Wantto to
address
economic
growth?
Address
inequality,
too.
By Guillermo Perry
ATIN AMERICA SUFFERS FROM BOTH
the world’s highest rate of income
inequality and from a lackluster economic performance that puts it well behind the growth levels of
other emerging regions such as Asia. Could there be
a connection? Recent research suggests that high
inequality and low social mobility are more than
just poor people’s problems: they represent a severe
drag on economic growth and stability. In Latin
America, vast numbers of people are not only cut
off from the benefits of economic progress: they are
unable to contribute meaningfully to the development of their societies.
This phenomenon, often ignored by economists,
has profound implications for the region on every
level, ranging from low levels of investment and
untapped human potential, to high crime rates and
macroeconomic instability. But these facts do not
imply that the region’s special history and flawed
institutions condemn it to permanent levels of high
inequality and low growth.
Several Latin American governments are pursuing policies that, in fact, have simultaneously reduced
inequality of opportunities, if not yet of income, and
enhanced growth. Chile, for instance, has adopted
conservative macro-financial policies and encouraged
free trade and private-sector participation in infrastructure and public services, while at the same time
expanding coverage of basic services and implementing an ambitious integrated program, Chile Solidario,
aimed at the extreme poor. Uruguay and Costa Rica
have similarly struck an effective balance between
pro-market policies and universal access to basic
