National
Accounts and by evasion)
Result
15%
21%
2005-2010
Accrued profits reported by SII (adjusted to National
Accounts and by evasion)
33%
2005-2010
Income reported by SII (adjusted to National
Accounts and including capital gains)
31%
2009
Income declared to SII
Distributed profits reported by SII (adjusted to
National Accounts)
Accrued profits reported by SII
Accrued profits reported by SII (adjusted to National
Accounts)
Accrued profits reported by SII (adjusted to National
Accounts and including capital gains)
15%
22%
19%
32%
33%
Source: Own elaboration in base of Lópezet al. (2013) and Fairfield & Jorrat (2014).
Notes: SII is "Servicio de Impuestos Internos" the tax agency of Chile. While both studies used the same source, the data
available in each one is different. The first one is public gross grouped data, the second one has the full universe for
individual tax returns.
19
C. A
look at wealth concentration at the
top: 2008-2014.
• a) The wealth share of the top 1 percent increased
substantially in Argentina, Brazil and Chile (between 18
percent to 60 percent).
• b) Large increases in the top 1 percent wealth share in
austerity countries: between 20 percent and 40 percent in
Greece, Spain and Italy.
• c) Rising wealth share for top 1 percent in Poland, Czech
Republic, France and the UK.
January 2014 - Routgers University
20
Wealth inequality change: Top 10 percent and top 1
percent
Changes in wealth distribution of the top decile and percentile: 2000-20014
Percentage change of the top decile
wealth(%)
2000-2008 2008-2014 2000-2014
Argentina
Brazil
Canada
Chile
Colombia
Czech Republic
Denmark
France
Germany
Italy
Mexico
Norway
Poland
Sweden
United Kingdom
United States
-5.9
-1.0
-6.3
-8.6
-4.8
-6.4
-10.2
-9.9
-3.8
-9.7
-8.6
-1.8
-14.0
-1.7
1.2
0.3
20.7
6.7
-1.0
11.4
-1.4
14.5
8.9
4.5
0.3
8.4
2.2
0.0
4.4
0.1
3.8
-0.3
13.8
5.6
-7.3
1.9
-6.1
7.3
-2.0
-5.9
-3.4
-2.1
-6.5
-1.8
-10.2
-1.6
5.0
0.0
Percentage change of the top
percentile wealth (%)
2000-2008 2008-2014 2000-2014
-14.4
-2.5
-15.8
-18.3
-13.8
-13.7
-20.4
-27.0
-11.0
-24.6
-22.0
-5.3
-29.1
-7.0
2.9
1.0
Source: Davies, Lluberas and Shorrocks, Credit Suisse Global Wealth Databook 2014
60.4
18.3
-2.7
27.4
-4.3
35.2
17.5
16.0
1.8
25.4
6.8
0.7
10.0
0.6
10.5
-1.3
38.2
15.4
-18.1
4.6
-17.6
17.3
-6.4
-15.1
-9.4
-4.8
-16.6
-4.6
-21.8
-6.4
13.7
-0.3
21
Top wealth shares in Austerity Countries
Changes in wealth distribution of the top decile and percentile: 200020014
Percentage change of the Percentage change of the top
top decile wealth (%)
percentile wealth (%)
2000- 2008- 20002000200820002008
2014
2014
2008
2014
2014
Core
Economies
Canada
-6.3
-1.0
-7.3
-15.8
-2.7
-18.1
France
-9.9
4.5
-5.9
-27.0
16.0
-15.1
Germany
-3.8
0.3
-3.4
-11.0
1.8
-9.4
Japan
-3.5
-1.4
-4.9
-8.9
-3.2
-11.8
United
1.2
3.8
5.0
2.9
10.5
13.7
Kingdom
United States 0.3
-0.3
0.0
1.0
-1.3
-0.3
European
Periphery
Greece
-12.2
16.5
2.4
-26.7
41.5
4.7
Italy
-9.7
8.4
-2.1
-24.6
25.4
-4.8
Ireland
-0.9
1.4
0.5
-2.2
2.2
0.0
Portugal
-2.9
3.9
0.9
-10.2
13.8
2.3
Spain
-4.3
7.3
2.8
-10.8
20.8
8.0
Source: Davies, Lluberas and Shorrocks, Credit Suisse Global Wealth
Databook 2014
January 2014 - Routgers University
22
Wealth shares of top 1 and top 10 percent by
region
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Top percentile
Africa
38 38.6 38.2 40.0 39.8 40.0 39.4 39.5 42.4 42.8 42.9 44.8 44.2 46.1
39.7
Asia-Pacific
39.0 38.4 38.1 37.8 37.6 37.1 36.8 36.8 37.2 37.6 37.9 38.6 39.2 39.4 40.4
China
24 25.5 27.2 29.1 30.3 31.6 33.1 34.6 35.4 37.2
19.0 19.8 20.6 21.6 22.8
Europe
31 30.4 29.7 29.1 28.6 28.3 27.8 27.7 28.2 28.8 29.6 30.3 30.6 31.1
31.7
India
43
36.8 37.9 39.0 40.2 41.6
44.6 46.4 48.1 48.3 48.6 48.7 48.8 48.9 49.0
