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Income Distribution and the Quality of Life in Latin America: Patterns, Trends, and Policy Implications

Published online by Cambridge University Press:  24 October 2022

David Felix
David Felix*
Affiliation:
Washington University in Saint Louis
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Latin America, more than other regions of the capitalist world, has been characterized by persistently high concentration of income and wealth and by limited trickling-down of the material gains from output growth. This situation was an enduring characteristic of “modern economic growth” in Latin America during its era of crecimiento hacia afuera, from the mid-nineteenth century to the onset of the Great Depression of the 1930s. It has remained so, with some modification, during the subsequent half-century, despite industrialization, rapid urbanization, the spread of education, and other conquistas sociales in many of the countries, and despite the faster economic-growth rates since World War II. Indeed, a further rise of income concentration accompanying that postwar growth is statistically detectable in many of the countries. By combining pre-World War II data with plausible inference, one can also deduce a still longer-run rising-concentration trend from the mid-nineteenth century, with oscillations downward in periods of slow growth and upward during fast growth periods. The result in most countries has been a slow improvement at best for the lowest 60 percent of the population in the more measurable and less ethnocentric dimensions of that amorphous concept, the quality of life.

Type
Research Article
Information
Latin American Research Review , Volume 18 , Issue 2 , 1983 , pp. 3 - 33
Copyright
Copyright © 1983 by the University of Texas Press

Footnotes

*

This essay was written originally for a seminar held by the Aspen Institute for Humanistic Studies in Quito in April 1981, which was part of the Institute's project on the Future of Governance in Latin America. The present version augments the original with documentation for various textual statements. I am grateful to the unknown editorial readers for larr who pointed out which of the statements especially required evidentiary support. The documentation, however, is intended merely to establish that supporting evidence exists, not that it is conclusive. I wish also to express my appreciation to the Aspen Institute for permission to publish the essay.

References

Notes

1. Postwar trend estimates for Brazil, Puerto Rico, and Argentina, plus point estimates for a few other countries are summarized in Adolfo Figueroa and Richard Weisskoff, “Viewing Social Pyramids: Income Distribution in Latin America,” in Consumption and Income Distribution in Latin America, ed. Robert Ferber (Washington, D.C.: Organization of American States, 1980), pp. 257-94. For Colombia, Albert Berry and Ronald Soligo, “The Distribution of Income in Colombia: An Overview,” in Economic Policy and Income Distribution in Colombia (Boulder, Colorado: Westview Press, 1980), pp. 14-17, which updates the earlier estimates of Berry and Miguel Urrutia in Income Distribution in Colombia (New Haven: Yale University Press, 1976). The Mexican estimates are from David Felix, “Income Distribution Trends in Mexico and the Kuznets Curves,” in Brazil and Mexico: Patterns in Late Development, ed. Richard Weinart and Sylvia Hewlett (Philadelphia: ISHI Press, 1982), pp. 265-316.

2. David Felix, “Interrelations between Consumption, Economic Growth and Income Distribution in Latin America: A Comparative Perspective,” in Consumer Behavior and Economic Growth in the Modern Economy, ed. Henri Baudet and Henk Van der Meulen (London: Croom Helm, 1982), pp. 152-68.

3. On falling real wages in the state of São Paulo during the 1880-1914 coffee boom, see Nathaniel Leff, “Economic Retardation in Nineteenth Century Brazil,” Economic History Review, Second Series 25 (August 1971): 491; for Chile, see Arnold J. Bauer, Chilean Rural Society: From the Spanish Conquest to 1930 (Cambridge: Cambridge University Press, 1975), p. 156, table 31; for Colombia, see Luís Ospina Vásquez, Industria y protección en Colombia, 1845-1930 (Medellín: 1955) and William P. McGreevey, An Economic History of Colombia, 1810-1930 (Cambridge: Cambridge University Press, 1971); for Mexico, see Fernando Rosenzweig, “La industria,” and Luís Cossio Silva, “La agricultura,” in Historia moderna de México, ed. Daniel Cosío Villegas (Mexico, D.F.: Editorial Hermes, 1956-71); Friedrich Katz, “Labor Conditions on Haciendas in Porfirian Mexico: Some Trends and Tendencies,” and John Coatsworth, “Railroads, Land-holdings, and Agrarian Protest in the Early Porfiriato,” Hispanic American Historical Review 54 (February 1974): 1-71; for Peru, 1900-39, see Rosemary Thorp and Geoffrey Bertram, Peru, 1890-1977: Growth and Policy in an Open Economy (New York: Columbia University Press, 1978), pp. 114-40. Argentina is a partial exception, with a horizontal real-wage trend during the nineteenth century, according to Carlos F. Díaz-Alejandro, Essays on the Economic History of the Argentine Republic (New Haven: Yale University Press, 1970), pp. 49-52.

