8 May 2018
ECLAC Report Highlights Inefficiency of Inequality
Photo by Peter Berko
story highlights

ECLAC Executive Secretary Alicia Bárcena writes that a culture of privilege inhibits progress in development with equality.

The report argues for transitioning towards a new development pattern that enables a “virtuous circle” between growth, equality and sustainability.

The report was published ahead of ECLAC's 37th session, convening from 7-11 May 2018.

6 May 2018: A report on inequality in Latin America and the Caribbean region argues that equality should be at the center of development, as social gaps impede growth, development and sustainability. The report titled, ‘The Inefficiency of Inequality,’ was issued ahead of the 37th session of the UN Economic Commission for Latin America and the Caribbean (ECLAC).

In the report’s foreword, ECLAC Executive Secretary Alicia Bárcena writes that a “culture of privilege” inhibits progress, pointing to “colonial vestiges” in the region that normalize social hierarchies and unequal access to development benefits, political participation and production assets. Bárcena warns that equality, productivity and democracy cannot be substituted for each other.

According to the report, LAC is the world’s most unequal region. Tax evasion equals 6.7% of its GDP in terms of income tax and value-added tax alone. In addition, access to education, high teenage motherhood rates, and discrimination based on ethnicity and race continue to perpetuate inequalities. “Territorial inequalities” between different socioeconomic levels also exist regarding life expectancy, infant mortality, illiteracy and access to drinking water. These disparities are exacerbated by: the extraction of natural resources; low infrastructure investment; gaps in access to sanitation, electricity and the internet; and climate change impacts.

The ECLAC study contends that inequality negatively affects productivity, fiscal policy, environmental sustainability and the spread of the knowledge society. By contrast, it emphasizes, pro-equality policies produce positive effects in terms of social well being, and help to create an economic system with benefits for learning, innovation, productivity and environmental protection. The authors call for transitioning towards a development pattern that enables a “virtuous circle” of growth, equality and sustainability. The report recommends revitalizing investment and immersing the region in the “fourth industrial revolution,” focusing on decarbonization, and decoupling growth from environmental impact.

The report details three pillars of decarbonization, namely digitalization, sustainable cities and renewable energies. On digital industry, it suggests that the region prioritize broadband infrastructure, the information technology industry, and business capabilities for the digital transformation of business models, products and services. It also calls for developing a regional digital market.

On urban sustainability, the report outlines proposals for decarbonizing universal public services and appropriating technological change in urban areas, including developing national urban policies and coordinating them with industrial and technological policies at different levels of government. On increasing the penetration of renewable energies in electric power generation, the report recommends: harmonizing regulations throughout the region; substituting imports in production chains; internalizing social costs, phasing out fossil fuel subsidies, pricing carbon and rewarding investment in renewables; reflecting the systemic risk of high-carbon paths; and regulating or standardizing bank financing for renewable energy projects.

The report also underscores the need to enhance transparency and trust in institutions, and strengthen international cooperation and multilateral institutions to make progress towards sustainable development. The 37th session of ECLAC is convening in Havana, Cuba, from 7-11 May 2018. [ECLAC Press Release] [The Inefficiency of Inequality Landing Page] [Publication: The Inefficiency of Inequality] [ECLAC 37 Website]

related events