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August 6, 2010

Low income countries have a $65bn hangover from the global crisis -will it destroy the MDGs?

August 6, 2010

Venezuela: Latin America's inequality success story

August 6, 2010
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Hugo Chavez, Venezuela’s President, has plenty of critics, who often focus on his style (not least his interminable unscripted chat show, Alo Presidente), and in many ways he does fit into the tradition of the Latin American caudillo (the ‘strong man on horseback’). But Venezuela certainly seems to be getting something right on inequality. According to the highly reputable UN Economic Commission for Latin America and the Caribbean, it now has the most equal distribution of income in the region, and has improved rapidly since 1990. Here’s a graph from a recent ECLAC report, ‘Time for Equality: Closing Gaps, Opening Trails‘. It shows the change in the gini index of income inequality in the major Latin American economies from 1990 to 2008.

Latin America inequality 1990-2008

Any country below the line has lowered inequality over the period (with the gini index, 1 = absolute inequality, zero = total equality). Two points jump out – firstly, as I’ve reported before, most of the region has had a good couple of decades, in which a combination of good social policy and economic stability have brought down historically high levels of inequality. But the thing that surprised me is Venezuela, which has overtaken Ecuador, Paraguay and Costa Rica to become the most equal (or since this is Latin America, the least unequal) country in the region. And this in a massively oil dependent country, when natural resource dependence typically leads to high levels of inequality, because it generates few jobs, and revenues tend to go to the well connected few. Anyone (pro or anti) got any convincing explanations? [h/t Katia Maia]

And here’s a (brief) taste of Alo Presidente

7 comments

  1. According to the same report, Venezuela’s “Institutions that Support Small and Medium-Sized Enterprise” spend the greatest percentage of their GDP, amongst all LA countries.

    Also it has the second highest Spending on social protection

    @Andrew: The report also says that the “…provision of social services is possible almost exclusively because of the higher levels of development achieved by societies with Governments buoyed by natural-resource revenues (the Bolivarian Republic of Venezuela and Mexico).” I am no expert, but to me this also shows that the govt/leadership has strong redistributive inclinations, and that’s a pre-condition for redistribution actually happening. I suspect that inclination is partly an outcome of ideology. Of course, I have no idea where to place ‘ideology’ within strategic frameworks/PRSPs et cetra.

  2. Hi Duncan,

    One question: does Chavez really deserve the credit? The chart is from 1990 to 2008.

    OTOH, the first chart in this VoxEU article, from 2000-06 has Venezuela as a relative under-performer:
    http://www.voxeu.org/index.php?q=node/5148

    I’m struggling to square the two.

    Duncan: Well, Chavez has been in power since 1998, so you’d have to be pretty churlish not to give him some of the credit, I think. On the other hand, if the VoxEU article is right (and it looks pretty solid), that suggests that the progress mainly took place in the 90s. Tricky.

  3. Worth noting two things:

    1. P172 and 173 of the ECLAC report have further charts broken into pre 2002 and post 2002. And Venezuela looks good in those for post 2002 (i.e. Chavez deserves credit). So maybe the discrepancy between ECLAC and VoxEU is because the VOXEU chart covers two of Chavez’s worst years (00-02) and excludes two of his best (06-08)?

    2. And, of course, the Gini coefficient won’t capture the welfare impact of his health clinics either. So in terms of welfare inequality (rather than income inequality) Chavez may do better still.

  4. Hi there and thx for the blog Duncan

    if you take a look at Venezuela Gini coeff within the period, for instance on the world bank website (data displayed until 2006), you may infer that the diminition must have happened somewhere within the 2006-2010 period. 2005: 49.5; 2006: 44.8 … and 2010: 38.9 as it seems.

    Strange strange …

    Question: how is it possible to reduce inequalities from such an amount in such a short period of time?
    My answer (as a statitician myself): mostly propaganda I am afraid.

    One could think the decrease reflects the impact of the economic slowdown and/or redistribution, but franckly this looks very very much like an old school sovietic set of home made statistics. The 2010 index can only be found on the venezuela national institute for statistics web, and in an adress from its director to explain the country’s achievements on the venezuela us embassy web (http://venezuela-us.org/2010/11/17/venezuelan-has-latin-america%E2%80%99s-best-income-distribution/).

    I agree people are free to believe in what they want, even in democratic socialism or bolivarian revolution, but I always find it strange they need figures for that.

    Best wishes and happy new year to all (yes, 2013. Chavez changed venezuela time zone by half an hour in 2007, so far he did not change the year, good for them).

    Paul

  5. “If a country transfers huge amounts of economic value from the hard-working productive demographic to the lazy and slothful demographic, causing the Gini number to become “More Equal,” is the country better-off? Does the economy improve? Or does the previously productive and motivated demographic change its behavior and reduce its productivity so there is less to take and hence consume?”

    http://www.economist.com/blogs/graphicdetail/2013/01/daily-chart-20?fsrc=scn/fb/wl/dc/gini

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