Latin America
39.6 38.9 38.2 37.9 37.1 36.5 35.8 35.1 34.3 36.1 37.1 38.3 39.0 39.5 40.5
North America
38.5 38.5 38.5 38.3 38.3 38.3 38.3 37.9 38.1 37.6 37.5 37.5 37.4 37.5 37.5
World
44
45 46.0 47.1 48.2
48.7 48.4 46.9 46.3 46.3 46.9 46.1 44.7 44.2
44.4
top decile
Africa
76
77
74.4 72.9 73.5 73.1 74.9 74.6 74.7 73.9 74.0
76.0 76.3 77.8
78.3
Asia-Pacific
86.4 85.5 85.1 84.6 84.0 83.1 82.2 81.1 83.4 83.8 83.6 84.8 84.7 84.2 85.3
China
48.6 49.4 50.2 51.1 52.2 53.3 54.6 56.1 57.6 58.7 59.7 60.8 62.0 62.7 64.0
Europe
70.1 69.4 68.8 68.2 67.8 67.2 66.9 66.3 66.2 66.7 67.0 67.8 68.2 68.4 68.8
India
65.9 66.7 67.4 68.3 69.2 70.1 71.2 72.3 73.4 73.6 73.8 73.8 73.9 73.9 74.0
Latin America
70 69.0 68.9 68.6 68.1 67.5 66.8 66.1 67.2 68.1 68.7 69.5
70
70.4
70.8
North America
73 73.0 73.1 73.1
74.1 74.2 74.1 73.9 73.8 73.7 73.7 73.4 73.4 73.1 73.0
World
88.5 87.9 87.3 87.1 87.3 87.2 86.5 85.1 85.7 85.4 85.0 85.5 86.0 86.4 87.4
Source: Davies, Lluberas and Shorrocks, Credit Suisse Global Wealth Databook 2014
23
Total tax revenue (% of GDP)
Argentina
Barbados
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
Uruguay
Venezuela
Unweighted average:
LAC (20)
OECD (34)
Source: OECD Stats
1990
12,4
23,0
7,0
28,2
17,0
9,0
16,1
8,3
7,1
10,5
9,0
16,2
23,0
15,5
..
14,7
5,4
12,1
19,6
18,7
2000
18,0
30,2
14,7
30,1
18,8
14,6
18,2
12,4
10,1
12,2
12,4
15,3
22,8
16,5
13,0
16,7
14,5
14,5
21,6
13,6
2008
24,7
31,5
20,1
33,8
21,4
18,8
22,7
15,0
14,0
15,1
12,9
18,9
25,0
20,7
16,8
16,9
14,6
19,0
26,1
14,1
2009
25,6
30,6
22,3
33,1
17,2
18,6
21,2
13,1
14,9
14,4
12,2
17,1
24,8
17,2
16,9
17,4
16,1
17,0
26,8
14,1
2010
26,7
30,7
20,4
33,2
19,5
18,0
20,8
12,8
16,3
14,8
12,4
17,3
25,0
18,5
17,6
18,1
16,5
18,0
27,0
11,4
2011
27,7
32,3
23,8
35,0
21,2
18,9
21,3
12,9
17,3
14,9
12,7
16,9
24,5
19,5
18,6
18,1
16,8
18,5
26,8
13,1
2012
29,5
34,0
25,5
35,6
21,4
19,6
21,2
13,5
19,4
15,1
12,8
17,5
24,5
19,6
19,2
18,7
17,7
18,8
27,4
13,9
2013
31,2
29,8
27,6
35,7
20,2
20,1
22,4
14,0
19,3
15,8
13,0
18,0
25,0
19,7
19,2
18,9
16,4
18,3
27,1
14,2
14,4
17,0
20,1
19,5
19,8
20,5
21,2
21,3
32,2
34,3
33,6
32,7
32,8
33,3
33,7
34,1
24
C. Summary and Interpretation
a) Inequality has been increasing in mature capitalist countries
(USA, UK) that embraced neoliberal policies and in large
countries that underwent post socialist transitions ( Russia
and China).
b)
Latin America has seen, according to household surveys, a
decline in labor inequality in the 2000s-2010s. This may be
due to :
– more rapid GDP growth
– education and pro -poor social policies.
c) But just moderate levels of tax collection hamper the
scope for effective redistribution (role of economic elites).
25
Summary and Interpretation (cont.)
a) But top income shares and wealth shares remain
high in Latin America
a) Wealth inequality has worsen in several LAC
countries also in countries under austerity policies
Greece, Spain, Italy, France, UK and other European
countries.
January 2014 - Routgers University
26
D. What can be done to reduce inequality?
a) Recognize inequality is a problem.
b) How to manage redistribution economically and
politically? How to overcome a blockade by the elites?
c) Mobilize middle class and working class support.
d) Keep the economy growing.
e) Increase the contribution of direct taxation in Latin
America (below OECD standards).
f) Increase top marginal income tax rates.
g) A wealth tax.
27
What can be done to reduce
inequality? (cont.)
a)
b)
c)
d)
Control tax evasion and tax heavens.
Pro-equity wage- setting institutions
More universal social policies.
Curb concentration of wealth and high
market shares by big conglomerates.
e) Democratic
public
ownership
versus
privatization.
January 2014 - Routgers University
28