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THE COSTS OF INEQUALITY IN

LATIN AMERICA

i
Diego Sánchez-Ancochea is Head of the Oxford Department of
International Development and Professor of the Political Economy
of Development at the University of Oxford

ii
THE COSTS OF INEQUALITY IN
LATIN AMERICA

Lessons and Warnings for the

Rest of the World

Diego Sánchez-Ancochea

iii
 I.B. TAURIS
Bloomsbury Publishing Plc
50 Bedford Square, London, WC1B 3DP, UK
1385 Broadway, New York, NY 10018, USA

BLOOMSBURY, I.B. TAURIS and the I.B. Tauris logo are trademarks of
Bloomsbury Publishing Plc

First published in Great Britain 2021

Copyright © Diego Sánchez-Ancochea, 2021

Diego Sánchez-Ancochea has asserted his right under the Copyright, Designs
and Patents Act, 1988, to be identified as Author of this work.

For legal purposes the Acknowledgments on p. vii constitute an extension of

this copyright page.

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Cover images: [left] Brazil © Patrick Altmann/Getty Images;
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without prior permission in writing from the publishers.

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for, any third-party websites referred to or in this book. All internet addresses
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publisher regret any inconvenience caused if addresses have changed or sites
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iv
 CONTENTS
Acknowledgments vii

Chapter 1
INTRODUCTION: LESSONS FROM THE LAND OF INEQUALITY 1
Inequality is Growing in Developed Countries . . . and it
is Even Higher in Latin America 3
Exploring Inequality Through Case Studies 6
The Book’s Arguments: The Economic, Political, and
Social Costs of Inequality 9
How Do We Move from Here? Some Latin American
Lessons 12
The Rest of the Book 14

Chapter 2
LATIN AMERICA: ALWAYS THE MOST UNEQUAL REGION? 17
The Most Unequal Region of the World? 18
It’s About the Rich, Stupid! 20
Always Unequal? 23
No Longer an Exception: Growing Inequality in Other
Parts of the World 26

Chapter 3
THE ECONOMIC COSTS OF INEQUALITY 27
A Historical Excursion 29
The Problem of Education Today 32
Inequality Limits the Opportunities to Create More
Dynamic Economies 34
The Difficulties of Taxing the Elite 36
Income Inequality and Financial Crises 41
From the Economy Back to Inequality 42
From Latin America to the Rest of the World 45

Chapter 4
THE POLITICAL COSTS OF INEQUALITY 49
The Uncomfortable Coexistence of Democracy and
Elite Power 51

v
vi Contents

The First Wave of Populism as a Response to the

Democratic Deficit 54
Authoritarian Breaks as Extreme Elite Responses 61
Into the Present: The Limits of Democracy and a
New Populist Response 64
From Politics Back to Inequality 71
Back to the Present 74

Chapter 5
THE SOCIAL COSTS OF INEQUALITY 79
The Most Violent Region in the World 81
Divided Lives, Private Spaces 86
Mistrust in Each Other and in Institutions 92
Racism and Discrimination: Cause and Consequence of
Inequality 95
From Violence, Social Segmentation, Mistrust, and
Racism Back to Inequality 98
From Latin America to the Rest of the World: Some
Warning Signs 101

Chapter 6
LATIN AMERICA ALSO PROVIDES POSITIVE LESSONS 105
Latin America as a Hotbed of Ideas 107
The Originality of Latin America’s Social Movements 115
Policies: Lessons from an Unexpected Reduction of
Inequality in the 2000s 129

Chapter 7
AND NOW WHAT? HOW TO FIGHT INEQUALITY IN LATIN
AMERICA AND BEYOND 133
The Latin American Experience Demonstrates how
Difficult the Fight Against Inequality is 134
The Many Policies Available to Reduce Inequality 137
Policies Without Politics Will Never Work 152
Conclusion 160

Notes 163
Index 195
 ACKNOWLEDGMENTS
At the time of writing the final pages of this book, the world is in the
midst of an unexpected health and economic catastrophe created by the
outbreak of the COVID-19 pandemic. In recent months, many of us
have been in a lockdown that has saved millions of lives while also
creating significant economic collateral damage. When this book is
finally out, most people will still be focused on the implications of the
pandemic for their lives, their countries, and the whole world. There is a
risk that we stop paying attention to problems like inequality that just
months earlier were at the heart of the public agenda.
This reaction would be understandable but mistaken. In fact, the
pandemic is likely to exacerbate the concentration of income and power,
further threatening our democracies and challenging our economic
model. It is thus even more important than ever to consider the costs of
income inequality and debate the ways to overcome it. To do so, the
historical experience of Latin America—a continent with more than
600 million people and four times the size of the European Union—will
be particularly relevant.
Given the growing challenge that inequality poses, academics must
make an effort to go beyond university walls and participate in public
debates. This book is my first attempt to do so. I could not have done it
without my wife Rosa’s unremitting backing. She encouraged me to
write a book for a general audience, supported my sabbatical plans
enthusiastically, and patiently listened to my worries and concerns.
Three friends supported this project from beginning to end. Jill
Hedges was instrumental in the initial phases. She liked my original
idea, put me in touch with her publisher, and commented on early
drafts—making sure that I did not make glaring mistakes in my
discussion of Perón! Salvador Martí i Puig read the full manuscript,
making thorough suggestions and providing additional readings.
Thanks to him (and to Ben Phillips) I ended up writing Chapter 6 on
Latin America’s positive lessons. I hope we can together write our
planned sequel to this book in Spanish. Juliana Martínez Franzoni has
been my coauthor and close friend for many years. Much of what I have
written here, particularly about social policy, results from hours of hard
work and fun conversations with her.
Others read either the full draft or at least some chapters. I thank my
aunt Margarita Sánchez Castilla and my sister Milagros Sánchez
vii
viii Acknowledgments

Ancochea as well as Ludovic Arnaud, Ana de Vicente Lancho, Mateo

García Cabello, Ben Phillips, and Pablo Sánchez-Blanco for their
constructive comments and appreciation of the project. Geoff Goodwin
deserves a special mention: during the editing phase, he commented on
several chapters at lightning speed.
I wrote the book while spending a sabbatical year at the Kellogg
Institute for International Studies. It is hard to imagine a more
welcoming place: everything there is organized to make the life of its
fellows easy and productive. I thank all its staff, particularly its director
Paolo Carrozza, its managing director Sharon Schierling, and its
fantastic assistant director Denise Wright for all their support. Being at
the Kellogg also gave me the opportunity to share time with a unique
group of visiting fellows. With two of them (Ben Phillips and Vicky
Paniagua) and with Ray Offenheiser I co-organized a conference on
inequality and democracy that helped develop some of my thinking for
the book.
At Notre Dame, I also had the opportunity to present the book’s
argument at the Higgins Labor Program lunch seminar series. I am
thankful to its director, Daniel Graff, for the opportunity and for great
conversations on inequality, labor rights, and social justice over lunch
and dinner. I was also invited to discuss parts of the book in the
International Seminar “Culture and the SDG” at the Universidad
Tecnológica de Bolívar in Cartagena, the Labour Party constituency of
Banbury and Bicester, the MA in Development Strategies and
Technologies in Madrid, Mount Holoyke College in the United States,
and the universities of Chile and Helsinki. I am very grateful to
participants in all these events for their comments and to the following
friends and colleagues for their invitation: José Miguel Ahumada, José
Antonio Alonso and Iliana Olivié, Tania Jiménez and Lizzette Robleto,
Jussi Pakkasvirta, and Eva Paus—always a great source of ideas and
inspiration. Agenda Pública also provided a unique opportunity to
publish some of my ideas on inequality, democracy, and Latin America,
and I thank Marc López for it.
I could not have written this book without the sabbatical leave given
by the University of Oxford. Over more than a decade, the Latin
American Centre and the Oxford Department of International
Development (ODID) have been great homes, full of interesting,
committed, and supportive colleagues. Much of what I know about
inequality comes from discussions with them. In the last few months I
have had the pleasure to head the ODID; I appreciate its staff ’s patience
in the run-up to the book’s submission. Outside Oxford, I have benefited
 Acknowledgments ix

from endless support over many years from Maxine Molyneux and Ken
Shadlen.
Joanna Godfrey from I.B. Tauris/Bloomsbury encouraged the idea
from the very beginning. I am thankful to her and to Olivia Dellow for
their support in every step of the process. Two anonymous referees also
provided useful comments. I also thank Robert Davies for his great
copy-editing job.
My interest in inequality and development comes from my parents
Diego and Milagros. They made sure that my sister Milagros, my brother
Ramón, and I understood how much the world has to change and that
we embraced the need to contribute to a more just world. This is a great
opportunity to acknowledge the support the four of them have always
given me.
My wife Rosa and my daughters Silvia and Maya have shown great
patience while I was writing this book. They always make life interesting.
Rosa is one of the most creative, supportive, and brave people I know.
Her commitment to fighting all kinds of inequality is inspiring. Silvia is
one of the most thoughtful and critical teenagers I have ever met (of
course I am biased!) and Maya is daily fun. I dedicate the book to the
three of them.
x
 Chapter 1

I N T R O DU C T IO N : L E S S O N S F R OM
T H E L A N D O F I N E QUA L I T Y

Occupy Wall Street, anti-austerity protests in Spain and Greece, the

electoral successes of Trump, Salvini, Erdogan, and Brexit, the 2008
financial crisis, the casualization of work. . . We thought that the first
two decades of the twenty-first century had been turbulent and then the
COVID-19 outbreak made things even more complicated. The world
seems to be in a continuous state of shock, with millions of people
struggling.
Although poverty has been reduced in many countries and the world
is wealthier than ever, a growing number of people are discontented.
They see the rich becoming richer and worry about their own stagnant
living standards. Many believe their children will fare worse than them,
suspect that the economy is rigged, and doubt that politicians will do
much to change things. The pandemic may have diverted our attention
in the short run, but it is likely to make things worse, creating even
larger income gaps.
The growing instability in the face of inequality is unsurprising for
those of us who study Latin America. We know well the catastrophic
consequences of the concentration of income and opportunities in a
few hands. In Latin America—one of the most unequal regions in the
world—inequality has historically contributed to many social ills, from
low economic growth to weak democratic institutions and high levels
of violence. Populism, financial crises, bad jobs, social polarization:
Latin America has struggled with all these problems for more than a
century.
This is why I decided to write this book. Little by little I have come to
realize that much of the world—from the US all the way to India—
looks more and more like the region I study and love. “As some western
economies have become more Latin American in their distribution of
incomes, their politics have also become more Latin American,” the
Financial Times commentator Martin Wolf wrote recently.1 If you want

1
2 The Costs of Inequality in Latin America

to understand why our economies are failing to sustain growth and

create good jobs for all, why our politics is increasingly broken, and why
social trust is at risk, you would do well to learn more about Latin
America’s struggles.
Recent events in the continent have only increased the relevance of
this book. Social protests in Chile and Colombia, indigenous revolts in
Ecuador, and political tensions in Bolivia have shown once again
how difficult it is to sustain democratic institutions and economic
development in highly unequal environments. These cases also point to
a growing risk across the world: the consolidation of vicious circles that
become increasingly hard to break. As the wealthy become more
powerful, they exert more control on the political system, people
become more dissatisfied, and economic and social instability intensifies,
resulting in an even worse distribution of income.
This book thus uses the Latin American experience to show the
economic and political costs of inequality. We will see how large income
gaps between rich and poor can hamper economic growth and
contributed to a lack of good jobs. Across Latin America, the wealthy
have faced limited incentives to invest in new sectors—they make
healthy profits anyway—and have been unwilling to pay enough taxes
to fund public social spending. Inequality has been one of the drivers of
weak institutions and the emergence of anti-system politics. The poor
and the middle class—losers of what they consider a rigged system—
have tended to distrust traditional political parties. Often in Latin
America’s history they have gravitated toward leaders who promised
rapid gains based on easy solutions. Inequality has also had serious
social costs, from high levels of violence to urban segregation, ethnic
discrimination, and lack of social trust.
The book will also help you understand how vicious circles contribute
to the perpetuation of income polarization. It is not only that inequality
has shaped political and economic institutions in Latin America; these
institutions have in turn contributed to more inequality. For example,
labor market duality (with large differences between good and bad
jobs) has led to growing income gaps between workers. Politics and
economics have also reinforced each other: inequality has contributed
to the election of leaders who, in their search for easy solutions, have
ended up triggering economic crises and ultimately favoring the
wealthy.
Although the book primarily constitutes a warning, it also provides
ideas on how to change path. Drawing from the Latin American
experience as well as broader policy debates, I emphasize the link
 1. Introduction: Lessons from the Land of Inequality 3

between ideas, policies, and politics. As you will see, I do not propose
radically new solutions, because we already know much of what needs
to be done to create a more equitable future. We need to strengthen
social movements and make them more politically influential; we must
consider distributional implications when making any policy proposal;
we should renew our belief in the power of democratic institutions and
also reject dominant individualistic ideals. Let’s only hope that the way
we react to the COVID-19 pandemic and its aftermath reinforces these
messages.
I hope that readers attracted to Latin America find this account of
the region’s long struggles with inequality insightful. More broadly, the
book should be of interest to anyone concerned with the high costs of
inequality today and in the future. As we will see in the next chapters,
Latin America’s history provides a painful reminder of the dangers of
income concentration and the urgent need to reduce it. While focusing
on income, the book will consider at times its connections to inequalities
in gender, race, and ethnicity.
The following pages show how much inequality has increased in
developed countries in recent years and why we should be worried
about it.2 The chapter also explains why Latin America is the region to
study if we want to understand the long-term costs of a bad distribution
of income. It also describes the main tools used in this book—case
studies—and why they constitute an important (if at times undervalued)
approach to making sense of the world. In the concluding pages, I
describe the argument of the book and reflect on some potential ways
to tackle the inequality plague we are witnessing.

