Thursday, January 25, 2007

The Power of Vested Interests

Here is an excellent discussion on economic development in Latin America. It is a good post that assesses the real status of poverty and non-development in contrast to that of the developed world. While productivity in Latin America is significantly lower than that in North America or Europe, employment rates and efficiency rates are not significant and do not explain the discrepancy in productivity. The problem is not that too few people are working but that they are not producing enough. The explanation is in the power exerted by Vested interests. Simply put, vested interests in the political, business and organized labor communities have been in a stronger position in Latin America than elsewhere to get the political and legal institutions to protect them. The result has been a concentration of wealth and a continuation of widespread poverty despite increased developments.

In this context it is clear that political reform will have to occur before economic reforms can do much to transform the daily drudge of the majority of the population: political freedom precedes economic freedom.