Latin American Inequalities in the Long-Run

Abstract

Despite recent declines, economic inequality has been relatively high in Latin America. Institutionally, contemporary inequalities have roots in the continent’s colonial past. This essay supports this view by refuting a counter-argument by Jeffrey Williamson. Comparing Latin American to European and North American developments, Williamson attributes relatively high levels of inequality in Latin America to a missed period of globalisation with levelling effects. My analysis, however, suggests that Williamson misses the “levelling effects” of war and crisis. Rather than missing an equalising period of globalisation, Latin America has missed the destructions of two world wars and the Great Recession. Williamson also overlooks the fact that inequalities have been relatively low in Latin America right after independence, mainly due to capital destruction during civil wars. Yet, extractive colonial institutions have persisted and still help explain Latin American inequalities today. According to Mazzuca’s analysis of “plebiscitarian superpresidentialism,” when commodity prices fall while extractive institutions persist, rent-seeking institutions temporarily generate lower inequalities. Through this lens, recent declines in Latin American inequalities should be seen as a short-lived phenomenon likely to be reversed.