Inequality is Growing in Developed Countries. . . and it

is Even Higher in Latin America

Here (on Nantucket in Massachusetts) “you don’t feel bad because you
want a nice bottle of wine. If you order a $300 bottle in a restaurant, the
guy at the next table is ordering a $400 bottle” explained Michael
Kittredge, an entrepreneur then worth half a billion US dollars, to a
New York Times journalist in the mid-2000s.3 Kittredge was part of the
small elite of American CEOs, hedge fund managers, and entrepreneurs
who most benefited from changes in US policy since the early 1980s.
In the last decade, the power and influence of this economic elite has
become even more evident in politics and the media. In 2013 President
Obama warned Americans that “the combined trends of increased
4 The Costs of Inequality in Latin America

inequality and decreasing mobility pose a fundamental threat to . . . our

way of life,” decreasing the trust in institutions, reducing opportunities
for personal growth, and weakening democracy.4
The data on the growing concentration of income in a few hands—
made popular by Thomas Piketty’s bestseller Capital in the 21st Century
(2013)—is staggering. Figure 1.1 compares the share of the total income
generated in each economy of the wealthiest 1 percent in 1980 and
2015. In the US, the share of pre-tax income in the hands of the top
1 percent almost doubled between the early 1980s and the present,
going from 11 percent to 20 percent. Between 2000 and 2007 this group
received 65 percent of all economic growth generated in the country!5
In social democratic Sweden, the share of the top 1 percent more than
doubled during the same period—from 4 to 9 percent. The US and
Sweden were not exceptions: in fact, in the last 25 years, the income
share of the wealthy has increased in every developed country in the
graph. Things are likely to worsen as a result of the COVID-19
pandemic, as many workers lose their jobs and struggle for new
opportunities, while the wealthy rapidly recuperate from the crisis.
Wealth inequality—i.e. the gap in the amount of assets such as stocks
and houses owned by different groups—is even higher. Today the top
1 percent controls around 40 percent of US net wealth, compared to 25
percent in the late 1980s.6 In the more egalitarian Norway, the share of
wealth controlled by the top 1 percent has grown by seven percentage
points, from 16 to around 23 percent. The rich compete with each other

Figure 1.1 Income share of top 1 percent in some wealthy countries, c.1980
and c.2015. Source: Author’s own, based on data from the World Income
Inequality Database.
 1. Introduction: Lessons from the Land of Inequality 5

for the best paintings, yachts, and palaces in the French Riviera. In 2010
many people were scandalized when an Andy Warhol self-portrait sold
for $32.6m—more than twice the expected $15m.7 Nevertheless, just three
years later, another Warhol reached the astonishing price of $105m.8
The bestselling book The Spirit Level (2011) demonstrates how this
high inequality contributes to many social ills, including mental illness,
drug abuse, homicides, and lower life expectancy.9 It also has negative
implications for politics. The “winner-takes-all” economy in which a few
company managers, financial investors, and successful professionals
receive huge rewards has also contributed to a “winner-takes-all”
politics. This is a term coined by political scientists Jacob Hacker and
Paul Pierson to describe the outsized influence that the wealthy exert in
policy decisions in the US. Rich individuals and large firms have used
campaign contributions, media influence, and lobbying to push for pro-
rich measures in areas such as taxes, social program reform, and
financial (de)regulation.10 In Europe, lobbying is more constrained, but
the economic elite (and right-wing parties) have still found alternative
ways to promote a regressive agenda.11
None of this is surprising for Latin American experts. For a century—
if not more—wealthy Latin Americans have controlled a larger share of
income than anywhere else in the world. The region’s staggering
inequality can be illustrated through the Palma ratio, based on the work
of the Chilean economist Gabriel Palma. In several studies published in
the last few years, he compares the income of the richest 10 percent with
that of the poorest 40 percent across the world. In many developed
countries, this ratio hovers around 1:1; that is, both groups receive a
similar income share. The situation in Latin America is quite different.
The average Palma ratio in the region is 2.75:1—the income share of the
top 10 percent of the population is almost three times higher than that of
the bottom 40 percent. The economic power of the wealthy is particularly
high in Colombia and Brazil—despite improvement in the latter under
the Partido dos Trabalhadores (Workers’ Party, PT) during the 2000s.
What’s more, these numbers underestimate the actual level of
inequality because they are calculated using household surveys—
questionnaires about income and expenditure distributed regularly to a
small sample of households. This kind of survey does not measure the
income of the rich particularly well: in every society, there are just a few
wealthy individuals who often refuse to answer income questions and
when they do, they are not always truthful.
As we just saw for the case of developed countries, tax-based data on
top incomes provides a more accurate perspective on the growing
6 The Costs of Inequality in Latin America

Table 1.1 Income share of the top 1 percent in some Latin American
countries, 1997–2014

Argentina Brazil Chile Colombia Mexico Uruguay

1997 12% 21%
2000 14% 17% 27%
2003 17% 20%
2004 17% 18% 25%
2005 22–32% 19%
2006 23% 21–31% 20% 27%
2007 24% 21–31% 21%
2008 26% 24–36% 20% 27%
2009 25% 22–33% 20% 14%
2010 25% 20–30% 20% 26% 14%
2011 27% 20–30% 14%
2012 26% 20–30% 27%
2013
2014 30%

Source: Author’s own, based on data from several studies.

concentration of income. Unfortunately, the same kind of data is only

available for a handful of Latin American countries. The results from these
studies are astonishing. As reflected in Table 1.1, the top 1 percent control
30 percent of total income in Chile and Mexico and around a quarter in
Brazil. While Argentina and Uruguay perform comparatively better, the
income share of the wealthy there is still high by global standards.
Behind these numbers lie disparities that are evident in all sorts of
ways. Think, for example, about São Paulo, where millions of workers
struggle daily with notoriously bad traffic—a two-hour commute is
common—while 500 helicopters, more than in any other city in the
world, fly the wealthy from one business meeting to another at lightning
speed.12 In Mexico, the wealth of Carlos Slim, owner of the mobile
company América Móvil and investor in well-known international
firms like the New York Times, is equivalent to 5 percent of the whole
country and could fund its education budget four times over.

Exploring Inequality Through Case Studies

In the era of big data and powerful computers, quantitative methods

have become the dominant approach to analyzing social problems.
 1. Introduction: Lessons from the Land of Inequality 7

Studies that explore correlations between numbers are supposed to be

objective, because they use data collected through independent surveys;
reliable, because they can be replicated; and generalizable, because they
incorporate information from many different countries and/or periods.
Using other sources and methodologies to study issues like inequality is
almost unimaginable for many mainstream academics and policymakers.
Despite their popularity, studies of this kind are not without
problems. Many use data uncritically, failing to fully understand its
sources and acknowledge its limitations. Data mining is not uncommon:
some researchers search for the relations they can find in their data
without reflecting on their meaning or linking them to specific theories.
Even more problematic is the emphasis of most researchers on
simplicity: they systematically ignore the complexity of human life,
struggle to uncover causal relations, and disregard the complex links
between economic, political, and social processes.
Case studies constitute a powerful alternative and can solve many of
these problems. They are in-depth explorations of countries, regions, or
cities, and of other social processes such as revolutions, democratic
transitions, and development “miracles.” Case study research relies on
multiple sources, including books, official memos, interviews, newspaper
articles, and documents from archives, as well as statistics. Researchers
triangulate all this data, comparing and contrasting different sources in
order to make causal claims about the world. They may explore how
wealthy individuals influence politicians, how the poor fight for social
rights, or how political and economic inequalities interact in specific
countries and/or periods of time.
There are all kinds of case studies—some are comparative while
others rely on a single unit; some aim to propose new theories while
others focus on testing old ones—and many ways to implement them.
Discussing all possible alternatives would require a totally different
book. What is most relevant for us is that all case studies provide a
unique opportunity to explain complex relations between income
distribution, democracy, and development, drawing on a range of
examples and experiences.
This book considers the case of Latin America to explore the
consequences of inequality. To justify why this selection makes sense, it
is useful to consider two questions. Can we really talk about “Latin
America” as a single unit? Can we draw lessons from the Latin American
experience?
There is no doubt that Latin American countries are different in size
(Brazil is 400 times bigger than El Salvador), population (Brazil and
8 The Costs of Inequality in Latin America

Mexico together have more people than all the other countries
combined), income (Chile’s gross domestic product per capita is closer
to Spain’s than to Bolivia’s), and racial composition. Yet all of them share
enough similarities to be grouped together. All Latin American countries
have a similar history: they became colonies of Spain and Portugal
during the sixteenth century, gained independence during the
nineteenth century, and then had to deal with similar obstacles to
building effective institutions. The state is weaker than in developed
countries: corruption is an endemic problem, changes in rules and
regulations are common, and policies are often inconsistent. They have
always had to deal with influential external actors, including the US,
and struggled with external dependence. Latin American countries also
share some cultural traits, including a common language (with the
exception of Brazil . . . but Portuguese and Spanish are similar), and
many social similarities. They are some of the most urbanized countries
in the developing world, and most have large non-white minorities.
Particularly important for this book—and relevant to answering our
second question—is the fact that all Latin American countries suffer
from a highly unequal distribution of income. Of course, inequality is
not exclusive to them; countries at different levels of development (from
the US to China and India) have witnessed large gaps between the rich
and poor at different points in their history. What makes the region
unique is the persistence of high inequality over long periods of time.
Although academics conduct heated debates over whether this problem
began in colonial times or during the late nineteenth century, there is
little doubt that inequality has been high for decades.
But can we use the example of Latin America to draw lessons for
other countries and regions? Many readers will be skeptical and believe
that the Latin American experience can teach little to countries like the
US, the UK, or India. You may wonder how anyone can compare a poor
region specialized in mining and oil with wealthy countries that have
diversified economies and strong institutions. Many will believe that
stable countries with durable political parties and consolidated
democracies cannot learn anything from extreme cases.
Paradoxically, most people do not have the same queries when the
experience of developed countries is used to draw lessons. Studies about
how Sweden created its welfare state, why the US has repeatedly
succeeded in introducing technological innovations, or what led South
Korea, Taiwan, and Singapore to transform their economies so
successfully often conclude with policy lessons for other parts of the
world. In fact, our understanding of economic development still relies
 1. Introduction: Lessons from the Land of Inequality 9

heavily on our interpretation of the historical experience of wealthy

countries—despite obvious cultural, historical, and institutional
differences.
If developing countries can learn from developed ones, we should
also be able to draw lessons in the opposite direction. Latin America’s
experience can be particularly relevant. Its countries are older and
richer than many others in the developing world, and benefit from
longer democratic traditions and better institutions. Three of them
(Chile, Colombia, and Mexico) have even become members of the
Organisation for Economic Co-operation and Development (OECD),
the “rich country club.” Additionally, Latin American societies have
historically been characterized by the kind of ethnic diversity and
economic duality that is now becoming the norm in many other parts
of the world.

