Question

How does income inequality affect development? Discuss with reference to historical development in North and South America.

Answer 1

Wealth inequality in the Caribbean & Latin America refers to economic discrepancies amongst persons of the area. Wealth inequality remains a grave concern despite robust economic growth & enhanced social indicators observed over the last decade. A report observed that: ‘Drops in the wage share have been ascribed to the effect of labour-saving technological change & to a general dwindling of labour market institutions & regulations. Such drops are likely to impact persons in the bottom & middle of the income distribution disproportionately, as they depend mostly upon labour income.’ Additionally, the report stated that ‘highly-unequal land holding distribution has created political & social tensions & is a source of economic inefficacy, as small landholder normally lack access to credit & other means to enhance productivity, whilst big owners may not have sufficient incentive to do so.

Inequality is undermining this area's economic potential & also the well-being of its populace, since it increases destitution & lessens the impact of economic growth on poverty reduction. Children here are usually compelled to seek work on the roads when their families can’t afford to support them. According to some studies, there’re 40 million such children in Latin America. Inequality here has its roots in the Latin European racially-based Casta system instituted here in the colonial era .The differences between endowments & opportunities amongst social clusters have constrained the poor's social mobility, hence, making destitution to be transmitted from one generation to the next, becoming a vicious circle. Inequality has been transmitted thru generations because the political systems here permit a differentiated access on the influence which social clusters have in the decision- making process, & it responds in different manners to the least favoured clusters which have a low political representation & ability of pressure. Recent economic liberalisation has also played a part as not everyone is equivalently capable of taking advantage of its benefits. Distinctions in endowments & opportunities tend to be based upon ethnicity, race, rurality & gender. As inequality in location & gender are universal, race & ethnicity play a bigger, more integral part in the unfair discriminatory practices here. These differences have a powerful impact upon the income distribution, capital standing & political standing.