Tuesday, June 03, 2014

Piketty and Latin America

Andrés Velasco has a short piece commenting on the relevance of Thomas Piketty's Capital in the Twenty-First Century for Latin America. His main point is that Piketty's key policy prescription--a tax--would alter almost nothing in the region.

Three main tools are available for improving the pre-distribution of income. First, education reform – with a strong emphasis on technical training – would endow low-income citizens with new skills that they could supply in the labor market. Second, targeted industrial policy would create the demand for those workers and their newly acquired skills. And, third, modernization of labor markets would lead to more efficient matching of workers’ skills and firms’ special needs in a context of growing heterogeneity. 
These policies are not substitutes but complements: they must all be undertaken at the same time. Doing so is not easy. In Latin America, center-left political leaders, concerned as they are with economic and social justice, will have to fashion their own country-specific approaches. There is no ready-made recipe awaiting them in a French economist’s magnum opus.

I am in the middle of reading Piketty right now (someday when I finish I'll write a review) and this seems pretty harsh. I have not reached the prescription part but he never says anything is easy or "ready-made." Quite the opposite--he notes how difficult it is to alter the system, to the point that only World War I did so as inequality built up over the late 19th century. He also talks a lot about the importance of education. Did Velasco read the book or just read reviews of it? I am finding the latter often to be superficial when compared to what I actually see in the book. It's ironic because he makes fun of people who are Piketty boosters but haven't read the book, yet I think he misrepresents it.

At any rate, Piketty mentions developing countries but his focus is really on the United States and Europe. Where I am now, the developing world comes in largely in terms of how colonizers made profits from their holdings abroad, which of course involved gross exploitation of Africa in particular but also Latin America. Therefore I'm not sure his analysis is so easily translated to Latin America where, unlike the United States, inequality never decreased. It's been a constant.


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