The Book’s Arguments: The Economic, Political,

and Social Costs of Inequality

“Although the region has achieved significant success in reducing

extreme poverty in the last decade, it still shows high levels of income
and wealth inequality, which have been an obstacle to sustainable
economic growth and social inclusion.” Thus proclaimed the heads of
the Economic Commission for Latin America and the Caribbean
(ECLAC), Alicia Bárcena, and Oxfam International, Winnie Byanyima,
in 2016.13 Years earlier, in an influential regional report the World Bank
warned that economic and political inequality have limited economic
development.14
Following these statements from leading international institutions,
this book will show how more than a century of inequality in Latin
America has contributed to poor economic performance, weak political
institutions, and social problems. In turn, low growth, exclusionary
politics, and violence and social mistrust have reinforced the
concentration of income, generating vicious circles.
Several mechanisms explain these pernicious relations. First, and
starting from the economy, a small elite, which has always controlled a
large share of land and financial resources, has faced limited incentives
to increase productivity and invest in more advanced economic sectors.
To be sure, the business elite has diversified into new activities at
different times, but they have generally been low risk, not particularly
sophisticated, and/or dependent on the government. This is still evident,
10 The Costs of Inequality in Latin America

for example, when considering the list of the ten wealthiest Latin
Americans, a group made up of nine men and one woman coming from
just four countries (Brazil, Chile, Colombia, and Mexico). Their revenue
comes from highly regulated telecommunication services (Carlos Slim),
finance (Jorge Paulo Lemann, Joseph Saphra, Luis Carlos Sarmiento
Angulo), food and drinks processing (Marcel Herrmann Telles, Iris
Fontbona, Carlos Alberto Sicupira), and mining (Iris Fontbona, Germán
Larrea Mota Velasco, Alberto Baillères González).15 Why would they
move into new, high-tech sectors when they can secure huge returns in
low-risk activities?
Lack of systematic innovation has gone hand in hand with insufficient
investment in education. Together, both processes have contributed to a
relatively low number of well-paying jobs. In fact, the kind of labor market
polarization evident in many wealthy countries today has been a feature
of Latin America for quite some time. During much of the twentieth
century, economic activity concentrated on large plantations, mining, and
some manufacturing production—activities that created limited formal
employment. Most workers had bad jobs that paid little and did not
provide access to social benefits. The process of market liberalization
promoted by orthodox economists in the 1980s and 1990s did not change
this negative relationship between inequality and the economy: a small
number of well-connected men (unfortunately they are still mostly men)
benefited from the privatization of public companies, while few domestic
firms were able to successfully compete internationally. As a result,
informality—that is, poorly paid jobs with no social benefits attached—
remained high across the continent from Mexico to Paraguay.
Second, the lack of economic dynamism has much to do with the
control of policymaking by the wealthy—politics and economics can
seldom be separated. The top 1 percent successfully pressured for low
taxes: most Latin American states collect less than they should, given
their level of development.16 Personal income taxes are particularly low:
in 2015 they accounted for less than 10 percent of total tax revenues
compared to almost 25 percent in OECD countries.17 At the same time,
most Latin American countries have failed to spend enough on basic
public healthcare and education. Until very recently, support for
universities and sophisticated hospitals for the rich was high, while
spending in primary education and rural health clinics was insufficient.
Adopting effective macroeconomic policies and avoiding financial
crises has also been harder due to inequality.
Third, given these exclusionary policies and lack of economic
dynamism, it is not surprising that citizens have repeatedly supported
 1. Introduction: Lessons from the Land of Inequality 11

populist responses. Leaders like Juan Domingo Perón in Argentina in the

1940s and 1950s or Hugo Chávez in Venezuela more recently promised
to provide good jobs and adequate social benefits to the poor and the
urban middle classes. Unfortunately, their governments often ended up
implementing unsustainable economic policies, while proving unable or
unwilling to systematically confront the power of the wealthy—a lesson
voters in developed countries would do well to remember.
Inequality has affected politics negatively in Latin America in many
other ways. It has contributed to polarization and reduced the space for
political compromise. The elite has never shown a willingness to
strengthen state capacity or promote effective anti-corruption measures,
while social movements have seldom been powerful enough to advance
reform agendas. Brazil’s instability in recent years constitutes a great
example of the negative links between weak institutions, corruption,
and inequality-induced political conflict. Under presidents Lula and
Rousseff, the government implemented redistributive policies that
favored the poor, yet failed to promote transparency and reduce
corruption. Conservative forces—which have always protected the rich
in Brazil—took advantage of this failure to reverse most progressive
policies, halting the reduction of inequality.
Fourth, inequality has also been linked to various social problems
from violence to social mistrust. Latin America is not only the most
violent region in the world but also one where people have little trust in
each other—problems that are at least partly caused by large income
gaps. High income inequality is also linked with disparities in many
other dimensions, including gender and ethnicity. Inequality has also
contributed to urban segregation and to ethnic and racial discrimination.
In turn, these social problems have hampered the growth of coalitions
between the poor and the middle class, which are required to implement
more redistributive public policies.
In sum, Latin America’s experience shows the negative impact of
income gaps on the economy (by leading to underinvestment,
particularly in dynamic sectors and human capital, and to periodic
economic crises), on politics (by contributing to weak democracies and
promoting personalistic politics), and on the social fabric (by
contributing to violence, social mistrust, and lack of cohesion). The
region’s history also demonstrates the high probability that inequality
persists over time, further reducing the chances to create dynamic and
integrated societies.
What makes the Latin American discussion particularly relevant
today is that similar problems are increasingly evident in many other
12 The Costs of Inequality in Latin America

countries. Inequality, labor market dualism, financial crises, and political

instability are growing everywhere. Wealthy countries like the US look
more and more like Latin America and—if they do not reverse
direction—could suffer many of the same negative interactions over the
long run. Unfortunately, avoiding the costs of inequality will become
harder and harder: Latin America shows that reversing the income gap is
difficult precisely because of negative political and economic feedbacks.
Our discussion in this book may also be relevant for large emerging
economies such as China and India. In recent years, both Asian giants
have grown rapidly while experiencing a growing concentration of
income at the top. As a result, they are witnessing the type of elite-driven
politics and institutional weakening that was evident in Latin America
for more than a century. If their economies were to slow down—as a
result, for example, of the COVID-19 pandemic—the negative impacts
of income inequality could become more evident and feed into social
discontent. In other parts of the developing world, inequality is already
a growing source of economic and political tensions as well.

How Do We Move from Here? Some Latin American Lessons

This book constitutes a warning: it draws on Latin America’s experience

to highlight the political and economic costs of inequality. Vicious
cycles of high inequality, economic underperformance, and anti-system
politics can easily become a norm more than an exception and will be
hard to reverse. If we do not act now, things could easily go from bad to
worse in the twenty-first century.
Yet Latin America’s history also offers positive lessons. The region
has become a hotbed of progressive ideas that provide unique
perspectives on inequality and exclusion. Appalled by their everyday
experience, economists, sociologists, theologians, and educators have
elaborated original theories and pushed for ambitious policy and
political reforms. Some of the most creative and active social movements
in the world can be found in Latin America. From the Movimiento dos
Trabalhadores Rurais Sem Terra (the Rural Landless Movement, MST)
in Brazil to the cocalero movement and its political party, the Movimiento
al Socialismo (Movement toward Socialism, MAS) in Bolivia, activists
in Latin America have successfully pushed for more rights. Although
they have not been able to reduce inequality as much as they would
have liked, these movements can teach much to activists in other parts
of the world. Their experience demonstrates, for example, the
 1. Introduction: Lessons from the Land of Inequality 13

importance of pressure from below on unresponsive states; the need to

link local and national struggles; the usefulness of connecting concrete
needs with broader development agendas; and the relevance of building
cross-class coalitions. Latin American movements have also been
extremely successful at combining traditional mobilization techniques
with the use of social media.
Latin America’s recent trajectory also offers some room for optimism:
inequality can be reduced even in this period of (neoliberal) globalization
and in difficult institutional environments. Between 2003 and 2013,
most Latin American countries improved their distribution of income,
precisely at a time when income gaps were increasing in the rest of the
world. Some of the drivers of this recent improvement are not particularly
relevant for wealthy economies but may be important for developing
countries. In some Latin American countries, the poor became the
subject of social rights for the first time in history, contributing to a rapid
increase in their income. The power of electoral competition to promote
some level of inclusion is a second useful lesson.
Other lessons are relevant for developed and developing countries
alike. The policy effort that some governments undertook to unify the
social benefits that different people receive is particularly interesting. In
Uruguay, for example, the healthcare system was revamped so that
everyone—both those contributing to social insurance funds and those
who were part of the public system—could receive the same basket of
benefits.18 The arrival of a left-wing government with a historical
commitment to equity and close links to social movements was—at
least in part—behind this reform. Uruguay also implemented a new
National System of Care, which simultaneously supported the elderly in
need and pre-school children.19
In Brazil, a drive to formalize many unskilled jobs together with
steady rises in the minimum wage contributed to a rapid improvement
in income distribution. Between 2002 and 2008, the share of formal
workers increased by six percentage points. Economic growth was
partly behind this positive trend, but progressive policies (including the
simplification of taxes for small firms and the expansion of labor
inspections) were also important. Efforts to increase formalization went
hand in hand with a rapid expansion of the real minimum wage, which
went from R$263 in 2000 to R$465 in 2009.20 Brazil’s experience thus
questions the much-repeated argument that minimum wages have a
negative impact on job creation.21
The 2000s in Latin America thus demonstrate that, even in weak
institutional environments, public policy matters in the fight against
14 The Costs of Inequality in Latin America

inequality. There are also more policy options than usually recognized.
Of course, I should not exaggerate Latin America’s recent success.
Inequality remains high across the region and its reduction has been
moderate. Moreover, recent improvements may not be sustained: now
that the Latin American economies are growing less, the reduction of
the income gap has slowed down.
Countries in both Latin America and other parts of the world need to
move urgently to promote equity. The book concludes with an exploration
of policy options and political requirements to make that happen. The
fight against inequality will demand concerted efforts in many areas
from wealth taxes to financial regulation and from stronger democracies
to more ambitious social policies. At a deeper level, it requires a reframing
of what a good society is, moving away from our current focus on
individualism and meritocracy and embracing solidarity and community
across the world. Will the COVID-19 pandemic make this reframing
more likely, or create even more obstacles for it?

The Rest of the Book

The rest of the book illustrates the negative relation between inequality,
economic development, and political institutions in Latin America. I
show how income gaps are related to negative political economy
outcomes—and how those outcomes often feed back into an even worse
distribution of income. Each chapter relates the Latin American
experience to the current situation in OECD countries. For example, I
show how economic problems such as labor market dualism and
financial crises are increasingly evident in rich societies where income
gaps are expanding. Although the comparisons draw primarily on the
US, the UK, and Southern European countries such as Spain and
Portugal, the conclusions extend to many other countries.
In Chapter 3, I review the links and interactions between inequality
and economic outcomes. We see how a poor distribution of income has
been one of the causes of lack of quality education. Income gaps have
also contributed to the consolidation of dual economies and insufficient
investment in high-tech activities. The dynamic sectors have not
changed much during the last century, in part because the wealthy had
limited incentives to invest in more dynamic but risky sectors. At the
other end, informal sectors with low productivity have expanded,
providing bad jobs to millions of workers who then have not had
enough resources to innovate. I also show how inequality may have
 1. Introduction: Lessons from the Land of Inequality 15

been connected to low taxation and to unsustainable macroeconomic

policies at different times in history, and how this contributed to
financial crises—not unlike the experience in the US a decade ago.
Chapter 4 discusses the links between inequality and politics. I show
how the winner-takes-all politics that characterizes the US today
appeared much earlier in Latin America, where the wealthy have always
exerted an outsized influence on democratic governments. At times, the
Latin American elite has gone as far as supporting military coups and
authoritarian governments.
Probably even more interesting for most readers will be the
connection between inequality and populism—a rather problematic
term that I use to refer to anti-system politicians who build direct
connections to the electorate. Populist leaders have historically been a
direct result of people’s discontent with the political system and with
the concentration of income and wealth. Some populists in Latin
America improved the lives of large segments of the middle class and
the poor—something President Trump is failing to do—but their
positive impact often proved unsustainable. Politically, they eroded the
party system, reduced the opportunities for informed policy debates,
and weakened democratic institutions. Economically, populist
governments often redistributed income in unsustainable ways, thus
contributing to economic mismanagement. Will we witness some of the
same problems in wealthy countries in the future?
Chapter 5 explores the social costs of inequality. I first consider the
complex relationship between violence and inequality. While Latin
America’s record level of crime has many roots, I show how large income
gaps between poor communities (where millions of young people feel
marginalized) and the wealthy are a significant factor. In Latin America,
inequality has also contributed to urban segregation and to the
fragmentation of social services. Unfortunately, the wealthy seldom
share hospitals and schools with the lower middle class and the poor,
making social cohesion harder. The chapter also explores the ways in
which ethnic and racial discrimination and income inequality reinforce
each other. All these problems have contributed to a lack of social
trust—the confidence that people have in their neighbors and public
institutions. Inequality contributes to societies where every individual
roots for him/herself and struggles to cooperate with others. In societies
like this, the opportunities to create the kind of intra-class coalitions
(between the poor and the middle class) required to expand
redistributive social programs are severely hampered—a problem that
is gradually becoming evident in other parts of the world as well.
16 The Costs of Inequality in Latin America

Chapter 6 moves to the positive lessons that Latin America can offer.
High inequality has contributed to the emergence of progressive ideas
and social movements. From economic structuralism to the Catholic
theology of liberation and from Mexico’s Zapatistas to Chile’s student
movement, the region’s dynamism can be an inspiration for activists
across the world. The chapter also discusses the (moderate) improvement
in income distribution that took place in Latin America in the 2000s.
The story is well known among regional experts and policymakers but
ignored in the rest of the world. Latin America’s recent trajectory is
rather paradoxical: one of the most unequal regions was improving
precisely at a time when much of the rest of the world (from the US and
the UK to China and India) was experiencing a growing concentration
of income at the top.
After summarizing the main arguments of the book, the concluding
chapter discusses what can be done to reverse course. What ideas could
should guide our fight in the future? What policies should we promote?
And what kind of political actors and social coalitions do we need to
implement these policies and sustain political change? The chapter
explicitly rejects simplistic or so-called revolutionary ideas; in fact,
we already know much of what needs to be done. Countries must
improve the distribution of human capital and wealth, redistribute
power within the key markets, expand financial regulation and improve
(or adopt for the first time) universal social programs. Of course, the
implementation of such an ambitious policy agenda will only happen
under the right political conditions. Deeper democracies, renewed
progressive political parties, and stronger social movements are
indispensable to win this fight.
Before discussing costs and solutions, let me first tell you a little bit
more about the characteristics of inequality in Latin America: when it
began, what we know about its evolution over time, and how bad it is
today. This next chapter will examine the severity of the distributional
problems in the region and show the relevance of Latin America for the
rest of the world today and in the future.
 Chapter 2

L AT I N A M E R IC A : A LWAYS T H E M O ST
U N E QUA L R E G IO N ?

