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High Levels of Inequality Putting Latin America’s Future Generations at Risk

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Returning economic growth across Latin America could mask serious economic challenges for future generations, according to the World Economic Forum’s Inclusive Development Index (IDI). The index seeks to provide leaders with a more accurate picture of an economy’s health based on inequality, debt and environmental burdens placed on future generations as well as economic growth.

The 2018 assessment was undertaken following two decades of solid economic activity. During this time, expansion of access to education and government transfers contributed to reducing the level of income inequality in Latin America. While these developments and measures have helped to narrow the income gap between skilled and unskilled workers, Latin America remains among the most unequal regions in the world.

“Economic approaches need to emphasize the well-being of future generations and inclusion as key priorities for Latin American economies, and many countries lag behind their peers according to the Inclusive Development Index. As countries move out of recession, they should seize the window of opportunity for speeding up reforms to this end,” said Margareta Drzeniek-Hanouz, Head of Future of Economic Progress, Member of the Executive Committee.

The index’s findings provide a fresh lens through which to examine the region’s economic challenges. While 2017 finished on a positive note with recessions ending in Brazil and Argentina, modest rises in economic activity and efficiency over the past five years and a projected growth rate of 1.7% in 2018 will be insufficient to alleviate the region’s sustainability concerns and support a robust rise in median living standards.

The World Economic Forum believes that building inclusive societies is essential for long-term economic growth. With elections in Brazil, Chile, Colombia, Costa Rica and Mexico in 2018, governments are urged to prioritize proactive strategies to further reduce levels of inequality and ensure the well-being of future generations.

Key findings

According to the index, the most inclusive Latin American economies are Panama, Uruguay, Chile, Costa Rica and Peru. Panama made great strides in reducing its carbon intensity of GDP, down 39.7% from five years ago. The country also has the second highest level of labour productivity in the region after Chile.

Adjusted net savings, which measures the true rate of savings in an economy after taking into account investments in human capital, depletion of natural resources and damage caused by pollution, has declined in one-half of the Latin American economies ranked in the index, with Bolivia, Brazil and El Salvador performing the worst on this indicator.

Moreover, public indebtedness as a share of GDP, which roughly illustrates the scale of borrowing by the current generation against the capacities of future ones, has increased in every country, notably in Brazil (+16%) and Mexico (+14.9%) over the last five years.

Although income inequality has declined in 14 out of the 16 Latin American countries ranked in this year’s IDI, the region accounts for 11 out of the 25 developing economies with the highest levels of income inequality.

Latin America’s largest economies

Ranking 23rd, Argentina’s overall score is supported by its performance on inclusion and intergenerational equity and sustainability. The indicators of economic growth and labour productivity are on the decline as the IDI data predate the current recovery. While Argentina’s income and wealth inequalities are relatively low compared with other Latin American countries, these disparities have been shrinking in recent years. The net income and wealth Gini indicators have dropped nearly 5% and 10%, respectively, over the last five years. Furthermore, the median household income in Argentina ranks in the top quintile of emerging economies in the sample. Although the employment rate is relatively low compared with the regional average, it has increased slightly despite the recent recession.

Mexico’s performance, ranking 24th among emerging economies, is driven by its higher score on intergenerational equity and sustainability. Through the lens of the IDI framework, this is in part due to a higher savings rate and low carbon intensity in national production. The country performs comparatively well across the board on growth and development factors, ranking 13th out of 74 emerging economies. It performs in the top quintile among Latin American countries in terms of labour productivity. In contrast, inclusion measures illustrate high levels of economic disparity, although they have shrunk over the last five years.

Brazil ranks 37th out of 74 emerging economies on this year’s IDI. Brazil’s overall score in the index is pulled up by its performance on intergenerational equity and sustainability. The country benefits from a highly favourable dependency ratio and relatively low carbon intensity. With the IDI data reflecting the period preceding the economic recovery, growth and development indicators, such as GDP per capita growth, labour productivity and employment rates, are trending negatively. Nonetheless, median household income levels appear to have improved throughout this period. Wealth concentration in Brazil is among the highest in both Latin America and emerging economies and has increased slowly over the past five years. With the Brazilian economy slowly recovering, growth and development factors in the IDI are expected to improve; trends may also be affected by the growth-enhancing reforms proposed by the government to address its fiscal constraints.

