Venezuela: Latin America’s inequality success story

August 6, 2010

     By Duncan Green     

[If you’re visiting this from the future, say 2019, please scroll down to the update at the bottom before frothing]

Hugo Chavez, Venezuela’s President, has plenty of critics, who often focus on his style (not least his interminable unscripted chat show, Alo Presidente), and in many ways he does fit into the tradition of the Latin American caudillo (the ‘strong man on horseback’). But Venezuela certainly seems to be getting something right on inequality. According to the highly reputable UN Economic Commission for Latin America and the Caribbean, it now has the most equal distribution of income in the region, and has improved rapidly since 1990. Here’s a graph from a recent ECLAC report, ‘Time for Equality: Closing Gaps, Opening Trails‘. It shows the change in the gini index of income inequality in the major Latin American economies from 1990 to 2008.

Latin America inequality 1990-2008

Any country below the line has lowered inequality over the period (with the gini index, 1 = absolute inequality, zero = total equality). Two points jump out – firstly, as I’ve reported before, most of the region has had a good couple of decades, in which a combination of good social policy and economic stability have brought down historically high levels of inequality. But the thing that surprised me is Venezuela, which has overtaken Ecuador, Paraguay and Costa Rica to become the most equal (or since this is Latin America, the least unequal) country in the region. And this in a massively oil dependent country, when natural resource dependence typically leads to high levels of inequality, because it generates few jobs, and revenues tend to go to the well connected few. Anyone (pro or anti) got any convincing explanations? [h/t Katia Maia]

And here’s a (brief) taste of Alo Presidente

Update: It’s 2018, and since this was written, things have changed horribly for the worse in Venezuela. This post now triggers an occasional rumbling of discontent, and even the odd Daily Mail rant. Which poses an interesting dilemma for a blogger. Should I take it down, as some have requested?

The piece was not uncritically pro-Chavez (and nor was I at the time) – it acknowledged that Chavez was in many ways a classic Latin American ‘caudillo’. Unsurprisingly it had nothing to say about his successor, Nicolás Maduro, who took over in 2013, after Chavez’ death. It did not endorse or indeed, even discuss the Chavez’ regime’s politics.

Instead it pointed out a surprising fact in the UN’s inequality data at the time. I’m pretty sure that progress on inequality (and certainly on poverty) will have gone massively into reverse since then, but I don’t think the ability to foresee the future should become a part of Oxfam sign-off procedures, and no-one who has commented thus far has questioned ECLAC’s data.

As I am not following Venezuela in any detail, I am not able to write an analysis of what is happening there today, but the news looks grim (as it is for Nicaragua, which I know better, having spent time there in the 1980s and 90s). Politics and the economy appear to be locked into a downward spiral with horrible consequences in terms of poverty, human rights and institutional stability.

So yes, I am now more negative about the Venezuelan government than I was in 2010. In the words of JM Keynes, ‘When the Facts Change, I Change My Mind. What Do You Do, Sir?’

But I am not about to take down the post until someone points out a factual error, rather than a lack of clairvoyance.

Hope that helps, (but doubt it will!).

August 6, 2010
Duncan Green