October 4, 2011
A dramatically changing Latin America can only face the challenges and opportunities ahead with policies that advance economic and social equality through progressive taxation, according to former Chilean President Ricardo Lagos.
Progress in democracy, human rights, and poverty reduction since the early 1980s has changed regional dynamics. And the past 10 years have largely spared Latin America – and especially South America – from the economic crises of Europe and the United States, with exports to China and the rest of Asia leading to double-digit increases in gross domestic product.
“Now you have middle income countries,” Lagos said in a recent lecture at the Watson Institute, where he is in residence as a Brown professor at large. But with a growing middle class come greater expectations for “democracy that delivers,” as he termed the current demand in the region for better education, healthcare, and opportunity.
In the face of these demands, however, Latin America’s policymakers and institutions remain mired in a system of extremely unequal income distribution and low taxation of the privileged, he said.
“This is quite a different world, the one we are entering. Are we in a position to understand and fulfill its demands?” asked Lagos. With many Latin American countries approaching the “first world” per capita income benchmark of $20,000, what should their social priorities be?
Beyond the $20,000 benchmark, he said, what determines quality of life and social cohesion is equality in the distribution of income.
In this context, Lagos listed several challenges that must be addressed, including the need to govern a better educated – and therefore more demanding – middle class. “They know what they want and they know how to demand it,” he said.
Among the challenges:
• Define a more participatory new democracy that allows for continuing improvements in such areas as human rights, gender, and the environment.
• Provide better access to higher education for all.
• Build a new infrastructure that can accommodate the region’s shifting trade focus to Asia.
• Handle dramatic demographic shifts, including South-South immigration and a sea change from historically high rates of population growth to very low rates, in such cases as Chile.
• Impose higher taxes on the region’s wealthiest people, who today pay far lower taxes than their counterparts in Europe and the United States, and devote much of the new revenue to education.
• Play a game-changing role in reducing the impact of global climate change – not in the same way as the world’s largest carbon-emitting nations but by producing model deforestation policies while protecting the Amazon.
Failure to face these challenges will lead Latin America down a path already trodden in such countries as the United States, he suggested, where the highest per capita income and a wide income gap are accompanied by some of the lowest health, education, and social indicators among its peers.
In Latin America, “we need to take steps now,” he said. “Addressing the issue of income distribution is the most important challenge we have to face.”
Watch the videos below for more from Lagos on the need for – and obstacles to – tax reform.