You should ask Argentina how well their socialist policies have worked for them these past few decades. Frankly, I think you can ascribe the dismal state of South America due to their pink-wave. South America is an example of how socialism destroys market forces, meritocracy, and therefore wealth, happiness and freedom. Ultimately, it even increases inequality, as people aren't owners of their own labour and capital --> it just means the government and people close to the government controls all the resources. Latin America is an example of where socialism leads.
Why this fetish for equality? Isn't absolute wealth more important? If I'm poor, I'd be happy to double my income and gain ground on a rich guy, but I'd be even happier to triple it, even if the rich guy quintuples his, making inequality "worse."
I understand that inequality can cause a lot of resentment, but I think that can be greatly mitigated if the poor are getting richer in absolute terms.
As a venezuelan who studied economics in undergrad, this topic strikes close to home.
Worth noting that Spain focused on "exploiting" its colonies in contrast to Britain focused on "colonizing" the foreign lands it controlled. Spain held an iron grip on its colonies, as described in Marie Arana's amazing biography titled "Bolivar". Britain in its colonies even built bureaucracies staffed with locals, these were useful institutions which remained after the Brits left.
Bolivia's Evo Morales is far left but respected the independence of Bolivia's Central Bank, in contrast to Venezuela's Chavez who did the opposite on steroids by not only taking over Venezuela's Central Bank but also by creating opaque funds which at one point accounted for over two-thirds of "government revenue" which was ballooning due to the increase of the price of oil from $10/bbl when Chavez was elected to a high of $154/bbl in 2008.
Note that Friday evening the venezuelan opposition agreed on a candidate to oppose Maduro on the elections on July 28. Keep an eye on Venezuela, change is in the air!
Failure to implement rural agricultural improvement policies that could increase exports. And, failed banking systems. Both account for the lack of progress.
My next door neighbor was an ag economist who traveled the world helping teach teachers who would then go on to try to improve agricultural output.
Several problems: First, most of the teachers seldom went out to the farm, but stayed in their air conditioned offices in urban areas.
Second, landowners lived in the cities and viewed the estate as a place you visit on the weekend. It was not viewed as an asset to be improved upon. In fact, the landowner was often judged on how his cattle looked, and not on how much beef he produced. The better looking cattle of a certain variety was terrible to eat, but looked good.
Third, these places could produce exportable crops. In fact, because they did not use fertilizer, they could call themselves organic. But, there was no system in place for export or marketing, and people were happy with what they had.
Finally, the banking systems were often a disaster. Owned by the elites, the elites lent to themselves, using the deposits of its depositors for the loans. If there were a financial crisis, guess what, instead of the elites loans being called, the government was brought in to "save the bank and depositors", never looking at the bad loans on the books.
Banking reform and ag policies and training, with exports would, he said, reduce inequality and increase income
You are an extremely open minded thinker, and I wish you would similarly “open up” the discussion on inequality. In brief, though extreme inequality is often correlated with dysfunctional institutions and cultures, it is not actually negative in and of itself. This is something that I am absolutely sure you both know and appreciate. The inequality of incomes is not a negative side effects of markets, it is an essential part of how and why they work, and “solving” inequality therefore emasculates and destroys any effective market dynamic.
Of course the real question is in regards not to “inequality” but to “excessive inequality.” But the devil here is in the details. What is excessive, and what are the underlying causes contributing to this? As the report you link to explains, the solution for improved growth in SA has been education. This increases the productivity of the bottom quintile, and also increases the complexity potential of the market.
In the wealthier economies, it should not be taken for granted that higher inequality is necessarily a bad thing (it can be of course, in some ways). Higher inequality reflects the market signaling and incentivizing higher education and skill development, relocation to higher productivity areas, additional investment and entrepreneurial activity, and so on. Higher equality can also reflect excessive transfers that are discouraging work and education and mobility and investment and entrepreneurship.
My point is that inequality is a mathematical concept. Increasing or decreasing inequality is not in itself a good or bad thing. It depends. And what it depends upon are the things that make your insights into economics so interesting.
"What did affect pretty much every country in the region, however, were two things: 1) faster economic growth, and 2) increased education."
Let's spend a little more time talking about item 1.
The countries that grew in the region were those that practiced freer trade, more property rights, market friendly reforms, etc over the past couple of decades. Ie Chile, Peru, Colombia. Those that didn't have stagnated growth or become worse: Brazil, Argentina, Venezuela.
As an Argentine it's pretty clear to me why we've failed to solve poverty, and it's our penchant for seemingly simple populist solutions.
Støstad's data comes from wid.world. That is Piketty, Saez, Zucman, etc... not what I would consider an unbiased source. Also, he doesn't mention whether he's using Piketty's post-tax income, or post-tax disposable income. Disposable is useless (or maybe not if you want an index that you can abuse in order to score ideological points).