Alexander von Humboldt was the archetypical scientific adventurer from

the Romantic era. Almost 250 years ago, together with the French explorer
Aimé Bonpland, he sailed to the Americas. Guided by his intense curiosity,
he climbed the Chimborazo in Ecuador and discovered Venezuela’s
Casiquiare Canal, which links the Amazon and Orinoco rivers.1
Humboldt wrote extensively about his five years in the Americas,
reflecting on the region’s geography and on its people. He was
particularly struck by high inequality. For example, he described Mexico
as “the country of inequality. Nowhere does there exist such a fearful
difference in the distribution of fortune, civilization, cultivation of the
soil and population.”2
If Humboldt could go back to Mexico today, he would still see sharp
differences between rich and poor. In 2014, the wealth of the richest
four Mexicans was equivalent to 9 percent of the country’s annual
production. Just using the yearly return from his wealth, Carlos Slim—
the richest of all—could hire almost two million Mexicans at the
minimum wage.3 In the rest of the region, things are not very different:
the wealthy everywhere maintain a privileged position. For example,
each Latin American high net worth individual—a euphemism used by
the financial industry to refer to people who own more than $1 million
in assets, excluding their main house—has an average wealth of $14.5
million compared to $10.1 million in Africa and less than $4 million in
the Middle East, North America, Asia Pacific, and Europe.4
This second chapter reviews Latin America’s history of income
distribution. I show how inequality has remained always high, despite
significant variations across time and space. Latin America has
repeatedly failed to sustain reductions in the income gap for long
periods of time—contrary to what has happened in other parts of the
world. This persistence of inequality over the long run makes the
region’s experience particularly relevant for current debates.

17
18 The Costs of Inequality in Latin America

The Most Unequal Region of the World?

The Serbian economist Branko Milanović is one of the premier experts

on inequality in the world. An amazing number cruncher and a creative
thinker, he has succeeded in making the study of income distribution
interesting and fun. In his books you can learn about almost anything,
from Marx’s contribution to the social sciences to life during the Roman
Empire or the contemporary problems of global inequality. While at the
World Bank, Milanović led an impressive effort to collect and compare
hundreds of household surveys across the world. His data provided a
better understanding of changes in global inequality—that is, the place of
each human being in the world’s income distribution—than before, and
allowed researchers to compare the position of different countries. Figure
2.1 below is one of Milanović’s most popular graphs, which I often discuss
in my courses at Oxford. It locates Indian, Russian, American, Chinese,
and Brazilian citizens on two axes: one measures their place in the
national distribution of income, while the other locates them in the global
distribution. The measure is not perfect: the data fails to account for the

Figure 2.1 Brazil’s unique pattern of distribution in the early 2000s. Note:
The table places individuals within the income distribution of their country
and the world. Income is measured at purchasing power parity dollars of 2002.
Source: Milanović, B. (2012), “Global Income Inequality by the Numbers, in
History and Now: An Overview,” World Bank Policy Research Working Paper
no. 6259.
 2. Latin America: Always The Most Unequal Region? 19

richest people in each country, whose income—as I have already

mentioned—is always underestimated in this kind of survey.
Notice Brazil’s unique position: low-income Brazilians are among the
poorest in the world while those at the top are almost as wealthy as in the
US. Other data sources confirm Brazil’s scandalous level of inequality:
for example, the country’s six richest men control as much wealth as the
bottom half of the population. Even more staggering, each member of
the richest 0.1 percent makes in a month the same as a worker receiving
the minimum wage earns in 19 years.5 Brazil’s experience reflects a
broader regional trend; in fact, in some countries, including Colombia,
Guatemala, and Honduras, the situation may be even worse.
Of course, comparing inequality across the world is not easy: each
country measures income distribution in a slightly different way, the quality
of the data varies significantly, and the wealthy are not adequately captured
in household surveys. Yet all the available information seems to confirm
that Latin America is at the top of any ranking of inequality. For example,
in a study of the Palma ratio—which, as we saw in Chapter 1, compares the
income of the top 10 percent and the bottom 40 percent—12 of the 18
worst performing countries were Latin American, and no Latin American
country was part of the group of more equitable developing countries.6
The Gini coefficient is an even more popular measure of inequality.
It considers the income received by every individual in a society and
goes from 0 (perfect equality) to 1 (total inequality). The Gini in Latin
America is five percentage points higher than in other developing
countries (see Figure 2.2): the contrast with Eastern Europe and Central
Asia is particularly striking.
The unequal income distribution affects rich countries like Argentina
and poor ones like Guatemala or Honduras, countries with a large
indigenous population like Bolivia and more homogenous ones like
Chile. As the General Secretary of the Economic Commission for Latin
America and the Caribbean (ECLAC) puts it, “inequality is a historical
and structural characteristic of the societies of Latin America and the
Caribbean, which is evident in multiple vicious circles.”7
Nevertheless, there are also significant differences within the region
which we should remember in the rest of the book. Latin America
includes 18 Spanish-speaking countries (including the Caribbean
Islands of Cuba and the Dominican Republic) and Brazil. Their members
have different levels of income (Uruguay’s income per capita is more
than seven times higher than Nicaragua’s), export specialization (apparel
and agriculture in Central America and the Caribbean, commodities in
the rest), and histories. Some of these political and economic differences
20 The Costs of Inequality in Latin America

Figure 2.2 Gini coefficient for the distribution of household consumption

per capita in developing countries, 2010. Source: Author’s own, based on data
from Alvarado, F., and L. Gasparini, “Recent Trends in Inequality and Poverty
in Developing Countries,” in A. Atkinson and F. Bourguignon (2015), The
Handbook of Income Distribution, Amsterdam: Elsevier, pp. 697–805.

also translate into differences in income distribution: see Figure 2.3,

which compares the Palma ratio and the share of the “middle class”—
those in deciles five to nine—in 18 Latin American countries during the
period 2000–16. Argentina and Uruguay stand out as the best countries
in Latin America; they have historically benefited from a more diverse
economy, a larger middle class, and a weaker elite. Other countries, such
as El Salvador and Peru, were historically unequal but have improved in
recent years because of a variety of political and economic factors
including democratization (in both), the influence of the left (in El
Salvador), and high economic growth (in Peru). In contrast, Brazil,
Honduras, Colombia, Panama, and Guatemala remain at the top of the
regional and global inequality rankings.

It’s About the Rich, Stupid!

The reason why inequality is so large in Latin America is not that the
poor are poorer than in other parts of the world, but that the rich are
 2. Latin America: Always The Most Unequal Region? 21

Figure 2.3 Recognizing diversity within an unequal region. Source: Author’s

own, based on data from the Socio-Economic Database for Latin America and
the Caribbean (SCEDLAS).

richer. Take, for example, the case of Chile: there, poverty has declined
rapidly in recent years and the income gap between the poor and the
middle class is similar to that in more developed parts of the world. In
fact, among the bottom 90 percent of the population, Chile is more
equal than many OECD countries and social mobility—the probability
that someone improves their social position compared to their parents—
is higher.8
What distinguishes Chile from wealthier countries is the concentration
of income at the very top. According to some estimates, the richest 1
percent in Chile control more than 30 percent of annual production,
compared to 18 percent in the US—a very unequal country in its own
right.9 Clearly there are not one but two Chiles: in one, a small elite enjoys
expensive houses, well-paying jobs, and the security that their children
and grandchildren will maintain superb living standards. In the other
Chile, the middle class and the poor face more economic uncertainty and
can seldom influence political institutions or shape economic change.
Chile is by no means an exception in Latin America: according to
Breaking with History?, the World Bank report on inequality I mentioned
earlier, “Latin American distributions are mainly characterized by a
higher income share among the rich relative to countries in other
regions.”10 The Latin American rich control a shocking proportion of
resources: for example, the wealth of all multimillionaires is 8.5 times
greater than the annual expenditure on public health and almost five
times higher than public investment in education.11
22 The Costs of Inequality in Latin America

The differences in the lives of the wealthy and the poor in Latin
America are extreme. Take the case of Mexico. There, Carlos Slim, one
of the three wealthiest people in the world, owns so many pieces of
art—including, for example, 380 Rodin sculptures—that he created one
of the best art museums in Mexico to host them all.12 In contrast,
millions of Mexicans live in poverty, despite working long hours for the
minimum wage. Indigenous people fare even worse: three out of four
are poor and almost two in five live in extreme poverty.13
Inequality in Latin America is thus primarily about the concentration
of income within a small elite—not even the top 10 percent but the top
1 and 0.1 percent. Who are they? In which sectors do they participate?
Where does their wealth come from? Unfortunately, it is not easy to
answer these questions: we have almost no quantitative information
about these groups, who tend to be secretive and unwilling to collaborate
with researchers. To understand their characteristics, one needs to rely
on a variety of sources of different quality, including articles in national
media, data from global media outlets, and country-level academic
studies.
One of these sources is the list of world billionaires published
annually by Forbes. According to its ranking, in 2018 there were 90
billionaires in Latin America, almost half of whom were located in
Brazil (Table 2.1). Their combined wealth was equal to $412 billion, of
which 77 percent was in the hands of Brazilian and Mexican nationals.
The list included individuals from the largest seven economies in Latin
America; the elites in other countries are also politically and
economically powerful, but their overall wealth is constrained by the
smaller size of their economies.
Travel to any of the best-known Latin American cities and this elite-
driven inequality will become immediately evident. Take the case of São
Paulo, the largest city in the region with more than 13 million people—33
million, if the entire metropolitan region is counted—a third of whom
live in slum-like conditions. If you walk west from Ibirapuera Park—a
vibrant combination of lawns, museums, a music hall, and Niemeyer-
designed buildings—you arrive at Vila Nova Conceição. Combining
upscale restaurants, government offices, and apartment buildings, Vila
Nova is one of the most expensive neighborhoods in Latin America.
You need $500,000 to buy a 100m2 apartment or between $7 and 8m to
purchase a four-bedroom duplex in one of the new building complexes.14
From there, you can walk to neighboring Vila Olimpia, home of
multinational companies like Unilever, Santander, and Facebook and
well known for its bars and nightclubs.15 The contrast between these
 2. Latin America: Always The Most Unequal Region? 23

Table 2.1 Latin Americans in the list of world billionaires, 2018

Average Wealth
Country Number Total wealth wealth (% GDP)
Argentina 9 15.6 1.7 2.4
Brazil 42 176.4 4.2 8.6
Chile 11 41.9 3.8 15.1
Colombia 4 20.8 5.2 6.7
Mexico 16 141.2 8.8 12.3
Peru 6 10.9 1.8 5.2
Venezuela 2 5.5 2.8 N/A

Note: The wealth data was downloaded in September 2018, while GDP is from 2017 and comes from
the World Bank. Source: Author’s calculation based on data downloaded from www.forbes.com in
September 2018.

areas of São Paulo and the many favelas that surround the city could not
be more striking.16 There, you will find 1.2 million people struggling
with high levels of crime and violence (as discussed in Chapter 5), poor
infrastructure, low-quality housing, and no employment opportunities.
Moving from São Paulo to Mexico City, Bogotá, or Caracas will only
confirm Latin America’s glaring contrasts.

