What Latin America Can Teach Us
By JORGE G. CASTAÑEDA
IN a Bertelsmann Foundation study on social justice released this fall, the United States came in dead last among the rich countries, with only Greece, Chile, Mexico and Turkey faring worse. Whether in poverty prevention, child poverty, income inequality or health ratings, the United States ranked below countries like Spain and South Korea, not to mention Japan, Germany or France.
It was another sign of how badly Americans are hurting their middle class. Wars, famine and violence have devastated middle classes before, in Germany and Japan, Russia and Eastern Europe. But when the smoke cleared and the dust settled, a social structure roughly similar to what existed before would always resurface.
No nation has ever lost an existing middle class, and the United States is not in danger of that yet. But the percentage of national income held by the top 1 percent of Americans went from about 10 percent in 1980 to 24 percent in 2007, and that is a worrisome signal.
So before the United States continues on its current road of dismantling its version of the welfare state, of shredding its social safety net, of expanding the gap between rich and poor, Americans might do well to glance south. The lesson is that even after a large middle class emerges, yawning inequities between rich and poor severely strain any society’s cohesion and harmony.
If ever a geographical stereotype had some truth to it, it would be that in Latin America, where a handful of immensely wealthy magnates wielded power over a sea of the poor. If there has ever been a social cliché with roots in reality, it would be that a vast middle class was always the backbone of the United States’ strength.
The United States has never had the type of robust welfare state that Europeans built after World War II. It didn’t need that. Through private initiative and efforts to equalize opportunity, Americans long ago ensured that a huge middle class would provide the social glue to hold their society together.
If that middle class withers, what might America look like? Well, what Latin America used to be, and in some ways still struggles to stop being.
So here are two questions: Does the United States really want to look like what Latin America was? And is there a lesson to be learned from its neighbors to the south — that once inequality becomes entrenched, reversing it becomes incredibly difficult?
Consider, first, some history. From the pre-Columbian era through most of the 20th century, conventional wisdom painted Latin America as the planet’s most unequal region, where the extreme poverty of its destitute was matched only by the extreme wealth of its rich.
In fact, this perception began departing from reality some 50 years ago in most of the region, and today it is true for only a few nations: Haiti, Honduras, Bolivia and maybe Nicaragua. By 1970, the larger nations like Brazil, Mexico, Colombia, Venezuela, Chile and Peru had all witnessed the emergence of sizable middle classes. Others, like Argentina and Uruguay, had been, for all practical purposes, middle-class societies since at least midcentury (although the Argentines in later decades worked hard at regressing.)
But there was always a gulf between those societies and the United States. Until quite recently, the Latin middle classes made up barely one-third of the population, and some of their most prominent members — Che Guevara in Argentina, Fidel Castro in Cuba, Salvador Allende in Chile — made political careers out of the cause of eradicating inequality. That cause was shared by thousands of students, union leaders, academics and middle-of-the-road politicians, who found their own way of life morally intolerable and politically untenable.
After years of frustration and failure, at the end of the 20th century something began to change. And over the last 15 years the trend has become unmistakable. According to one definition of the middle class used in recent research by the Organization for Economic Cooperation and Development, the middle class is in the majority in Chile, Brazil, Mexico, Uruguay, Costa Rica and to a lesser extent Colombia. In the 1960s and ’70s, even after decades of robust growth, those middle classes were barely at 30 percent; today in Mexico, Brazil and Chile the figures range from 55 to 60 percent.
Yes, it is still a slim and precarious majority, and it is not your mother’s middle class — as secure and well-off as in Europe, North America, Japan or South Korea. The Latin middle class still struggles, with living standards far behind those of the local affluent. But a middle class it is nonetheless: with cellphones and used cars; with tiny but well-built homes with every appliance; and with modest but deeply enjoyable holidays at the beach.
Consumer markets have expanded. The World Bank and the O.E.C.D., writers like this one and universities like the Getulio Vargas Foundation in Rio de Janeiro have produced reams of data and analysis about the size, depth and lasting power of this middle class. Politicians know they can be elected only if they connect with that class and are doomed when they appeal exclusively to the poor, who, though now a minority, are still too large a share of the population.
So it can be said that much of Latin America has arrived: it is democratic, with a slight but growing majority of its people prosperous, competitive and possessing international ambitions (real, though not always realistic).
But reducing poverty and building broad middle classes do not automatically reduce inequality. The statistical measures of inequality known as Gini coefficients have begun to fall slightly in Latin America, but remain the highest in the world, with the wealthiest 1 percent, 5 percent or 10 percent of the population controlling incredibly high shares of total wealth or income. In Brazil, Chile and Mexico, which together account for nearly 70 percent of the region’s G.D.P. and population, the wealthiest 10 percent held an average of 42 percent of national income in 2008-9; the equivalent figure for the United States was 29 percent.
This is why hundreds of thousands of Chilean students have brought their country’s government to a virtual standstill this year, even though Chile is the most successful Latin nation by any economic or social standard. It is why Colombia, Brazil and Mexico have murder or kidnapping rates far higher than those of the richer nations, which are, despite their wealth, less unequal.
Indeed, the historic inequalities that linger have produced singular traits of national character, handed down between generations, that must change if these societies are to continue equalizing their wealth and realizing their promise. Brazilian fatalism, Chilean insularity and Mexican individualism are being slowly shed. And that is good; these traits should be jettisoned completely if these societies ever hope to achieve the level of equality for which the United States has been their model.
And yet, as all of this is occurring, the United States — that epitome of the middle-class society, of the egalitarian dream that pulled millions of immigrants away from Latin America — has begun to go Latin American. It is in a process of structural middle-class shrinkage and inequality expansion that has perhaps never occurred anywhere else (again, possibly excepting Argentina).
Americans can object — and in this they have a point — that their society differs from Latin America because there is mobility at the top and the bottom. South of the Rio Grande, the affluent are always the same; in the United States, they vary from generation to generation, often strikingly. This is what gives so many Americans the impression — false as it must be for most — that one day they might reach the top and that those already there will make room for them. But this ability to aspire does not really address the issue of how large the distance is growing between those at the top, middle and bottom; nor does it comfort those in the middle who see their chance of moving up growing ever more slight.
WHICH leads to a question for the United States: why would you allow that to happen, when we in Latin America can show you how difficult it is to achieve the kind of exemplary middle class that you invented in the first place, and that gave you such economic power and social cohesion — at least since the 1920s? Especially when we all know its existence is crucial to preserving some of the best traits of your own national character.
Alexis de Tocqueville made the point nearly two centuries ago. Something in the American character had produced a far more egalitarian society than any in Europe, and something in that society was producing a different, more modern and exciting national character, with room for experimentation, cooperation and acceptance of differences. Americans cannot retain the tolerant, forward-looking and innovative national character they cherish if they give up the egalitarian middle-class configuration that comes with it.
Mexico and other Latin American lands are reshaping our national characters and democratic politics in our quest for a larger and more vibrant middle class, and at last we are having some success. The United States’ middle class is coming under increasing pressure as the income gap between it and the very rich widens.
Do Americans really have nothing to learn from us, after we have learned so much from them?