A few gems:
- "There are many ways to reduce inequality... minimum wages"
- "We seek to distribute the entirety of national income among resident households (including... to and from the foreign sector)".
- "Our estimate of missing net foreign income is based on the work of Zucman (2013). A well-established anomaly of balance of payment statistics is that, when summing net foreign incomes at the world level, the total tends to be consistently negative rather than around zero. As if the world as a whole was a net debtor. Since this is not possible, the main explanation for that fact — given by Zucman (2013) — is that assets hidden in offshore tax havens get recorded as a liability but never as an asset"
Latin America is also probably the most crime-ridden region of the world, although perhaps it is the inequality that fuels the drug cartels in the first place?
And as for Venezuela, how much of its collapse was down to incompetence, and how much was it down to Chávez being a massive Fidel Castro fanboy who basically turned Venezuela into Cuba's oil colony?
I've mentioned before that we have a huge influx of Venezuelan migrants in Denver. It's interesting to see the differences between the younger migrants and the older ones. The folks over 40 seem to be more functional and certainly more literate. One of the over-40 folks said that it's because she and her cohort actually got educated. The younger group are barely literate. There are Facebook groups trying to connect locals to migrants to provide support and the migrants sometimes can't make themselves understood because they can't read, write, or spell. Local Denverites who are fluent in Spanish have as much trouble as those of us using translation apps.
And of course migrants who have no work permit, no documents, AND no literacy or numeracy are at a huge disadvantage when trying to find any kind of work or even work training. It's all quite distressing.
The graphs that you cited ends in 2012-2014, which is roughly before the commodity prices crashed (most notably, oil prices), and with that, the GDP growth for nearly all Latin American countries. (Just note that Argentina for now has known GDP per capita decline for over a decade, for example).
Also, the pink tide largely receded from roughly the same time; even though there are more left-wing leaders like Boric or Petro, they are less radical compare to people like Chavez though. Just some ideas for you to improve your analysis 😀
Instituting high school in the U.S. made an Economic Leap Forward possible. The world soon followed, institutionalizing high school in their societies.
I could say that thermonuclear war is the greatest threat to the survival of America. I’d be right but since that is global ending threat it does’t apply. What is the problem which threatens the survival of America? Our public schools continuing inability to educate our youth.
People believe that a good school depends on clean nice buildings, safety, good teachers and administrators. Sorry but the answer is no, they only matter on the margins. The single thing that matters most is the cohort of children. What makes a good cohort? Children who go to school to learn. Parents have the most control over whether children come to school to learn or not.
Why do charter schools do so well? It is largely due to parents who want their kids to go to one because they value education. My wife, a 6th grade language arts teacher in a good suburban school with largely middle to upper middle class homes can point to why her kids don’t do well. They don’t want to. They’d rather talk, have fun, do anything other than school work. How does the school treat kids who choose not to do their work? Spend time talking instead of working on their work?
Nothing. the worst punishment you can get at her school is lunch detention. 25 min. You don’t get to go to the cafeteria and spend that time with friends. There is no holding children back who don’t do their work. There is no suspension. No after school detention and no Saturday suspension.
When notes are sent home they have no effect. I could go on but I’ll share one email from a frustrated parent. “We have tried everything but he simply doesn’t mind. Frankly we are close to giving up”
Have parenting skills been lost? My solution is to start holding kids back. If parents cannot instill a culture of learning, explain that school is their job, something has to be done to motivate these kids.
I will also say, everybody seemingly has ADD ADHD, anxiety or depression or something that affects their learning....Without some discipline our schools are going to hell in a hand basket.
I wonder to what degree cell-phones have helped enrich the poor and increase the middle class. Now obviously you need some education to use a phone so this isn't exactly competing with the educationa hypothesis. However once you hit that base the main thing a cellphone does is make it easy to communicate with potential customers and suppliers and to search for better deals/offers.
Very useful stuff but I live in Mexico in the center of the country and have worked extensively in many parts of the country and there is some reliable evidence that the numbers for Mexico are somehow inaccurate. During the time(3 decades) I have worked there the number and breadth of secondary and tertiary educational opportunities have expanded significantly. At the same time if you move around the country you see large numbers of middle class housing projects being built - the fastest growing city in the country (Queretaro) is replete with many developments. The recent moves in several countries to the left (with the counter example of Milei in Argentina - if he can stay the course) have not exactly been a harbinger of improving the GINI.