Always Unequal?

Latin America’s inequality is not new. Many experts locate its origin in
colonial times. When Spaniards arrived in the Americas, they tried to
replicate the social, economic, and legal system they had left behind in
the Iberian Peninsula.17 Their hope was to get rich quickly, while
working as little as possible. To achieve this goal, the conquerors first
instituted the encomiendas, which gave them ownership over large
tracts of land as well as the right to tax indigenous people living there. A
small elite of newcomers received a huge amount of resources from the
Crown; for example, Hernán Cortés alone “controlled” more than
100,000 Indians. Indigenous people had to work for the encomendero
and pay taxes in the form of corn, wheat, cloth, chickens, and many
other goods to sustain the Spaniards’ lavish standards of living.
The encomienda proved to be inefficient and unpopular and was
eventually eliminated. Yet it was soon replaced by other exploitative
systems such as the repartimiento and the mita. In theory these new
systems gave indigenous people more rights (e.g. limits on how much
24 The Costs of Inequality in Latin America

they had to work), but in practice they represented new forms of forced
labor. Indians still had to work for a member of the elite and pay high
taxes. Conditions in the mines were particularly difficult: thousands of
Indians struggled with 12-hour shifts hundreds of feet below the
surface, poor-quality air, and daily abuses.
The colonial political system was extremely hierarchical. The
descendants of the Spanish conquerors—either white or of mixed
race—controlled local, regional, and national institutions and received
more and better education than anyone else. Men occupied positions of
power while women were treated as inferiors. The Spaniards’ primary
aim was to maintain an exclusionary economic system, while limiting
the influence and power of indigenous groups and slaves. They lived in
fear of a revolution from below: at the end of the eighteenth century, for
example, the Caracas elite warned against the creation of army battalions
made of people of color because they would “increase the arrogance of
the pardos, and give them organization, chiefs, and arms to facilitate a
revolution.”18
According to many academics, this colonial system produced some
of the highest levels of inequality in the world.19 Ownership of land gave
the elite enough influence and power to shape political institutions and
policies exclusively in their favor.20 Indigenous people, slaves, and, later,
their descendants received extremely low wages and no public social
benefits.
Some other academics have questioned this dominant story. For
example, the economic historian Jeffrey Williamson believes that for
centuries Latin America was not particularly unequal. According to his
estimates, inequality in France in 1788 or in England in 1801 was
actually higher than in Peru in 1856 or Brazil in 1872.21 According to
this perspective, Latin America did not become the most unequal
region of the world until the twentieth century, after the first wave of
globalization.
The contemporary relevance of this discussion on the origins of
Latin America’s inequality should not be exaggerated. Maybe the
distribution of income was no worse in Latin America in the middle of
the nineteenth century than in England during the Industrial
Revolution; rapid economic transformation in Manchester, London,
and other British cities did create wealthy winners and millions of
losers, as Karl Marx eloquently explained. Yet it is clear that in Latin
America institutions and policies were organized in favor of the
powerful from early on: huge latifundios, underinvestment in primary
education, and restrictive voting rights were the norm across the region.
 2. Latin America: Always The Most Unequal Region? 25

The negative implications of this elitist model became particularly

clear at the end of the nineteenth century. A series of technological
innovations made international trade easier and cheaper, leading to the
first wave of globalization. The construction of railways, the inauguration
of long-distance steam service, and the introduction of refrigeration
moved Latin America closer to the US and Europe: according to some
estimates, transatlantic transport costs decreased by 45 percent between
1870 and 1913.22 Latin American exports of beef, agricultural products,
and minerals expanded quickly.
When the first wave of globalization met Latin America’s traditional
institutions, inequality accelerated. In Argentina, Brazil, Chile, and
Uruguay the Gini coefficient increased by at least five percentage points
between 1870 and 1920.23 Rich landowners found new opportunities to
make large amounts of money through exports. They benefited from
the new trains connecting their regions to the main ports and from
public efforts to further concentrate land in a few hands. Another
world-renowned US historian, John Coatsworth, explains this dramatic
transformation well: “modernization appears to have produced a
massive new concentration of land ownership provoked, inter alia, by
railroads that brought opportunities for commercial exploitation to
once isolated regions; technological change (especially in sugar) that
created economies of scale; the rapid development of large banana
plantations in the tropics; and the sale of public lands in large blocks to
land and survey companies and well-connected entrepreneurs.”24
Latin America has remained the land of inequality since then—with
the dire consequences that we will consider in the next chapters. It is
true that income distribution improved in some periods thanks to
economic growth and redistributive policies. The 1930s–1960s was a
particularly positive period for countries such as Chile, Mexico, and
Uruguay: industrialization, urbanization, and the expansion of social
programs enlarged the middle class and reduced the income share of
the rich. Yet progressive redistribution faced major obstacles, including
a powerful elite and weak labor markets. Unluckier countries like
Colombia and most of Central America never witnessed a significant
reduction of the income gap.25 The combination of a dual economy,
weak political institutions, and a powerful economic elite—all inherited
from the past—contributed to vicious circles of inequality. In contrast,
during this same period, much of Europe, together with Australia,
Canada, and New Zealand (as well as some developing countries such
as China), experienced a “Great Leveling” as the income of the poor and
the middle class grew much faster than that of the wealthy.
26 The Costs of Inequality in Latin America

No Longer an Exception: Growing Inequality in

Other Parts of the World

Of course, the Great Leveling is long gone, having finished abruptly in

the late 1970s. Between the mid-1980s and the late 2000s, income
distribution worsened in 17 OECD countries, while decreasing in just
two (Turkey and Greece).26 Outside the OECD, the expansion of
inequality was also the norm: between 1990 and 2010 it increased by
11 percent in developing countries, according to the United Nations.27
This negative trend has been particularly clear in the two Asian giants:
China, one of the most equal countries in the world until the 1980s, is
now one of the most unequal,28 and India has a worse distribution of
income today than at any time since data was first reported in 1922.29
This expansion of inequality across the world has been driven by the
concentration of income at the top. The number of billionaires continues
to expand rapidly, and the share of income and wealth controlled by the
rich is staggering. In recent years, China has produced two new
billionaires per day while in India—a country now ruled by billionaires
according to the former Financial Times journalist James Crabtree—the
top 1 percent owns 58 percent of total wealth—eight percentage points
more than in the rest of the world.30 In the US, the situation is not much
different, as we saw in the introductory chapter.
Elite-driven inequality—a classic Latin American phenomenon—is
now evident even in Northern Europe. According to the Swedish
professor Jesper Roine, “Sweden is still a very equal society compared to
most other countries. But it’s true that gaps in income have grown, and
Sweden is no longer as different as it once was in that sense.”31 The
Nordic country now hosts 113,000 high net worth individuals—making
the list of top 25 countries for the first time in 2017—and more than a
dozen billionaires. In Norway, the number of high net worth individuals
increased by 13 percent in 2017, more than in any other European
country but Russia and the Netherlands.32
Will this growing concentration of income at the top just be a
temporary phenomenon? Will we witness a new Great Leveling in years
to come? Although providing a definite answer to these questions is
almost impossible, the Latin American experience does not give us
cause for optimism. We will see why in the next three chapters, where
we will consider the economic, political, and social costs of inequality in
Latin America and identify a series of vicious circles.
 Chapter 3

T H E E C O N OM IC C O S T S O F I N E QUA L I T Y

In 2013, Gregory Mankiw, a famous Harvard professor and former

advisor to President George W. Bush, went to the rescue of the wealthy
with an article titled “Defending the One Percent.”1 Inviting readers to
reflect on the positive contributions that Steve Jobs, J.K. Rowling, and
Steven Spielberg have made, he claimed that the rich were simply
reaping the benefits of their unique contribution to society. In his view,
inequality does not harm economic development and any attempt to
reduce it through redistribution would be damaging.
In his fearless defense of the rich, Mankiw echoed a number of right-
wing politicians and conservative economists for whom inequality can
actually be positive. Their arguments include “high salaries are required
to promote innovation,” “giving more resources to the rich will increase
savings and investment,” and “it is good to have economies dominated
by the most intelligent people.” Of course, if these commentators were
correct, unequal countries should have developed faster than more
equal ones.
The Latin American experience disproves this claim. For decades,
the region has grown significantly less than many developed and
developing countries. In fact, in 2010 the ratio between the GDP per
capita in Latin America and in rich countries was lower than a century
earlier (27 percent vs. 35 percent). Year after year Latin American
countries have failed to innovate and move away from exporting mining
and agricultural products—a sharp contrast with South Korea’s success
in creating world-class high-tech companies such as Samsung.
Multiple reasons explain Latin America’s failure but, as we will see in
this chapter, inequality is one of the most significant. The combination
of income concentration at the top and poverty at the bottom has
created numerous obstacles to achieving economic development. In this
chapter, I concentrate on four particularly significant problems—as
reflected in Figure 3.1. The first two have to do with insufficient
investment in education and innovation. The economic elite has

27
28 The Costs of Inequality in Latin America

historically lacked the incentives to promote high-quality education for

all or to spend much on new technologies. If you are making vast sums
in traditional sectors, why would you want to develop new ones?
Meanwhile, a majority of the population have never been wealthy
enough to spend massively on education and small and medium firms
have not had enough profits to innovate.
Third, the economic elites have also used a variety of legal and illegal
tricks to avoid paying the taxes they owe and to block progressive tax
reforms. Unfortunately, governments without resources cannot fund
much-needed investments in social programs and infrastructure.
Fourth, Latin America’s experience reflects the link between income
inequality and external crises. In some cases, high inequality has
contributed to excessive borrowing, which is particularly problematic
when the global economy deteriorates. In others, inequality has been an
obstacle to implementing much-needed but costly macroeconomic
policies at difficult times. The region’s failure to react appropriately to
changing international conditions in the 1970s, which resulted in one of
the worst debt crises the world has seen during the 1980s, constitutes a
great example.
Latin America’s economic weaknesses have, in turn, contributed to
even more inequality, leading to what economists call vicious circles.
Inequality has led to economic stagnation which, in turn, has resulted in
further income inequality, which has worsened the economy even more,

Figure 3.1 The economic costs of inequality, and its vicious circles. Source:
Author’s own.
 3. The Economic Costs of Inequality 29

in a never-ending spiral. The consolidation of dual labor markets (where

good jobs are the exception) and orthodox spending policies have been
at the heart of these negative processes.
Some readers will think that this painful story is irrelevant to other
countries with higher economic growth and more economic dynamism.
At the end of the chapter I will argue against this view. Latin America’s
problems, including uneven investment in education, difficulties in
taxing the wealthy, economic crises, and informal labor markets, are
increasingly evident in other parts of the world and seem more
widespread and entrenched than ever.

A Historical Excursion

Let’s start with the problems of education and innovation, beginning in

the second half of the nineteenth century, a few decades after most
Latin American countries gained independence. These were turbulent
times for the continent: between the 1820s and the 1880s, there were
more than thirty wars (both internal and external) in the region, with
Argentina, Brazil, Chile, Cuba, Mexico, Peru, and Uruguay fighting at
least two, and every other country experiencing periodic military
coups.2
The result of this volatile period was the emergence of the so-called
“oligarchic state” dominated by a small elite with support from the
army.3 In many countries, an authoritarian leader controlled political
power, implementing policies that favored primary exporters. In other
countries, electoral competition took place, but participation was
limited to a small share of the population.
The exporting elite in power benefited from the rapid expansion of
external markets during the first wave of globalization. Thanks to
technological innovations in shipping and growing investment in
railways, they began exporting beef to London, corn to the US, and
copper to Germany. They formed a strong alliance with foreign
companies, which have always been extremely influential in Latin
America’s history. Not surprisingly, the wealthy (with support from
foreign actors) used their powerful position to push for pro-export
public policies. This had three negative economic consequences. First,
the concentration of land in a few hands intensified: the state took land
from indigenous people and the Catholic Church and privatized
common land, redistributing all to a small number of individuals and
companies.
30 The Costs of Inequality in Latin America

Second, in this environment the elite had no incentive to innovate.