The Inclusive Development Index

The IDI is published by the World Economic Forum’s System Initiative on Shaping the Future of Economic Progress, which aims to enable sustained and inclusive economic progress. It seeks to achieve this through deepened public-private cooperation, thought leadership and analysis, strategic dialogue and concrete cooperation, including by accelerating social impact through corporate action. The Latin American countries ranked in this index are Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala Honduras, Mexico, Nicaragua, Panama, Peru, Paraguay and Uruguay.

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Americas

Flames of Globalization in the Temple of Democracy

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Authors: Alex Viryasov and Hunter Cawood

On the eve of Orthodox Christmas, an angry mob stormed the “temple of democracy” on Capitol Hill. It’s hard to imagine that such a feat could be deemed possible. The American Parliament resembles an impregnable fortress, girdled by a litany of security checks and metal detectors at every conceivable point of entry. And yet, supporters of Donald Trump somehow found a way.

In the liberal media, there has been an effort to portray them as internal terrorists. President-elect Joe Biden called his fellow citizens who did not vote for him “a raging mob.” The current president, addressing his supporters, calls to avoid violence: “We love you. You are special. I can feel your pain. Go home.”

That said, what will we see when we look into the faces of these protesters? A blend of anger and outrage. But what is behind that indignation? Perhaps it’s pain and frustration. These are the people who elected Trump president in 2016. He promised to save their jobs, to stand up for them in the face of multinational corporations. He appealed to their patriotism, promised to make America great again. Arguably, Donald Trump has challenged the giant we call globalization.

Today, the United States is experiencing a crisis like no other. American society hasn’t been this deeply divided since the Vietnam War. The class struggle has only escalated. America’s heartland with its legions of blue-collar workers is now rebelling against the power of corporate and financial elites. While Wall Street bankers or Silicon Valley programmers fly from New York to London on private jets, an Alabama farmer is filling up his old red pickup truck with his last Abraham Lincoln.

The New York banker has no empathy for the poor residing in the southern states, nothing in common with the coal miners of West Virginia. He invests in the economies of China and India, while his savings sit quietly in Swiss banks. In spirit, he is closer not to his compatriots, but to fellow brokers and bankers from London and Brussels. This profiteer is no longer an American. He is a representative of the global elite.

In the 2020 elections, the globalists took revenge. And yet, more than 70 million Americans still voted for Trump. That represents half of the voting population and more votes than any other Republican has ever received. A staggering majority of them believe that they have been deceived and that Democrats have allegedly rigged this election.

Democrats, meanwhile, are launching another impeachment procedure against the 45th president based on a belief that it has been Donald Trump himself who has provoked this spiral of violence. Indeed, there is merit to this. The protesters proceeded from the White House to storm Congress, after Trump urged them on with his words, “We will never give up, we will never concede.”

As a result, blood was shed in the temple of American democracy. The last time the Capital was captured happened in 1814 when British troops breached it. However, this latest episode, unlike the last, cannot be called a foreign invasion. This time Washington was stormed by protestors waving American flags.

Nonetheless, it is not an exaggeration to say that the poor and downtrodden laborers of America’s Rust Belt currently feel like foreigners in their own country. The United States is not unique in this sense. The poor and downtrodden represent a significant part of the electorate in nearly every country that has been affected by globalization. As a result, a wave of populism is sweeping democratic countries. Politicians around the world are appealing to a sense of national identity. Is it possible to understand the frustrated feelings of people who have failed to integrate into the new global economic order? Absolutely. It’s not too dissimilar from the grief felt by a seamstress who was left without work upon the invention of the sewing machine.

Is it worth trying to resist globalization as did the Luddites of the 19th century, who fought tooth and nail to reverse the inevitability of the industrial revolution? The jury is still out.

The world is becoming more complex and stratified. Economic and political interdependence between countries is growing each and every day. In this sense, globalization is progress and progress is but an irreversible process.

Yet, like the inhumane capitalism of the 19th century so vividly described in Dickens’ novels, globalization carries many hidden threats. We must recognize and address these threats. The emphasis should be on the person, his dignity, needs, and requirements. Global elites in the pursuit of power and superprofits will continue to drive forward the process of globalization. Our task is not to stop or slow them down, but to correct global megatrends so that the flywheel of time does not grind ordinary people to the ground or simply throw nation-states to the sidelines of history.

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Deliberate efforts were made to give a tough time to President Joe Biden

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Image credit: Todd Jacobucci/ flickr

President Trump-Administration is over-engaged in creating mess for in-coming President Joe Biden. The recent deliberate efforts are made to give a tough time are:  naming Cuba a state sponsor of terrorism, designating Yemen’s Houthi rebels as a foreign terrorist organization, Terming Iran as a new home to al-Qaida, and lifting restrictions on contacts between American officials and representatives from Taiwan.