4. An early perceptive statement of the growth-immiseration view sans historical numerology is Margaret Alexander Marsh's “Monoculture and the Level of Living: An Hypothesis,” Inter-American Economic Affairs 1 (June 1947): 77-111; Sanford A. Mosk, “The Coffee Economy of Guatemala, 1850-1918: Development and Signs of Instability,” Inter-American Economic Affairs 9, 3 (1955): 6-20, also stresses that land seizure and labor impressment intensified with the spread of coffee cultivation in Guatemala.

5. See notes 1 and 3 for data sources.

6. Morris D. Morris, Measuring the Condition of the World's Poor (New York: Pergamon Press, 1979).

7. Along with the PQLI estimates, Morris has an excellent discussion of the difficult conceptual and measurement problems in constructing a quality-of-life index. On this topic, see also Norman Hicks and Paul Streeten, “Indicators of Development: The Search for a Basic Needs Yardstick,” World Development 7 (June 1979): 567-80.

8. John R. Wells, “The Diffusion of Durables in Brazil and Its Implications for Recent Controversies concerning Brazilian Development,” Cambridge Journal of Economics 1 (September 1977): 259-79.

9. United Nations, Economic Commission for Latin America, “Income Distribution in Selected Major Cities in Latin America and Their Respective Countries,” Economic Bulletin for Latin America, 17, 1 and 2 (New York: United Nations, 1973): 13-45.

10. From the diagonals of table 4, one also observes that families moving to the next-higher income bracket and to a more urbanized locale on average reduce their food-expenditure percentage and thus conform to Engels's Law while increasing their caloric deficiency. On the other hand, those moving to the next-higher income bracket and to a less-urbanized locale violate Engels's Law, but reduce their caloric deficiency.

11. Wells, “The Diffusion of Durables in Brazil,” Cambridge Journal of Economics 1: 263-67, 269-71; World Bank, Brazil: Human Resources Special Report, Annex 1, Table 12.

12. On Colombia, see McGreevey's Economic History of Colombia, p. 131, table 18; on Mexico, compare the hacienda data in Harry E. Cross, “Living Standards in Rural Mexico: Zacatecas, 1820-1880,” Journal of Latin American Studies 10 (May 1978): 1-19, with those for the lowest 40 percent of rural households in the Banco de México's La distribución del ingreso en México: encuesta sobre los ingresos y gastos de las familias, 1968 (Mexico, D.F.: Fondo de la Cultura Económica, 1974), Cuadro IV-2. In neither country, however, was the decline monotonic. McGreevey's data imply that the 1890s were the low point for rural Colombian workers, while Berry and Urrutia, in Income Distribution in Colombia, estimate a horizontal real-wage trend for rural Colombian workers during 1935-74, but at a higher level than that of the 1890s (pp. 68-72, 90-95). The consumption level for rural Mexican labor, other than in the northern states, deteriorated sharply during the Porfiriato, but probably rebounded after the revolution. Since World War II, however, rural income and employment data indicate renewed deterioration of the real income of rural labor. See Salomón Eckstein, El marco macroeconómico del problema agrario mexicano (Mexico, D.F.: Centro de Investigaciones Agrarias, 1968).

13. Simon Kuznets, “Economic Growth and Income Inequality,” American Economic Review 45 (March 1955): 1-18, and Modern Economic Growth: Rate, Structure and Spread (New Haven: Yale University Press, 1966), pp. 206-19.

14. See, for example, Harry Oshima, “The International Comparison of the Size and Distribution of Family Income with Specific Reference to Asia,” The Review of Economics and Statistics 44 (November 1962): 439-45; Felix Paukert, “Income Distribution at Different Levels of Development,” International Labour Review 108 (August-September 1973): 97-125.

15. A. L. Bowley estimated the income share of the top 5 percent of British households at 48 percent in 1880 and 43 percent in 1913. Both are higher than the share of Mexico's top 5 percent after World War II; however, the share of Mexico's top quintile in the 1970s matched Britain's of the 1880s and exceeded Britain's of 1913, while the lowest 60 percent received a smaller share in post-World War II Mexico than in pre-World War I Britain. Compare Simon Kuznets, “Quantitative Aspects of the Growth of Nations: Distribution of Income by Size,” Economic Development and Cultural Change 11, 2, part 8 (January 1963), table 16, and Felix, “Income Distribution Trends in Mexico,” in Brazil and Mexico: Patterns in Late Development, table 3.

16. For example, John C. H. Fei and Gustav Ranis, Development of the Labor Surplus Economy: Theory and Policy (Homewood, Ill.: Richard D. Irwin, 1964). On the algebra of these models, see Sherman Robinson, “A Note of the U-Hypothesis Relating Income Inequality and Economic Development,” American Economic Review 66 (June 1976): 437-40.

17. The British ratio pattern is computed from data in B. R. Mitchell and Phyllis Deane, Abstract of British Historical Statistics (Cambridge: Cambridge University Press, 1962), pp. 8, 60, 366. For recent Latin American ratios, see Figueroa and Weisskoff's chapter in Consumption and Income Distribution in Latin America, tables 5 and 7.

