Friday, November 15, 2013

In Honduras and Canada, the strange political silence on inequality

Ten days left until the Honduran national elections, and I’m thinking about inequality.
It’s stunning in Honduras. There are the obvious signs - the contrast between the lavish malls in the cities and the squatters’ shacks along any stretch of highway where there is a precarious place to cobble together some sticks and tarps and corrugated tin.
And there are the statistics.
The UN does a useful Human Development Report each year.
This year’s HDR report shows the top 20 per cent of the Honduran population have average incomes 29.7 times greater than the bottom 20 per cent. The only countries with more inequality, based on that measure, are Angola and Micronesia.  Even the failed states of Africa don’t reach that level.
Lavish malls...
In Canada, by contrast, the top 20 per cent have incomes 5.5 times as high as the bottom 20 per cent. Imagine how different the society would look if the richest Canada took the same share of incomes as their Honduran counterparts.
The HDR also uses another, broader measure of inequality. Based on that, Honduras still ranks as one of the most unequal countries in the world - only the Seychelles, Micronesia, Haiti and four African nations having greater inequality. (I hadn’t even heard of Comoros, one of the African countries.)
The myth is that inequality just happens, a result of hidden economic forces. Kind of like gravity, except only some people get held down.
But that’s not true, in Canada or Honduras. Governments make decisions that increase or reduce inequality. Reduce public health care, as I noted here, and you increase inequality. Cut taxes, and the result is the same. Raise the minimum wage, and you reduce inequality.
... and dismal shacks
In Honduras, for example, taxing an extra two per cent of the incomes of the highest-earning 20 per cent would fund a 60-per-cent increase in the incomes of the poorest one-fifth of the population. (Those people are really poor. About 74 per cent of Hondurans live in poverty, and 47 per cent in extreme poverty.)
Or the money could pay for a better education system or other measures which could reduce inequality in the long term. (Honduran schools are generally terrible.)
Instead, the government has been collecting less in taxes. I don’t now if that’s policy or corruption or incompetence or a combination of all those factors and more. Tax evasion is the norm; the director of the revenue department estimates it loses 43 per cent to tax scofflaws.
The government went through a huge exercise earlier this year that was supposed to eliminate some of the many tax exemptions. Nothing came of it. A 2010 study found 69 corporate tax breaks. Fast food franchises, mostly owned by a few of the elite, got a 10-year break on all taxes and a permanent exemption from paying import duties on the dubious claim they were good for tourism. (Come to Honduras, and eat a Big Mac.)
Social spending has also been cut, from 13.3 per cent of GDP in 2009 to 10.9 in 2012, according to a report on the Honduras post-coup economy by the Center for Economic and Policy Research.
The same report found that from 2010 to 2012, the top 10 per cent of Hondurans received more than 100 per cent of the benefits of economic growth. The average incomes of the other 90 per cent shrunk.
But, as in Canada, there is not much discussion of inequality.
Security, corruption, crime - they have been big issues in the election campaign.
Reducing poverty, of course, has been on the agenda, though not in an especially coherent way. 
The platform of Libre, a new party challenging the established Liberal-National party duopoly, includes measures that would address inequality. But even its campaign has talked much more constitutional reform than growing inequality.
The silence on such an important issue is as puzzling here as it is in Canada.


Anonymous said...

The longer people like yourself have been giving thoughtful expression to the notion and reality of the widening gap between the rich and poor in this country, just as in so many others...the wider that gap has continued to grow. Earlier, when you wrote about the recent throne speech which totally ignored this subject my comment was that I happened to be re-reading "A Tale of Two Cities" at the time. I haven't quite finished that book yet, and I believe my earlier comment to be as relevant today as it was then. For some reason it didn't get past your editor's desk. I would point out that the shape of the curve on a graph depicting these realities will not and cannot go on in one direction indefinitely, as history has proven time and again. It might be a long way off from today in Canada, but if things don't change our time will come. Whether peacefully or otherwise will depend, but I'm sorry to tell you, given the leadership our electorate has repeatedly endorsed in the recent past gives me no good reason for optimism.

Raymond Graham

Anonymous said...

Fed Nominee Janet Yellen: Income Inequality Is ‘A Very Serious Problem’