Exporting agricultural goods and/or various mining products was
much more profitable than trying to produce manufactures. Between
1850 and 1912, primary exports grew by an annual average of 3.3
percent with a particularly fast expansion in Argentina (6.1 percent)
and Uruguay (5.6 percent).4 Meanwhile, the manufacturing sector
struggled to become more productive. As the British economic historian
Victor Bulmer-Thomas explained, artisans were simply “not part of the
social political elite and lacked the bargaining power to influence public
policy in their favour.”5
Third, Latin American countries invested little in education. Why
should they spend scarce resources on training workers that were only
needed to produce coffee or sugar and mine copper, nitrates, and gold?
For the dominant elite in the nineteenth and early twentieth century, a
more educated citizenship would have only created problems, including
more demands for democracy and redistribution.
By the beginning of the twentieth century—with a 75-year delay
compared to Canada and the US—only Argentina, Chile, Costa
Rica, and Uruguay had introduced mass primary education.6 At
that time, the literacy rate (i.e. the percentage of people above 10 years
of age who could read and write) was only 17 percent in Bolivia,
15 percent in Brazil, 22 percent in Mexico, and 30 percent in
Paraguay. In contrast, more than 90 percent of Canadians and were
literate.7
Primary education did expand during the twentieth century, as
countries modernized, learnt from their neighbors, and faced demands
from an emerging urban middle class. Yet even then, inequality was a
curse. Public schools, particularly in the rural sectors, remained poorly
equipped and understaffed.8 An American expert visiting El Salvador in
the late 1940s aptly described the state of schools there—in a description
that was equally valid for neighboring countries:

Very few Salvadoran schools are housed in buildings originally

constructed for educational purposes. The great majority are found
in former residences of the Spanish colonial type, in which the
classrooms surround a patio that is used as a playground.. . . The
classrooms are generally small, badly lighted, and poorly equipped.
In 90 percent of them, there is little more than a blackboard, a map of
El Salvador, and a few readers. The desks are mostly old, disfigured,
and inadequate in number—frequently three and four pupils are
found seated in a desk intended for two.9
 3. The Economic Costs of Inequality 31

Low-quality education led to high absenteeism as well as repetition and

dropout rates. A 1952 report on Brazil’s education system found that
more than 40 percent of students dropped out of school without even
passing the first grade and almost no student graduated on time. The
situation was particularly worrisome in the poorest regions of the
northeast, where, the report explained, “retardation in the primary
schools reaches alarming proportions . . . multiplying the first
grades, crowding the classroom, and dividing the school periods into
two, three, or even four sessions because there are not enough funds
to build more schools.”10 In a recent study, the economic historian
Ewout Frankema uses a sophisticated methodology to compare
repetition rates across the world for the period 1960–2005.
After discovering that Latin American countries performed very
poorly, he concludes that “the quality of the educational systems that
have been erected in 20th century LACs was far below international
standards.”11
None of this bothered the elite, since they had developed a parallel
private system, particularly at the secondary school level. For example,
two-thirds of the minority of Colombians who attended secondary
school in the 1920s went to private institutions. Such situations
continued unchanged for several decades. Additionally, the wealthy
created exclusive universities where their children and those of the
upper middle class received high-quality education and enhanced their
social capital. For example, in Mexico, the Instituto de Monterrey—
one of the 50 universities with the highest number of millionaire
graduates in the world—was founded in the 1940s by Eugenio Garza
Sada, owner of a large brewery, and other wealthy entrepreneurs from
the region.12 Around the same time, Raúl Baillères, founder of an
economic empire now led by his billionaire son, together with a group
of bankers and industrialists, created the Instituto Tecnológico Autonómo
de México (ITAM) to train a new elite of economists and business
people.13
The contrast with East Asia could not be more striking. In Latin
America inequality contributed to underinvestment in education
which, in turn, hampered the creation of a more dynamic economy.
Countries such as South Korea, Taiwan, and Singapore—historically
less unequal—have invested many resources in primary and secondary
education since the middle of the twentieth century. A more skilled
labor force helped them to promote the new economic sectors (from
heavy industry to semiconductors) that were behind their economic
miracle.14
32 The Costs of Inequality in Latin America

The Problem of Education Today

“There are no fans, not enough chairs. The structure is in really bad
shape, it needs to be re-painted, it needs fans as some rooms have them,
others don’t. The [chalk/white] boards also need improving. The kitchen
needs improving, it’s a total mess, really disgusting. There are animals in
there that shouldn’t be. There are cats, dogs,” complained 19-year-old
Gisele when describing her secondary school in Recife, Brazil. José
Antonio, who attended a neighboring school, confirmed the bleak
picture and linked it to the city’s problems: “in Brazil, schools are very
closed because of the violence. So you can’t have schools that have open
spaces, with trees, because, at night, outside of school time, vandals
would come and destroy it. They would steal the equipment and
everything in the school. Schools are very closed, grey, without colour,
without life, exactly for this reason—to try to protect students from the
outside world, which is very dangerous.”15 Gisele, José Antonio, and
other young people paint a grim picture of demotivated and unprepared
teachers, poor infrastructure, and insufficient hours of learning. Low-
quality education in the context of difficult family lives leads many
children to quit school or combine their education with demanding
low-paying jobs or with motherhood.
These are not just exceptional cases. In her research on education
and social policy in Brazil, my former student and now lecturer at the
London School of Economics, Hayley Jones, demonstrates the extensive
shortcomings of Brazil’s public education system. After interviewing
Gisele, José Antonio, and other young Brazilians, and collecting data
from national and international institutions, Jones concluded that
secondary education in poor areas of Brazil was not “making much
contribution to human capital formation . . . young people are [not]
developing the knowledge, capacity, and skills needed to pull themselves
and their families out of poverty.”16
Similar problems are evident across the region. Insufficient class
time and demotivated teachers still characterize public education in
Latin America. As a result, despite significant improvements in recent
years, the region’s performance in international standardized tests
remains weak. In 2012, students in the eight Latin American countries
that participate in the Programme for International Student Assessment
(PISA) performed significantly worse than their peers in other regions:
63 percent of all 15-year-old children who participated did not achieve
the recommended level of math compared to just 23 percent in wealthy
countries and 9 percent in Asia Pacific. The performance in writing was
 3. The Economic Costs of Inequality 33

not much better: 45 percent of Latin Americans did not achieve the
minimum required, compared to 18 percent in wealthy countries.17
Other tests show similar limitations at the primary school level: in a
UNESCO-led test implemented in 2006, a third of students did not
achieve the required level of reading, while half did not have the
minimum level of mathematics.18
Although multiple factors explain these shortcomings in quality, the
concentration of income at the top is particularly important. On the one
hand, the poor do not have enough income to attend private schools or
enough political influence to demand better public schools in their
neighborhoods. Most major social movements demanding better
education—from the so-called Pinguinos in Chile to the Green March
in the Dominican Republic—have been led by the middle class.
On the other hand, the elite has no incentives to promote better
public education for all. Economically, the leading business groups do
not require a highly trained labor force. In an excellent study on Latin
America’s economic model, Ben Schneider shows how Latin American
companies tend to specialize in sectors that either require few workers
or where low-educated workers are particularly important. For example,
in Chile, copper mining during the 2000s accounted for 15 percent of
total production but just 2 percent of the labor force.19 In some of
Brazil’s leading business groups, such as Camargo Corrêa and Andrade
Gutierrez, less than 15 percent of workers have college training.20
The children of the elite (and those in the upper middle class) usually
attend private schools, which are strikingly different from those
described by Gisele and José Antonio. The most exclusive schools across
the region are either owned by the Catholic Church or have links to
international (usually British or American) institutions. These schools
provide not just a high-quality education, but also a network of personal
and business contacts.21 Since reviewing all elite schools country by
country is impossible, I will give just three examples from the Guardian’s
list of the best schools with a British curriculum in the world.22 In São
Paulo, St. Paul’s School—whose 10,000 euro annual fee is higher than
Brazil’s average salary—prepares children to study “at top universities
both in Brazil and abroad.”23 Newton College, which charges between
US$8,000 and US$16,000, has an 11 hectare campus on the outskirts of
Lima that includes a large theater, two swimming pools, and a sports
center. Students also do fieldtrips in their geography and biology courses
to a study center in the Amazon.24 Talk about applied education! In
Chile, the Grange School—one of the few English-based schools—has a
hefty fee of US$10,000. Occupying 10 hectares in one of the most
34 The Costs of Inequality in Latin America

expensive neighborhoods in the capital Santiago, the school has

educated large segments of the Chilean elite including several members
of the Luksic family, one of the wealthiest in the country.
This educational apartheid has significant political consequences.
Two education experts from the Inter-American Development Bank
describe them well: “for the most part, the children of the politically
influential people attend private primary and secondary schools. Thus
they do not directly feel the deficiencies of the public school system,
because their interests are not directly and immediately affected by the
success or failure of public schools. This reduces the sense of urgency
that might otherwise lead influential parents to press decision makers
to make tough policy choices.”25

Inequality Limits the Opportunities to Create More

Dynamic Economies

Think for a second about a country where a small group of powerful

individuals controls key economic sectors. These business owners can
easily protect their large profits by influencing public policy. The
managers and other skilled workers who work for them receive generous
salaries and are thus happy with the status quo. Why would any of them
want to innovate and invest in more complex and risky sectors?
Additionally, the same country has a large number of poorly paid
informal workers and entrepreneurs, who lack the resources, political
connections, and access to finance to enter into new sectors. How can
they become an engine of transformation even if they want to?
Actually, you do not need to imagine any of this; it is an accurate
description of the connections between inequality and the lack of
innovation and economic dynamism in Latin America today. Across
the continent, a small number of business groups—owned by the
wealthiest families—control most key economic sectors. In Chile, for
example, just three families (the Luksic, Angelini, and Matte) owned
all large publicly traded companies in the late 1990s.26 In Argentina,
200 companies—many owned by large conglomerates—are responsible
for more than a quarter of yearly output and almost three-quarters of
all exports.27 In Colombia, in the mid-2000s, half of the largest
nonfinancial firms were in the hands of just five business groups and
90 percent belong to 23 groups.28 During the same period, the five
largest Mexican business groups controlled more than 10 percent
of GDP.29
 3. The Economic Costs of Inequality 35

Business concentration is also evident at the sectoral level. A 2008

study published by the economist and business manager Huberto
Campodónico found that significant sectors in Peru were in the hands of
just a few companies. For example, the beer, telecommunication (fixed
lines), and airline sectors as well as 81 percent of the milk business, 70
percent of cooking oil, and more than 60 percent of cement, iron, and
steel were controlled by just two companies each.30 A similar trend is also
evident in Chile. In hardware stores, two companies (Easy and Sodimac)
have become dominant players, contributing to the disappearance of
almost 3,500 smaller firms that operated in the sector in the 1990s. Three
pharmaceutical chains (Cruz Verde, Salcobrand, and FASA) are
responsible for more than 90 percent of medicine sales. The list of sectors
dominated by just two or three companies—many of which are part of
larger conglomerates—also includes telecommunications (mobile and
internet), cable, supermarkets, and electricity.31
This process of business concentration has not been “spontaneous”
but can be directly linked to public policy. Since the late nineteenth
century, family business groups have benefited from privileged access to
state institutions to shape public policies in their favor. Large firms
across the region have systematically pushed against competition
policies that could eliminate monopolies or fine companies that collude
to set excessively high prices. Once again, they have worked in tandem
with multinationals, at times forming strategic alliances with them.
As we will see later in the chapter, they have also opposed redistributive
tax laws.
Close access to the state—made possible by high inequality—has
thus helped large firms to sustain high profits. Examples of large family
groups that benefited from state protection—even in the supposedly
neoliberal era of the 1990s and 2000s—abound. Telefónica de México
(TELMEX) is one of the most scandalous cases.32 Owned by Slim since
its privatization at the beginning of the 1990s, TELMEX has profited
immensely from its monopolistic position and the state’s lack of
regulation. Instead of reducing the installation fee as required in the
privatization agreement, TELMEX increased it by 85 percent. The
company has repeatedly hiked the prices of local calls—where it does
not face any competition—while reducing the prices for long-distance
calls to ruin its competitors, in the kind of cross-subsidy that is forbidden
by law.33
Powerful and protected business groups face limited incentives to
innovate. It is much better for them to remain in their safe niches than
to move into new sectors where competition from American, European,
36 The Costs of Inequality in Latin America

and Chinese firms is intense.34 As a result, in Latin America the private

sector is responsible for only one-third of total spending in research
and development (R&D) compared to 50 percent in Asia and 70 percent
in the OECD.35 The Latin American private sector seldom introduces
new products to the market: in fact, the probability of that happening is
20 percentage points lower in Latin America than in Eastern Europe
and Central Asia.36
Large groups coexist with an ocean of self-employed workers and
small firms where an estimated 60 percent of Latin Americans work.37
As the Spanish professor Javier Vidal explains, most of these firms
are characterized “by low productivity [and] difficulties with
internationalizing their activities and incorporating technological
innovations.”38 In Chile, for example, labor productivity (that is, the
amount of output that each worker generates) in small firms is thirteen
times lower than in large firms.39
Most small firms do not make any profit and have limited access to
credit markets. Given their precarious situation, it is not surprising that
most of these small and medium firms do little research. According to
another World Bank study published in 2013, just 3 percent of small
Latin American manufacturing firms innovate; the number of
companies in other sectors is unlikely to be much higher.40
In summary, the large economic gap between a few powerful business
groups with limited interest in innovation and a large number of small,
unproductive firms with no resources to invest is behind Latin America’s
backward position. In 2011, spending in research and development was
just 0.33 percent of GDP; in contrast, it was 1.1 percent in Asia and 2.0
percent in wealthy countries. The number of licenses and patents—
which have increased rapidly in Asia in the last decade—is also
extremely low.41 Unfortunately, without innovation it is hard to sustain
economic growth and a dynamic transformation of the economy.