The consequence may turn into dire situations, like a return to cold war era tension. Efforts were made to resume Cuba-US relations to normal for decades and were expected to sustain a peaceful co-existence. Any setback to relations with Cuba may destabilize the whole region. Pompeo’s redesignation of Cuba as a sponsor of state terror will possibly have the least material impact, but it signifies a personal loss to Biden and a momentous political win for Trumpism. In doing so, Trump is hitting the final nail in the coffin of Barack Obama’s efforts to normalize relations with Cuba.

Yemen issue was a creation of Arab spring sponsored by the CIA, and after realizing the wrongdoings, the US was trying to cool down the tension between Saudi Arabia and Yemen, but with the recent move to name Yemen’s Houthi rebels as a foreign terrorist organization, may open new hostilities and bloodshed. It has been designated by UNICEF as the “largest humanitarian crisis in the world, with more than 24 million people — some 80 percent of the population — in need of humanitarian assistance, including more than 12 million children.” Such statements may halt humanitarian assistance and may result in a big disaster.

The history of rivalries with Iran goes back to 1953 when the UK and the US jointly overthrew the legitimate government of Prime Minister Mossadeq. But the real tension heightened in 2018 When President Trump withdrew from JCPOA. But the recent allegation that Iran as a new home of al-Qaida may take a new turn and give a tough time to Joe Biden–Administration. Although there is no evidence, however, Secretary of State Pompeo made such an allegation out of his personal grudge against Iran. It can complicate the situation further deteriorate and even may engulf the whole middle-east.

Lifting constraints on contacts between American officials and representatives from Taiwan, is open violation of “One-China Policy.” Since Washington established formal diplomatic relations with Beijing in 1979, it has resisted having official diplomatic associations with Taipei in order to avoid a confrontation with the PR China, which still comprehends the island — home to around 24 million people — as part of China. Chinese are very sensitive to the Taiwan issue and struggling for peaceful unification. However, China posses the capabilities to take over by force, yet, have not done so far. Secretary of State Mr. Pompeo’s statement may be aiming to instigate China and forcing toward military re-unification. It might leave a challenging concern for Joe Biden-Administration.

Raffaello Pantucci, a senior fellow at Singapore’s S. Rajaratnam School of International Studies, said, “The Trump administration is locking in place a series of conflicts that change the starting point for Biden walking into the office on the world stage.”

Even Mr. Pompeo had a plan to travel to Europe to create further hurdles for in-coming administration, but fortunately, some of the European countries refused to entertain him, and desperately he has to cancel his trip at the eleventh hours.

It is just like a losing army, which destroys all ammunition, weapons, bridges, infrastructures, etc., before surrendering. Although President Trump’s days in office are numbered, his administration is over-engaged in destruction and creating hurdles for the next administration. He is deliberately creating hurdles and difficulties for President-Elect Joe Biden.

President Joe Biden has many challenges to face like Pandemic, unrest in the society, a falling economy, losing reputation, etc. Some of them might be natural, but few are specially created!

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Latin America and the challenges for true political and economic independence

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Latin America – and its core countries, namely Brazil, Argentina and Mexico – has become a region of high global strategic value due to its vast territory, abundant resources, great economic development, unique geographical position and active role in global and regional governance.

Factors such as history, geography and reality, combined with the complexity of the region’s internal political logics, have once again made Latin America a place where major powers pay attention to and play key games.

Latin America’s cooperation with ‘external’ powers has become ever closer, leading to unfounded suspicions and malicious provocations among the countries of the region concerned.

What bothers ‘democrats’ and ‘liberals’ is the presence in the area of countries without a colonialist and exploitative past.

Historically, Latin America and the Caribbean were the coveted location of various Western forces. Since the Latin American countries’ independence – and even today – large countries inside and outside the region have competed in this area.

The complexity and uncertainty of the current global political and economic situation in Latin America lie behind the competition between the major powers in geopolitics and international relations.

Latin America’s vast lands and resources are linked to global food security, the supply of agricultural and livestock products, and energy security. It is an important ‘product supplier’ that cannot be neglected.

Latin America has a huge surface of over 20 million square kilometres, covering four sub-regions of North America (Mexico), the Caribbean, Central America and South America, with 33 independent countries and some regions that are not yet independent, as they are tied to the burden of the old liberal-colonialist world.