You should ask Argentina how well their socialist policies have worked for them these past few decades. Frankly, I think you can ascribe the dismal state of South America due to their pink-wave. South America is an example of how socialism destroys market forces, meritocracy, and therefore wealth, happiness and freedom. Ultimately, it even increases inequality, as people aren't owners of their own labour and capital --> it just means the government and people close to the government controls all the resources. Latin America is an example of where socialism leads.
Why this fetish for equality? Isn't absolute wealth more important? If I'm poor, I'd be happy to double my income and gain ground on a rich guy, but I'd be even happier to triple it, even if the rich guy quintuples his, making inequality "worse."
I understand that inequality can cause a lot of resentment, but I think that can be greatly mitigated if the poor are getting richer in absolute terms.
North America: Canada, US, Mexico
Mexico is NOT part of Central America; though it’s part of Latin America.
It pisses off (this Mexican) to no end when Mexico is grouped w Central America.
As a venezuelan who studied economics in undergrad, this topic strikes close to home.
Worth noting that Spain focused on "exploiting" its colonies in contrast to Britain focused on "colonizing" the foreign lands it controlled. Spain held an iron grip on its colonies, as described in Marie Arana's amazing biography titled "Bolivar". Britain in its colonies even built bureaucracies staffed with locals, these were useful institutions which remained after the Brits left.
Bolivia's Evo Morales is far left but respected the independence of Bolivia's Central Bank, in contrast to Venezuela's Chavez who did the opposite on steroids by not only taking over Venezuela's Central Bank but also by creating opaque funds which at one point accounted for over two-thirds of "government revenue" which was ballooning due to the increase of the price of oil from $10/bbl when Chavez was elected to a high of $154/bbl in 2008.
Note that Friday evening the venezuelan opposition agreed on a candidate to oppose Maduro on the elections on July 28. Keep an eye on Venezuela, change is in the air!
Failure to implement rural agricultural improvement policies that could increase exports. And, failed banking systems. Both account for the lack of progress.
My next door neighbor was an ag economist who traveled the world helping teach teachers who would then go on to try to improve agricultural output.
Several problems: First, most of the teachers seldom went out to the farm, but stayed in their air conditioned offices in urban areas.
Second, landowners lived in the cities and viewed the estate as a place you visit on the weekend. It was not viewed as an asset to be improved upon. In fact, the landowner was often judged on how his cattle looked, and not on how much beef he produced. The better looking cattle of a certain variety was terrible to eat, but looked good.
Third, these places could produce exportable crops. In fact, because they did not use fertilizer, they could call themselves organic. But, there was no system in place for export or marketing, and people were happy with what they had.
Finally, the banking systems were often a disaster. Owned by the elites, the elites lent to themselves, using the deposits of its depositors for the loans. If there were a financial crisis, guess what, instead of the elites loans being called, the government was brought in to "save the bank and depositors", never looking at the bad loans on the books.
Banking reform and ag policies and training, with exports would, he said, reduce inequality and increase income
Second,
Noah,
You are an extremely open minded thinker, and I wish you would similarly “open up” the discussion on inequality. In brief, though extreme inequality is often correlated with dysfunctional institutions and cultures, it is not actually negative in and of itself. This is something that I am absolutely sure you both know and appreciate. The inequality of incomes is not a negative side effects of markets, it is an essential part of how and why they work, and “solving” inequality therefore emasculates and destroys any effective market dynamic.
Of course the real question is in regards not to “inequality” but to “excessive inequality.” But the devil here is in the details. What is excessive, and what are the underlying causes contributing to this? As the report you link to explains, the solution for improved growth in SA has been education. This increases the productivity of the bottom quintile, and also increases the complexity potential of the market.
In the wealthier economies, it should not be taken for granted that higher inequality is necessarily a bad thing (it can be of course, in some ways). Higher inequality reflects the market signaling and incentivizing higher education and skill development, relocation to higher productivity areas, additional investment and entrepreneurial activity, and so on. Higher equality can also reflect excessive transfers that are discouraging work and education and mobility and investment and entrepreneurship.
My point is that inequality is a mathematical concept. Increasing or decreasing inequality is not in itself a good or bad thing. It depends. And what it depends upon are the things that make your insights into economics so interesting.
"What did affect pretty much every country in the region, however, were two things: 1) faster economic growth, and 2) increased education."
Let's spend a little more time talking about item 1.
The countries that grew in the region were those that practiced freer trade, more property rights, market friendly reforms, etc over the past couple of decades. Ie Chile, Peru, Colombia. Those that didn't have stagnated growth or become worse: Brazil, Argentina, Venezuela.
As an Argentine it's pretty clear to me why we've failed to solve poverty, and it's our penchant for seemingly simple populist solutions.