18. For theoretical appraisals of the stability properties of pure capitalist market economies in general, see Kenneth J. Arrow and Frank H. Hahn, General Competitive Analysis (San Francisco: Holden Day, 1971); Geoffrey Harcourt, ed., The Microfoundations of Macroeconomics (London: McMillan, 1977); E. Roy Weintraub, The Compatibility of Microeconomics and Macroeconomics (Cambridge: Cambridge University Press, 1979); Frank H. Hahn, “Monetarism and Economic Theory,” Economica 47 (February 1980): 1-18; and “Unemployment from a Theoretical Viewpoint,” Economica 47 (August 1980): 285-98. For a critique focusing on the LDCs, see David Felix, “The Technological Factor in Socio-Economic Dualism: Toward an Economy of Scale Paradigm for Development Theory,” Economic Development and Cultural Change 25 Supplement (January 1977): 180-211; and “De Gustibus Disputandum Est: Changing Consumer Preference in Economic Growth,” Explorations in Economic History 16 (July 1979): 260-96.

19. Kazushi Ohkawa and Henry Rosovsky, Japanese Economic Growth (Palo Alto: Stanford University Press, 1973), pp. 82-87; K. Ohkawa and Miyohei Shinohara, Patterns of Japanese Economic Development: A Quantitative Appraisal (New Haven: Yale University Press, 1979), p. 232, table 13.5; El Colegio de México, Estadísticas económicas del Porfiriato: fuerza de trabajo y actividad económica por sectores (Mexico, D.F.: Seminario de Historia Moderna, 1965), pp. 147-51.

20. Carl Mosk, “Fecundity, Infanticide and Food Consumption in Japan,” Explorations in Economic History 15 (1978), table 1. On Mexico, see Rozenzweig's and Cossio Silva's chapters in Historia Moderna de México for material on the nutritional decline of Mexican urban and rural workers during the Porfiriato.

21. Donald Keesing, “Structural Change Early in Development: Mexico's Changing Industrial and Occupational Structure from 1895-1950,” Journal of Economic History 29 (December 1969): 723.

22. Labor productivity of the Japanese artisan sector rose at only a moderately slower rate than did the factory sectors. For example, in 1909 the value added per factory worker was 2.3 times that of the artisan worker; by 1937 the ratio had risen merely to 2.8. Artisan employment increased during that interval and in 1937 was still supplying 26 percent of Japanese industrial output. Ohkawa and Rosovsky, Japanese Economic Growth, pp. 81-83, tables 4.4 and 4.6.

23. Yuichi Shionaya, “Patterns of Industrial Development,” Economic Growth: The Japanese Experience, ed. Lawrence Klein and K. Ohkawa (Homewood, Ill.: Richard D. Irwin, 1968), appendix tables 3A-4 and 3A-5; Estadísticas económicas del Porfiriato: comercio exterior de México, 1877-1911 (Mexico, D. F.: El Colegio de México, 1960).

24. “The long-term demand forces—in particular the degree of imbalance in technological progress between sectors using machines, skills, and raw labor with varying intensity … have been understated as determinants of inequality trends. Indeed, such technological imbalance has not been well-appreciated in explanation of accumulation and growth.” Peter Lindert and Jeffrey G. Williamson, “Three Centuries of American Inequality,” Research in Economic History 1 (1976): 107. For an elaboration of this theme, see Felix, “De Gustibus Disputandum Est,” Explorations in Economic History 16:260-96.

25. For an initial attempt using postwar Argentine input-output tables, see David Felix, “The Dilemma of Import Substitution—Argentina,” Development Policy: Theory and Practice, ed. Gustav Papanek (Cambridge, Mass.: Harvard University Press, 1968), pp. 55-92.

26. Nathaniel Leff, “Multinational Corporate Pricing Policy in Developing Countries,” Journal of International Business Studies 6 (Fall, 1975): 55-64; Eileen McKenzie, “Marketing in Brazil Comes of Age” and “Measuring the Growing Consumer Market” in Brazilian Business 17 (January 1977).

27. For a recent review of these studies, see William R. Cline, “Income Distribution and Economic Development: A Survey and Tests for Selected Latin American Cities,” in Consumption and Income Distribution in Latin America, pp. 205-49.

28. Henry Rosovsky and Kazushi Ohkawa, “The Indigenous Components of the Modern Japanese Economy,” Economic Development and Cultural Change 9 (April 1961): 476-501. With housing excluded, the proportion was 49 percent, and it also fell moderately with higher household income.

29. Richard Weisskoff and Edward Wolff, “Linkage and Leakages: Industrial Tracking in an Enclave Economy,” Economic Development and Cultural Change 25 (1977): 607-28.

30. Ibid, p. 626.

31. Marcelo Selowsky, Who Benefits from Government Expenditures: The Case of Colombia (New York: Oxford University Press, 1979).

32. Albert O. Hirschman, “The Changing Tolerance for Income Inequality in the Course of Economic Development,” Quarterly Journal of Economics 87 (November 1973): 544-66.