Latin America is blessed with favourable natural conditions. For example, it has become a well-known ‘granary’ and ‘meat provider’ because of its fertile arable land and abundant pastures. It is an important area  for the production of further agricultural and livestock products. At the same time, other countries in the region have huge reserves of natural resources such as oil and gas, iron ore, copper and forests, and have become important global suppliers of strategic materials.

Secondly, the Latin American region has a relatively high level of economic development and has brought together a number of important emerging economies – a significant global market that cannot be ignored.

The Latin American region plays an important role in global economy. Brazil and Mexico are not only the two largest economies in Latin America, but also the top 15 in global economy.

At the same time, recent calculations on 183 countries (regions) with complete data from the World Bank and related studies show that the group consisting of Brazil, Mexico, Argentina, Chile, Peru, Colombia, etc., has entered the ranking of the “30 emerging markets” (E30) worldwide. According to World Bank statistics, Latin America’s gross domestic product (GDP) in 2018 was about 5.78 trillion dollars and the per capita GDP exceeded 9,000 dollars. With the exception of a few, most countries in Latin America are middle-income and some have entered the high-income ranking.

Therefore, Latin America has become a large consumer market that cannot be ignored due to its relatively high level of economic development, high per capita income and a population of over 640 million people.

Indeed, as Latin American region with a high degree of economic freedom and trade openness, it has been closely connected with the economies of other regions in the world through various bilateral and multilateral agreements, initiatives and free trade mechanisms.

Thirdly, Latin America’s unique geographical position has a significant impact on global trade, shipping and climate change.

Latin America is situated between two oceans. Some countries border on the Pacific, or the Atlantic, or are even bathed by both oceans. This special position gives the Latin American region the geographical advantage of achieving ‘transpacific cooperation’ with the Asian region or building a link of ‘transatlantic cooperation’ with the European region. Thanks to the Panama Canal, it is the fundamental hub for global trade.

Besides its strategic relevance for food security and clean energy production, the Amazon rainforest, known as the ‘lungs of the earth’, has a surface of over six million square kilometres, accounting for about 50% of the global rainforest. 20% of the global forest area and the vast resources covering 9 countries in Latin America have become one of the most important factors influencing global climate change.

Finally, as an active player in the international and regional political and economic arena, Latin America is a new decisive force that cannot be neglected in the field of global and regional governance.

Firstly, as members of organisations such as the United Nations, the World Trade Organisation, the International Monetary Fund and the World Bank, the major Latin American countries are both participants in and creators of international rules.

Moreover, these countries should be considered from further aspects and viewpoints of multilateralism.

The major Latin American countries, particularly regional powers, such as Brazil, Mexico and Argentina, are members of the G20. Brazil belongs to both BRICS and BASIC.Mexico, Chile and Peru are within the Asia-Pacific Economic Cooperation. Mexico, Peru and Chile are members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), while Mexico and Chile are members of the Organisation for Economic Cooperation and Development (OECD).

They are playing an irreplaceable role in responding to the economic crisis and promoting the reform of global governance mechanisms; in promoting the conclusion of important agreements on global climate change; in advancing economic cooperation between the various regions; in leading ‘South-South cooperation’ between developing countries and in holding a dialogue on the main current issues (opposition to unilateralism, protectionism, protection of multilateralism, etc.).

It must also be said that Latin American countries are naturally also active in regional organisations and institutions – such as the Organisation of American States, the Inter-American Development Bank, etc. – so that they can participate directly and try to oppose U.S. hegemonism.

Within the Latin American region, these countries first initiated a process of cooperation and integration and later established various sub-regional organisations -such as Mercosur (Mercado Común del Sur-Mercado Comum do Sul) and Alianza del Pacífico (Mexico, Colombia, Chile and Peru) – to cooperate with other regions of the world and shake off the unfortunate definition of “America’s backyard”.

Located in the Western Hemisphere, where the well-known superpower is present, Latin American countries have long been deeply influenced by the United States in politics, economics, society and culture.

In 1823, the United States supported the Monroe Doctrine and drove the European countries out of Latin America with the slogan ‘America for the Americans’, thus becoming the masters of the Western Hemisphere.

The Monroe Doctrine also became a pretext for the United States to interfere in the internal affairs and diplomacy of Latin American countries.

In 2013, 190 years after the aforementioned declaration, the United States publicly declared that the Monroe Doctrine era was over and emphasised the relationship on an equal footing and the shared responsibility between the United States and Latin America.

Nevertheless, the current Latin American politics shows once again that the end of the so-called ‘Monroe Doctrine’ era is nothing more than a common myth.

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