The Difficulties of Taxing the Elite

In December 1999 Chileans elected the first Socialist president since a

violent coup overthrew Salvador Allende 26 years before. An economist
with a PhD from Duke University and an extensive career in government,
Ricardo Lagos took power with the commitment to reduce inequality.
Together with his Minister of Finance Nicolás Eyzaguirre, he promised
to reform the healthcare system and expand corporate taxes. Eyzaguirre
knew that he would face unjustified criticism: as he explained years
 3. The Economic Costs of Inequality 37

later, “[critics] were trying to argue that the economy was going to stop,
that investment was going to stall, that . . . small and medium enterprises
were going to collapse . . . my team was a very serious team, in terms
of knowledge of sound economic theory—the arguments were
nonsense.”42
When the government announced a modest increase in the corporate
tax rate and a reduction of some loopholes, the business elite mobilized
to stop the reform. They used their close links to right-wing
political parties, their lobbying capacity, and their access to the press to
weaken the proposal significantly. After a protracted negotiation, the
government had to accept a minimal increase in the tax rate from 15
percent to 17 percent—well below the Latin American average of 30
percent. Years later, when another Socialist president, Michelle Bachelet,
tried to implement a more comprehensive reform of all income taxes,
the business elite was also successful in watering down the initial
proposals.43 As a result, and despite a moderate increase in the tax
burden in the last two decades, Chile still struggles to tax wealthy
individuals. Fiscal loopholes, which disproportionately benefit the elite,
represent an estimated 4 percent of GDP, more than in any other
OECD country except Mexico.44 Taxes on natural resources such as
aquaculture, fisheries, and forestry remain low, and tax rates for high-
income groups are significantly below other countries.45 The average
effective tax rate for the richest 1 percent is around 16 percent, compared
to 24 percent in the US and an even higher number in other OCDE
countries.46
Chile’s experience is by no means unique. Governments across Latin
America have struggled to raise taxes, particularly on personal and
corporate income. In a study published in 2009, I showed how most
Latin American countries collected fewer taxes than one would expect
given their level of income.47 The contribution of property taxes—
potentially an important income source, since houses and land cannot
move somewhere else like entrepreneurs do—was then particularly
disappointing. They represented only 0.3 percent of total revenues in
the whole region and in five Latin American countries they generated
no revenues at all.48
Things have not changed enough in recent years. Some academics
and policymakers have celebrated the increase in tax revenues during the
2000s, linking it to the growing policy emphasis on equality. According
to the Italian economist Andrea Cornia—who believes that Latin
America “discovered” a new social democratic model in the 2000s—“tax
policy underwent gradual but deep changes in much of the region. In a
38 The Costs of Inequality in Latin America

significant departure from the 1990s, tax policy during the 2000s often
emphasized corporate income tax and reduced exemptions, extended
the scope of presumptive taxation, cut regressive excises, and introduced
indirect taxes on luxury items.”49
Yet these researchers are too optimistic: the truth is that taxes in
Latin America are still low and regressive and that much of the elite
pays little.50 Wealthy individuals have routinely used their political
influence to keep taxes low. In eight Latin American countries the
richest 10 percent of the population pay less than 5 percent of their
income in income taxes, three times less than in the US and six times
less than in Sweden.51
Every time there is an attempt at reform, the economic elite pressures
the government to create new tax exemptions. This is particularly
evident in some of the more dynamic sectors such as mining, maquilas
(where clothes and electronics are assembled for exports), and tourism.
The arguments to secure these benefits are always the same: “if we have
to pay more taxes, we won’t be able to compete with other countries,” or
“if you increase our taxes, investment and growth will suffer significantly.”
I still remember vividly a back-to-back trip I did to Costa Rica and the
Dominican Republic years ago: when I arrived in Costa Rica, assembly
producers and tourist operators were calling for more tax incentives to
compete with the Dominican Republic. Of course, when I traveled to
the Dominican Republic, they were doing the same . . . but comparing
themselves with Haiti. This is a never-ending and costly game: in some
Latin American countries, tax subsidies are as high as 8 percent of GDP.
In Nicaragua during the late 2000s, tax exemptions were 40 percent
higher than the whole public health budget.52
Latin American states have also been unwilling to fight tax evasion
and other fiscal crimes. Given the economic and political power of the
elite in these unequal environments, governments across the region
probably feel that it is a lost battle. Yet the result has been additional
revenue losses: according to some estimates, tax evasion leads to a
reduction of more than 50 percent of personal income tax revenue in
several countries. In the case of the corporate tax, the loss ranges
between 27 percent in Brazil and 65 percent in Costa Rica.53 As a result
of all these problems, the Comisión Económica para América Latina y el
Caribe (Economic Commission for Latin America and the Caribbean,
CEPAL) estimates that tax evasion was equivalent to US$320 billion or
6.5 percent of regional GDP in the late 2000s.54
Tax evasion has gone hand in hand with the massive use of
unregulated tax havens. Leaked data on accounts at the Swiss subsidiary
 3. The Economic Costs of Inequality 39

of the British bank HSBC—the so-called Swissleaks—revealed that

Latin American residents have hidden deposits for US$52.6 billion—
equivalent to one-quarter of total public investment in healthcare in the
region.55 The Panama Papers—leaked from the Panamanian law firm
Mossack Fonseca by an anonymous source—identified thousands of
wealthy individuals with offshore accounts, including politicians, artists,
and powerful business people. In total, the Tax Justice Network estimates
that Brazilians have more than US$519 billion hidden in offshore
accounts (equivalent to 160 percent of Brazil’s foreign debt), Mexicans
have more than US$417 billion (equal to 224 percent of the country’s
foreign debt), and Venezuelans more than US$405 billion (a staggering
728 percent of their country’s total foreign debt).56
Privileged access to the state in the context of high inequality
explains the wealthy’s success in avoiding taxes. In recent publications,
Oxfam has identified some of the most common mechanisms the rich
use to capture the state.57 Let me mention here just a few. First, the elite’s
control of mass media—both newspapers and TV—has allowed them
to shape public debate and build opposition against tax hikes. Multiple
op-eds and TV programs repeat the same half truths about the negative
impact of taxes on investment, the link between taxes and corruption,
and the need to limit state regulation.
Second, the use of revolving doors is quite common in Latin America.
Entrepreneurs and business managers spend their professional lives
moving from the private to the public sector and back. A common
excuse is that governments need the best possible experts, many of
whom work in the private sector. Yet the problem is that when you put
a powerful landowner in charge of the Ministry of Agriculture or a
banker becomes the Minister of Finance, the chances of adopting
progressive policies diminish substantially. Conflicts of interest are
seldom properly regulated, and business associations tend to have better
access to the government when it is occupied by their peers.
Third, as we saw in the case of Chile, the business elite often has close
links to political parties, contributing to their campaigns and lobbying
through formal and informal channels. Although most governments
have advanced in the regulation of campaign financing, large
corporations and powerful individuals still transfer millions of dollars
to presidential and legislative candidates. The behavior of the Brazilian
construction company Odebrecht in recent years constitutes a good
illustration of this problem. According to company insiders, Odebrecht
spent US$3.4 billion to fund electoral campaigns in Argentina, Chile,
Colombia, Ecuador, Panama, Peru, the Dominican Republic, Mexico,
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 LAMMERGEYER.

The Eagle and Vulture Aviary stands in an open glade, but well
surrounded by forest trees, in Bird Valley, between the Aquatic Bird
House and the new Zebra House. It is a commodious and pleasant
installation, well adapted to exhibit the Society’s collection of
rapacious birds. Its length over all is 210 feet. It has seven very large
flight cages and six smaller ones. The largest cages are 24 feet wide,
33 feet deep and 31 feet high. In the rear of the great wire structure
will stand a very comfortable brick building to serve as a winter
shelter for the tropical birds of the collection; but it will not be open
to the public.
Now that our eagles and vultures are to be brought together, visitors
will find that the collection is a large one, and contains many fine
species.

The Condor, (Sarcorhamphus gryphus), of the Andes, is the largest

of the birds of prey, having a wing-spread of over nine feet. It feeds
entirely on carrion, rarely attacking living animals. In the male, the
head is adorned with a large fleshy comb, much like that of a barn-
yard cock. The Society at present possesses several specimens of this
great bird.

The King Vulture, (Gypagus papa), is as its proud name implies,

the one member of the Vulture Family which really is clad in 144
royal robes, and color-decked to match. Its range extends
from Mexico and Central America to Trinidad and Brazil. The visitor
should not fail to see this gorgeously caparisoned body of white,
cream-yellow and black, and head of orange, purple and crimson.

Black Vulture, (Catharista urubu).—These ill-favored but very useful

birds are quite abundant, and even semi-domesticated, in some of
our southern cities. This is due to the protection accorded them,
because of their valuable services as scavengers. They are said to
devour every particle of exposed organic refuse, and in a warm
climate these services are of more value than we in the north can
realize.

The Yellow-Headed Vulture, (Cathartes urobitinga), of northern

South America, is a much handsomer bird than its two preceding
relatives. It has much the same feeding habits, but is very rare and
delicate in captivity.

The California Condor, (Gymnogyps californianus).—This is one of

the rarest, and to all Americans the most interesting, bird of prey in
the Park. The species is confined to a very small area in the rugged
mountains of southern and lower California, and beyond all doubt,
the skin-collecting ornithologists will exterminate it within the next
twenty years, or less.
The Griffon Vulture, (Gyps pulvus), and the Kolbe Vulture, (G.
kolbi), are Old World birds and although more closely related to the
eagles than to the vultures of the New World, resemble the latter in
general habits.

Differing strongly from its congeners in general appearance, is the

Eared Vulture, (Otogyps auricularis). This rare bird is a native of
North Africa, where it feeds on such carrion as it is able to find. Its
bare, wrinkled head and neck and great bill give it a decidedly
gruesome appearance.

The Red-Tailed Hawk, (Buteo borealis).—The “Hen Hawk,” or

“Chicken Hawk,” is one of our commonest birds of prey. It hardly
merits its common name, as its favorite food is mice and other small
mammals. This is the hawk seen, in the fall of the year, going south
in flocks, sometimes of one hundred or more.

One of the most splendid members of the collection is the Harpy

Eagle, (Thrasaetus harpyia), of South America. The remarkably large
legs and claws indicate the great strength which enables the bird to
prey upon sloths, monkeys, and other fairly large animals.

145
KING VULTURE.
 BLACK VULTURE.

The Lammergeyer or Bearded Vulture, (Gypaetus barbatus), is

now probably extinct in Europe, but is still found in parts of Asia. It
feeds largely on lambs.

A nearly cosmopolitan bird is the Golden Eagle, (Aquila chrysaetos).

It is equally at home in the highlands of Scotland and the mountains
of North America, nesting on the highest cliffs.

The Bateleur Eagle, of Africa, (Helotarsus ecaudatus), has narrowly

missed the distinction of being the most beautiful of all birds of prey.
Its plumage is charmingly colored but it is out of proportion. Its tail is
so absurdly short that its wings quite conceal it, and make it appear
as if altogether tailless.
HARPY EAGLE.
 GRIFFON VULTURE.

Bald Eagle, (Haliaëtus leucocephalus).—The appearance of 146

the adult Bald Eagle, our National emblem, with its
conspicuous white head and tail, is familiar to all; but the immature
birds, as shown by several of the specimens, lack the white in their
plumage. These birds are found usually near water, and their food is
chiefly fish. These they sometimes catch for themselves, but if
ospreys are found in the vicinity, they are watched by the eagles, and
often robbed of their hard-earned prey.

Perhaps the fiercest among all the hawks is the White Gyrfalcon,
(Falco islandus). A native of the far north, it descends to a more
equable clime only when forced to do so by scarcity of food. It is so
swift of wing that it is able to capture a duck in full flight.
Sea snakes form the rather unusual food of the White-Breasted
Sea Eagle, (Haliaëtus leucogaster), of the East Indies, while the
strikingly-colored Vulturine Sea Eagle, (Gypohierax angolensis), a
native of Africa, feeds on fish, crabs, and the fruit of the oil palm.

