Finance and Power in Argentina
The shift from China to South America is a move from a vast but idiosyncratic postcommunist case to something much more familiar: middle-income countries in the throes of financial globalization. This chapter compares the evolution of pay inequalities in Argentina and Brazil from the early 1990s through 2007.1 The data cover the period of high neoliberalism in world policy, the crisis in each country, and their aftermath. In both countries, it turns out that the financial sector was the biggest single contributor to inequality and also to change in inequality. In both, the years leading up to crisis saw a big increase in the economic weight, power, and income of the banks. And then there was a decline in that weight as the crisis passed, economic growth was restored, and a more normal situation returned. In both countries, but especially in Brazil, the retreat of finance created economic space that was taken up by an expanding public sector alongside a truly dramatic reduction in deep poverty that marks Brazil as one of the success stories of the early twenty-first century.
What is different between the two cases is the timing. In Brazil, the return to a normal path of growth and development, associated with a decline in measured inequality as well as major progress against poverty, began to happen in the mid-1990s. In Argentina, it occurred only after the crisis in December 2001. By monitoring these developments soon after they occurred, Galbraith, Spagnolo, and Pinto (2007d, originally published 2006) were able to establish that inequality in these two major Latin American countries was in fact declining four years before this fact won wide notice in the larger literature on inequality in Latin America (López-Calva and Lustig, 2010).