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| Latin America's income inequality falling, says World Bank | Latin America's income inequality falling, says World Bank |
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| Income inequality is falling in Latin America even as it rises elsewhere in the world, according to a World Bank study that encourages government intervention to reduce the wealth gap. | Income inequality is falling in Latin America even as it rises elsewhere in the world, according to a World Bank study that encourages government intervention to reduce the wealth gap. |
| Over the past 15 years, more than 50 million people have risen into the middle class, which is now – for the first time – about the same size as the population of poor in the region, says the report, which was unveiled on Tuesday. | Over the past 15 years, more than 50 million people have risen into the middle class, which is now – for the first time – about the same size as the population of poor in the region, says the report, which was unveiled on Tuesday. |
| For decades, Latin America was notorious for some of the widest income gaps in the world, but a combination of favourable economic conditions and interventionist policies by left-leaning governments in Brazil and other countries has brought it more closely in line with international norms. | For decades, Latin America was notorious for some of the widest income gaps in the world, but a combination of favourable economic conditions and interventionist policies by left-leaning governments in Brazil and other countries has brought it more closely in line with international norms. |
| "This is not just a statistical anomaly. It is a significant reduction in inequality," said the World Bank's regional chief economist, Augusto de la Torre. | "This is not just a statistical anomaly. It is a significant reduction in inequality," said the World Bank's regional chief economist, Augusto de la Torre. |
| He said Latin America remains one of the most unequal regions in the world, but it one of the only places where the gap is closing. | He said Latin America remains one of the most unequal regions in the world, but it one of the only places where the gap is closing. |
| "There is some sort of convergence. Latin America is approaching the norm of advanced economies, but unfortunately, advanced economies are approaching the norm of the Latin America model," De la Torre said during an online press conference to mark the release of the report | "There is some sort of convergence. Latin America is approaching the norm of advanced economies, but unfortunately, advanced economies are approaching the norm of the Latin America model," De la Torre said during an online press conference to mark the release of the report |
| He said the main reason for the reduction in inequality is not a compression of income from the rich at the top, but because of a rapid growth in the incomes and spending power of those at the "bottom of the population pyramid". | He said the main reason for the reduction in inequality is not a compression of income from the rich at the top, but because of a rapid growth in the incomes and spending power of those at the "bottom of the population pyramid". |
| About 30% of the region's population is now in the middle class, which the World Bank defines as those who have less than a 10% chance of falling back into poverty. This is similar to the proportion who are classified as poor. In between is the biggest group, the 38% who are considered "vulnerable" because they live just above the poverty line on an income of between $4 and $10 a day. | About 30% of the region's population is now in the middle class, which the World Bank defines as those who have less than a 10% chance of falling back into poverty. This is similar to the proportion who are classified as poor. In between is the biggest group, the 38% who are considered "vulnerable" because they live just above the poverty line on an income of between $4 and $10 a day. |
| The authors of the report emphasised that the gains are still fragile because many people could easily slip back into poverty. Some have increased their spending power through greater access to credit rather than higher-paying jobs. A substantial factor in the economic gains of recent years has been extra demand for commodities from China, which has slowed this year. | The authors of the report emphasised that the gains are still fragile because many people could easily slip back into poverty. Some have increased their spending power through greater access to credit rather than higher-paying jobs. A substantial factor in the economic gains of recent years has been extra demand for commodities from China, which has slowed this year. |
| "It is a remarkable phenomenon. But we in Latin America must not sing victory yet because it has been accompanied by very strong tail winds in the last few years, very favourable international conditions," said De la Torre. "If they become much less benign, we must be particularly vigilant to pursue policies that preserve what we have gained." | "It is a remarkable phenomenon. But we in Latin America must not sing victory yet because it has been accompanied by very strong tail winds in the last few years, very favourable international conditions," said De la Torre. "If they become much less benign, we must be particularly vigilant to pursue policies that preserve what we have gained." |
| The report, titled Economic Mobility and the Rise of the Latin American Middle Class, recommends improvements in public education and healthcare as a way of consolidating the upward mobility of the population. Currently, one of the biggest gaps is not in spending power, but in access to decent social services. In many countries, poorer families have no choice but to put their children in low-standard schools and their sick in poorly-funded hospitals, while the middle class spend substantial sums on private education and health care. | The report, titled Economic Mobility and the Rise of the Latin American Middle Class, recommends improvements in public education and healthcare as a way of consolidating the upward mobility of the population. Currently, one of the biggest gaps is not in spending power, but in access to decent social services. In many countries, poorer families have no choice but to put their children in low-standard schools and their sick in poorly-funded hospitals, while the middle class spend substantial sums on private education and health care. |
| The World Bank's president, Jim Yong Kim, emphasised the role played by the private sector, which he said creates 90 percent of jobs in developing countries. | The World Bank's president, Jim Yong Kim, emphasised the role played by the private sector, which he said creates 90 percent of jobs in developing countries. |
| But he said the great strength of the story in Latin America was that countries that have self-consciously focussed on reducing inequality have also experienced rapid economic growth. | But he said the great strength of the story in Latin America was that countries that have self-consciously focussed on reducing inequality have also experienced rapid economic growth. |
| The recently appointed head of the World Bank - a major lender to developing nations - said he has passed on the same message this week to Haiti, which has the worst inequality in the region and the worst access to education and healthcare in the region. | The recently appointed head of the World Bank - a major lender to developing nations - said he has passed on the same message this week to Haiti, which has the worst inequality in the region and the worst access to education and healthcare in the region. |
| He described Haiti's current system as a brand of "market-based capitalism that nobody wanted to see". | He described Haiti's current system as a brand of "market-based capitalism that nobody wanted to see". |
| "I made very clear to them that the evidence from the rest of Latin America is that their path to growth has to include many, many more people. It has to open access to the market, to education and to health services to a much broader sector of society. That is not because equality is good and inequality is bad; it is because that is the path to growth," Kim said. | "I made very clear to them that the evidence from the rest of Latin America is that their path to growth has to include many, many more people. It has to open access to the market, to education and to health services to a much broader sector of society. That is not because equality is good and inequality is bad; it is because that is the path to growth," Kim said. |
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