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Tuesday, January 10, 2006 

Poverty and inequality in Latin America and the Caribbean
Franklin W. Knight
Wednesday, January 11, 2006

Wealth and poverty have always been major preoccupations of individuals and nations. Today, thanks to the initiatives of the United Nations, the development of statistics and the integration of knowledge and power globally, the concern has taken on universal urgency. Establishing reliable indices of poverty is as old as it is difficult. Wealth and poverty are major considerations in ranking nations, communities or individuals.

Wealth and poverty are relative terms whose indices have always been vague and can sometimes be quite misleading. Too often poverty is confused with inequality. Both within and between nations statistical differences are interpreted to reflect a questionable general poverty.

Nowadays many attempts have been made to measure and quantify poverty and wealth. The United Nations recently established eight Millennium Development Goals which its 191 members have agreed are attainable by 2015. The first of these goals was the elimination of extreme poverty and hunger throughout the world, although not all hungry people are poor.

No one seriously believes this will happen. Nevertheless, several countries have accepted the challenge and have been making significant progress.

In a world where almost everything has a price, wealth is measured in terms of potential purchasing power and material. Economists like to express the measure of potential wealth in terms of either gross domestic product - the sum of all value produced within any given state, or per capita income - the after-tax earnings of an individual.

Determinations of both the gross domestic product and the per capita income are useful measures in analysing the general economic profile of a country. But they are notoriously unreliable in measuring wealth or poverty.

The United States prides itself on its relatively high level of per capita income. For the country as a whole, the estimated per capita income in 2000 was estimated at US$30, 271. Ten states and the District of Columbia exceeded the average. West Virginia had the lowest per capita income given as US$22,721, a sum exceeding by far every Latin American and Caribbean country.Yet many poor people throughout the region felt fortunate that they did not live in New Orleans at the time that hurricane Katrina struck.

The presumably wealthy United States portrayed a dismal picture to the international community of a country where indigence rivalled incompetence. The material poverty of the sufferers paralleled the technical and intellectual poverty of the administrators at federal, state and municipal levels. The United States has the highest proportion of its population in prison of any developed country. Indeed, 13 per cent of all families in the United States of America live below the officially accepted poverty line.

Moreover, conditions of life in most American cities are, as Thomas Hobbes once expressed it, "nasty, brutish and short".

By contrast, Cuba has an official per capita income of only US$2,800. Its social indicators compare quite favourably with those of the United States in life expectancy, infant mortality rates, formal education, literacy, and general health. The Cuban government spends more on foreign assistance than any other country in the world.

Since in the developing world - a curious term used to describe the more powerful countries in the world - most households have more than one income earner, some prefer calculations based on the total income of a statistical family of four. Families that pool their earnings have an advantage in the index of poverty.

Most studies tend to zero in on family income and express this in terms of the United States dollar. Of course, the purchasing power of a dollar varies considerably across Latin America and the Caribbean as well as between the region as a whole and the United States.

For that reason the United States attracts a large number of illegal immigrants who make the perilous journey to improve their economic situation. If workers in the United States find the minimum hourly wage of just over five dollars unacceptably low compensation for them, new immigrants often find that a princely sum when compared to a day's income in their own countries. A "poor" worker in the United States can rank in the upper middle class in Haiti or Nicaragua or Mexico.

Another indicator of the elasticity of purchasing power is reflected in the large amount of remittance money flowing from the United States to the rest of the hemisphere. In March 2005 the Inter-American Development Bank issued a report that estimated that in the previous year Latin American and Caribbean workers abroad sent back to their home countries more than US$45.8 billion. While the largest gross remittances flowed to Mexico, Brazil and Colombia, Haiti benefited the most, receiving more than US$1 billion or more than one-quarter of its gross domestic product from nationals working abroad.

Direct family income, however, represents only one aspect - albeit an important one - of the general picture of poverty and inequality in Latin America and the Caribbean. Direct family income affects health, education, and social conduct. The larger society can and often does mitigate the circumstances with national programmes designed to ameliorate the direst conditions.

One such federal government programme in Brazil is trying to eliminate hunger, poverty and some forms of inequality through its Fome Zero (Zero Hunger) establishment to provide a minimum income of US$40 dollars to every family. It is not, however, dependent on confiscating the wealth of the rich.For this reason the anomaly exists across the Americas that even as the number of those classified as poor and indigent increases, the general populations are healthier, living longer and enjoying a more comfortable material existence.

In some countries classified as "poor" the quality of life exceeds those of their wealthier neighbours. Those who advocate open markets and non-governmental support for the indigent fail to realise that it takes an entire country to eliminate poverty.

A far more important observation, however, is that wealth and poverty travel together as opposite sides of the same coin. As the Brazilian case illustrates, if poverty and inequality are to be eliminated the foundations of wealth cannot be shattered.

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