"For example, Morten N. Støstad"
Støstad's data comes from wid.world. That is Piketty, Saez, Zucman, etc... not what I would consider an unbiased source. Also, he doesn't mention whether he's using Piketty's post-tax income, or post-tax disposable income. Disposable is useless (or maybe not if you want an index that you can abuse in order to score ideological points).
A few gems:
- "There are many ways to reduce inequality... minimum wages"
- "We seek to distribute the entirety of national income among resident households (including... to and from the foreign sector)".
- "Our estimate of missing net foreign income is based on the work of Zucman (2013). A well-established anomaly of balance of payment statistics is that, when summing net foreign incomes at the world level, the total tends to be consistently negative rather than around zero. As if the world as a whole was a net debtor. Since this is not possible, the main explanation for that fact — given by Zucman (2013) — is that assets hidden in offshore tax havens get recorded as a liability but never as an asset"
You usually cite very reliable sources.
Latin America is also probably the most crime-ridden region of the world, although perhaps it is the inequality that fuels the drug cartels in the first place?
And as for Venezuela, how much of its collapse was down to incompetence, and how much was it down to Chávez being a massive Fidel Castro fanboy who basically turned Venezuela into Cuba's oil colony?
I've mentioned before that we have a huge influx of Venezuelan migrants in Denver. It's interesting to see the differences between the younger migrants and the older ones. The folks over 40 seem to be more functional and certainly more literate. One of the over-40 folks said that it's because she and her cohort actually got educated. The younger group are barely literate. There are Facebook groups trying to connect locals to migrants to provide support and the migrants sometimes can't make themselves understood because they can't read, write, or spell. Local Denverites who are fluent in Spanish have as much trouble as those of us using translation apps.
And of course migrants who have no work permit, no documents, AND no literacy or numeracy are at a huge disadvantage when trying to find any kind of work or even work training. It's all quite distressing.
The graphs that you cited ends in 2012-2014, which is roughly before the commodity prices crashed (most notably, oil prices), and with that, the GDP growth for nearly all Latin American countries. (Just note that Argentina for now has known GDP per capita decline for over a decade, for example).
Also, the pink tide largely receded from roughly the same time; even though there are more left-wing leaders like Boric or Petro, they are less radical compare to people like Chavez though. Just some ideas for you to improve your analysis 😀
Instituting high school in the U.S. made an Economic Leap Forward possible. The world soon followed, institutionalizing high school in their societies.
I could say that thermonuclear war is the greatest threat to the survival of America. I’d be right but since that is global ending threat it does’t apply. What is the problem which threatens the survival of America? Our public schools continuing inability to educate our youth.
People believe that a good school depends on clean nice buildings, safety, good teachers and administrators. Sorry but the answer is no, they only matter on the margins. The single thing that matters most is the cohort of children. What makes a good cohort? Children who go to school to learn. Parents have the most control over whether children come to school to learn or not.
Why do charter schools do so well? It is largely due to parents who want their kids to go to one because they value education. My wife, a 6th grade language arts teacher in a good suburban school with largely middle to upper middle class homes can point to why her kids don’t do well. They don’t want to. They’d rather talk, have fun, do anything other than school work. How does the school treat kids who choose not to do their work? Spend time talking instead of working on their work?
Nothing. the worst punishment you can get at her school is lunch detention. 25 min. You don’t get to go to the cafeteria and spend that time with friends. There is no holding children back who don’t do their work. There is no suspension. No after school detention and no Saturday suspension.
When notes are sent home they have no effect. I could go on but I’ll share one email from a frustrated parent. “We have tried everything but he simply doesn’t mind. Frankly we are close to giving up”
Have parenting skills been lost? My solution is to start holding kids back. If parents cannot instill a culture of learning, explain that school is their job, something has to be done to motivate these kids.
I will also say, everybody seemingly has ADD ADHD, anxiety or depression or something that affects their learning....Without some discipline our schools are going to hell in a hand basket.
I wonder to what degree cell-phones have helped enrich the poor and increase the middle class. Now obviously you need some education to use a phone so this isn't exactly competing with the educationa hypothesis. However once you hit that base the main thing a cellphone does is make it easy to communicate with potential customers and suppliers and to search for better deals/offers.
Very useful stuff but I live in Mexico in the center of the country and have worked extensively in many parts of the country and there is some reliable evidence that the numbers for Mexico are somehow inaccurate. During the time(3 decades) I have worked there the number and breadth of secondary and tertiary educational opportunities have expanded significantly. At the same time if you move around the country you see large numbers of middle class housing projects being built - the fastest growing city in the country (Queretaro) is replete with many developments. The recent moves in several countries to the left (with the counter example of Milei in Argentina - if he can stay the course) have not exactly been a harbinger of improving the GINI.
Who cares about equality? what really matters is poverty, we can have very little inequality and have generalized poverty