THE WILD TURKEY ENCLOSURE, No. 33.

At the northern end of Squirrel Ridge, where the Alligator Walk
intersects the Rodent Walk, an ideal quarter of an acre, of oak and
hickory trees, underbrush, and bare rock, has been dedicated to the
king of game birds.

The Wild Turkey, (Meleagris gallopavo silvestris), is a bird of

magnificent size and presence, and the splendid metallic luster of his
plumage—a mixture of burnished bronze copper, lapis lazuli, and fire
opal iridescence—backed up by a great bulk of savory flesh, all
combine to make this the finest game bird on earth. It was once
fairly abundant throughout the eastern United States, and still is
found in Pennsylvania, southern Ohio, Virginia and other southern
states as far west as Texas. Three other species of Meleagris are now
recognized—one in Florida, one in southern Texas and northeastern
Mexico, and the fourth in Mexico, extending to western Texas and
Arizona.

THE LARGE BIRD-HOUSE, No. 7.

On the northwest quarter of Baird Court stands the largest and the
most generously equipped home for perching birds now in existence.
This is not an unnecessary boast, but merely a brief 147
statement of a fact which the visitor has a right to know. It
was designed on our long-established principle that every captive
wild creature is entitled to life, exercise and happiness. Our principle
of very large cages, with many birds in each cage, is just the reverse
of the views that have prevailed in the older zoological gardens, even
down to the present day. To an important extent, the cage equipment
of this building represents a new departure. There are many
zoologists with experience longer than ours who believe that small
birds thrive better and live longer when installed in small cages, with
only one or two birds in each.

WILD TURKEY.

The Large Bird-House, specially designed for Passerine birds, was

developed on the strength of experiments previously made in the
Aquatic-Bird House, and in community cages outside. After three
years’ experience with the new building, and a careful tabulation of
diseases and death rates within it, we are able to state that this
installation is a complete and gratifying success.
The Large Bird-House is an L-shaped building, with an all-glass house
in its angle. The main hall extends east and west, and it is 60 feet
long by 50 feet wide. This great room contains the foreign song-
birds, many tropical doves and pigeons, and such tropical varieties
and oddities as the great crowned pigeons, tinamous, 148
toucans, giant king-fishers and hornbills. In the great central
flying cage there is perhaps the most remarkable omnium-gatherum
of small tropical birds—swimmers, waders, upland game birds and
perchers—ever brought together in one cage. The bottom of the L is
the Parrots’ Hall, 65×30 feet. It contains the parrots, macaws,
cockatoos, and a few other species.

SERIEMA.
 SECRETARY BIRD.

In the angle of the main building stands a structure almost wholly

composed of metal and glass, which is known as the Glass Court. It
was designed especially for North American song-birds. The visitor
should not overlook the fact that there are cages filled with birds all
along both the eastern and western sides of the Large Bird House.

Nearly all the cages of both the exterior and interior of the Main and
Parrots’ Halls, are accessible from the back by passage-ways; a
convenience that greatly facilitates the work of the keepers in caring
for their various charges.

The capacity of this installation as a whole may be judged from the

following memorandum of cages:
 149

APPROXIMATE SIZES OF CAGES OF THE LARGE BIRD-HOUSE

INDOORS.
Main Hall Central Flying Cage 15×36×20 feet high 1
Side Cages 5×5×9 35
End Cages 5×12×9 2
Parrot Hall Side Cages 6×8×9 21
Glass Court West Cages 8×9×9 6
East & North Cages 5×6×8 16
OUTDOORS.
Northeast Cages 7×12×10 2
East Cages 6×8×10 10
Southeast Circular Flight Cage 20×20×2 1
South Cages 6×8×10 3
Large Western Cages 15×15×15 3
Smaller Western Cages 6×9×10 14
Total number of cages 114

Regarding the state of health and spirits of the birds in this building,
the visitor must be left to judge for himself. It is only fair to state,
however, that the death rate here and indeed amongst the birds of
the Park generally, is very low.

In view of the great number of avian species inhabiting the Large

Bird-House, it is a practical impossibility to give more than a general
outline of the groups and leading features of the collection.

As the visitor enters at the south door, nearest the Lion House, he is
greeted by a discordant chorus of ear-piercing shrieks and squawks,
joyous but very raucous, and at times too persistent. Loudest are the
voices of the gorgeously-plumaged Blue-and-Yellow Macaw, (Ara
ararauna); the Red-and-Blue Macaw, (Ara macao), and the Great
Green Macaw. Around their cages there is no such thing as
stagnation or somnolence. The soft-hued Rosella Parakeets, the flock
of mostly-green Cuban Parrots, the Leadbeater Cockatoos and the
White Cockatoos all join in their voices, to the limit of their respective
abilities, but against macaws which can be heard a mile, their best
efforts seem tame. The members of the Order Psittaciformes (as
above) have been beautifully colored by Nature, and their harsh
voices seem strangely out of harmony with their plumage.

The indoor cages along the western side of the Large Bird-House
(both halls included), contain an extensive series of tropical Pigeons
and Doves, which are well worth some attention.

The most startling exhibit in this group is the Bleeding Heart Pigeon
(Phlogoenas luzonica), from the Philippines, whose creamy-white
breast seems to have been recently stabbed with a stiletto. It is no
wonder that now and then a sympathetic visitor seeks the curator, or
a keeper, and reports that a bird has been injured, and is 150
bleeding from a wound in its breast.
 GREAT CROWNED PIGEON.

The Flying Cage in the center of the Main Hall contains a pool of
running water, some small trees, an imitation rock, and the floor is
covered with a comfortable layer of sand. Hopping or flying about,
and perching on the trees, is a really remarkable medley of birds.
There are the Wood Duck and Mandarin Duck, Black Skimmers,
Common and Sooty Terns, several species of Teal, Curlews,
Gallinules, Coots, Lapwings, Snipe, Ruffs, Quail, Francolins, Senegal,
Turtle, Wonga-wonga and other Pigeons and Doves, Skylarks, Robins,
Orioles, Cardinals, Woodpeckers, Java, Fox, Tree, and other Sparrows
and Weavers.

The south side of the Main Hall is devoted to miscellaneous rare birds
from the tropics, regardless of the Orders to which they belong. The
largest are the Great Crowned Pigeons,—Victoria and Common,—the
oddest are the Concave-Casqued Hornbills and the Toucans (eight
species). The Rufous Tinamou, of South America, is a species which,
through lack of use for its wings, is rapidly losing the power of flight.
The Giant Kingfisher is the “Laughing Jackass” of Australia, and its
cry is strangely like the mirthless horse-laugh of a man who has few
smiles and seldom uses one. The Himalayan Jay-Thrush is so
confirmed a murderer of birds smaller than himself, it is necessary to
quarter that species with other birds abundantly able to 151
defend themselves against its attacks.
SULPHUR CRESTED COCKATOO.
 TOCO TOUCAN.

On the northern side of the Main Hall there will be found a very
interesting group of Cuban birds, another of birds of the Bahamas, a
fair-sized collection of Finches, Weavers, Canaries, Trogons, and
other small species of foreign lands. Here also is the rare and
beautifully-plumed Greater Bird of Paradise, (Paradisea apoda).

The visitor is reminded that for all cages that contain more than one
species, the picture labels quickly furnish a key for identification of
each.

In the Glass Court and around it, the Curator of Birds, Mr. C. William
Beebe, has scored a gratifying success in the installation of the Order
Passeres. The birds are arranged by Families, and all of the twenty-
one families of eastern North American perching birds are
represented. These Families are as follows: Flycatchers, Swallows,
Wrens, Mockingbirds and Catbirds, Thrushes, Kinglets, Vireos,
Waxwings, Shrikes, Chickadees, Nuthatches, Brown Creepers,
Warblers, Pipits, Horned Larks, Sparrows, Honey Creepers, Tanagers,
Blackbirds and Orioles, English Starling, Crows and Jays. It is only
those who have attempted to form and install such a collection who
can appreciate the effort which that collection has cost, or the
difficulties involved in the maintenance of so large a number of
insect-eating birds. The birds in this section of the Bird-House 152
are especially interesting to the teachers of pupils of the
public schools of this city.

The large circular flying cage, at the outer corner of the Glass Court,
is filled with Robins, Bluebirds, Thrushes and Woodpeckers which
winter there very comfortably, because they are fed and watered,
and sheltered from the worst storms.

Along the western wall of the Large Bird-House, outside, fourteen

large cages are filled with members of the Crow and Blackbird
Families (Corvidae and Icteridae), such as the Ravens, Crows, Jays,
Magpies, Blackbirds, Meadowlarks, Cowbirds and Grackles, beside
which appear our old friends the Yellow-Shafted Flicker and Red-
Headed Woodpecker.

The following is a systematic enumeration of the Orders of birds

represented in the Zoological Park on April 1, 1913:

LIST OF BIRDS, APRIL 1, 1913.

ORDERS. Species. Specimens.
Rheiformes Rheas 2 2
Struthioniformes Ostriches 2 2
Casuariiformes Emeus and Cassowaries 2 3
Tinamiformes Tinamou 5 5
Galliformes Quail and Pheasants 88 204
Turniciformes Hemipodes 1 2
Ptericlidiformes Sand Grouse 1 1
Columbiformes Pigeons and Doves 57 183
Ralliformes Coots and Gallinules 15 35
Lariformes Gulls and Terns 17 54
Charadriiformes Plovers and Sandpipers 18 48
Gruiformes Cranes, Seriema 13 30
Ardeiformes Ibises, Storks and 35 85
Herons
Palamedeiformes Screamers 3 4
Phoenicopteriformes Flamingoes 2 5
Anseriformes Swans, Geese and Ducks 72 712
Pelecaniformes New World Vultures 9 30
Cathartidiformes Cormorants and Pelicans 8 27
Serpentariiformes Secretary Birds 1 2
Accipitriformes Hawks and Eagles; Old 28 48
World Vultures
Strigiformes Owls 20 47
Psittaciformes Parrots, Macaws and 86 194
Cockatoos
Coraciiformes Kingfishers and Hornbills 12 15
Trogoniformes Trogons 1 1
Cuculiformes Touracos and Cuckoos 10 18
Scansoriforme Toucans and Barbets 8 13
Piciformes Woodpecker 9 26
Passeriformes Thrushes, Sparrows and 378 1242
all perching birds
Totals 903 3038
153

WILD-FOWL POND,
Heretofore Called the Aquatic Mammals’ Pond.
As the birds on this pond have been transferred from the Duck
Aviary, the interest of this exhibit is of special character, and greatly
enjoyed by hosts of visitors. This is the nursery of the ducks and
geese, where, in the tangle of long grass, briars and underbrush
along the east side of the pond, the nests are built in early spring,
the eggs are laid and patiently incubated. Finally the broods of
ducklings are led to the water, to feed to repletion, throughout the
summer, on the worms, bugs and insects so dear to the appetite of
these amusing little fellows.

Cope Lake is the especial province of the nesting pairs of Canada

geese, and sometimes as many as eight golden-colored goslings are
hatched in one nest on the small island.

The Mallard Duck, (Anas boschas), is one of our finest swimming

birds, the joy of the sportsman who finds it in its haunts, the delight
of the epicure who finds it on the bill of fare. Sluggish indeed must
be the blood which does not beat faster at the sight of a flock of wild
Mallards, free in Nature, and ready to leap into the air and away at
the slightest alarm. After the pintail and the wood duck, this is one of
the handsomest ducks of North America, and also one of the finest
for the table. Its range covers practically the whole of the western
continent down to Panama, and even extends to the Azores, north
Africa, and northern India. The drakes are readily recognized by the
splendid irridescent green of the head.

The Green-Winged Teal, (Nettion carolinensis), and Blue-Winged

Teal, (Querquedula discors), are very delicate birds, and therefore
rather difficult to maintain in captivity. A flock of each will be found in
the Flying Cage.

The Pintail Duck, (Dafila acuta), is specially commended to the

notice of visitors because of its great beauty, both in color and form.
Its colors form an exquisite harmony of soft brown and gray 154
tones which fairly rival the more gaudy color-pattern of the
wood duck. The species is yet found occasionally along the Atlantic
Coast, but like all other edible birds, its numbers are rapidly
diminishing. A large flock of these birds will be found on the Wild-
Fowl Pond.

DUCKS FEEDING: WILD FOWL POND.

The Gadwall, (Chaulelasmas strepera), is a handsome gray bird,

well known to gunners along the Mississippi Valley, but rarely seen
along the Atlantic coast. Its chief breeding grounds are in the great
marshes of central Canada.
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