This paper raises the question whether the current wave of macro-economic and structural reforms in latin America should be viewed as a decisive change in the continent's long-term development strategy or as part of but another stop-and-go cycle, for which the continent has been known in the past. While no unambiguous answer is provided, the paper outlines what is still needed in the way of persistent micro-economic policy change if obstacles of political economy, including an abundance of natural resources and relatively easy access to foreign capital, are to be overcome.

Two facts stand out from even the most cursory inspection of income distribution data in Latin America. First, income is highly concentrated, making the region one of the most unequal in the world. Second, despite the fact that the region has now reached an intermediate position among the world's nations in terms of per capita income (some US$2,000 per year on average), a level which, by historical standards, would presuppose a more equitable distribution of income, this has not happened. In fact, the distribution of income in Latin America has become, if anything, more highly skewed than ever. The question then is: why is this so? The explanation forms the heart of this paper. Precisely because neither of these statements would hold if the countries to which they apply were either “average” or “well-behaved,” the explanation thatfollows assumesa “neostructuralist perspective” (Lustig, 1991) — i.e., one that ascribes causality to a number of regional charactristics related to its history and the interaction among its factor, cultural, and institutional endowments.

The production of inequality has been one of the most enduring features of Latin American economic and social systems, and one in which the institutional structure has perhaps exhibited the greatest consistency over time. In a very real sense, inequality is what the Mexican Revolution was all about, as was the Bolivian Revolution of the early 1950s. So, too, with the rise, in the middle decades of this century, of assorted populist political parties and movements. By the 1960s, participatory development had become almost a Zeitgeist, and distributional concerns had ostensibly come to suffuse many of the development programs launched during that first United Nations Development Decade, including the Alliance for Progress. It is relevant to recall that, quite early in the postwar flowering of development studies, Viner (1952) had suggested that the chief aim (and test) of development should be the reduction of mass poverty.

According to the present paper, absolute poverty and relative inequality have persisted in Latin America as a result of mutually reinforcing, and unfair, patterns of distribution of final private, broad, and total consumption and income. Furthermore, it is argued that the prevailing pattern, characterized by a vicious circle of distributive injustice in both consumption and income (production), can be broken only by mesoeconomic, sectoral constitutions and, thus, by public policies that uphold the principles of justice, freedom, and equality — on both the consumption and income (production) sides.