Is More Equality Possible in Latin America?: A Challenge in a World of Contrasted but Interdependent Inequality Regimes

Abstract

Three contemporary paradoxes deserve explanations. First, in America, the finance-led growth regime has brought about a rupture with the Fordist Golden Age, causing a surge of inequality, because of quite specific spill-over effects from the economy to policy, whereby diverse social science research has convincingly concluded that the cost of inequality has become excessively large. Second, the Euro-zone crisis is often perceived as reflecting the limits of universal welfare states and the ideal of social equality, but some social democratic countries have resisted and continue to exhibit a complementarity between an extended welfare system, moderate inequalities and a dynamic innovation and production system. Third, Latin America, which used to be the continent with the highest inequality, has reversed its previous dynamics and seems to exhibit a growth pattern based upon inequality reduction, while still relying heavily upon the strong international demand for commodities. To resolve these paradoxes, a common socioeconomic approach is proposed, based upon the concept of inequality regimes. It is then applied to investigate the durability and likelihood of such a U-turn for Latin America. Conventional interpretations stress the universality of the mechanisms which widen individual inequalities within each nation-state but reduce the hierarchy of national standards of living. This analysis, however, concludes that Asia, North America, Europe and Latin America do not follow the same trajectory at all, since they have developed contrasting regimes of inequality that co-evolve and are largely complementary at the world level. This could be an alternative to the hypothesis of an irreversible globalization of inequality. As a consequence, the future of more inclusive Latin American economies depends on the interaction between new domestic democratic advances and the reconfiguration of the international economy.