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October 22, 2014
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Obama: US headed for ‘Argentine inequality’

United States President Barack Obama compares US inequality to that in Argentina.
By Francisco Aldaya
for the Herald

President’s remarks come up short under the scrutiny of international statistics

United States President Barack Obama this week warned that his country’s “levels of income inequality rank near countries like Jamaica and Argentina,” an inaccurate comparison considering the widespread recognition of Argentina as a regional leader in wealth distribution, along with Uruguay.

Obama was correct to recognize the rising inequality in the United states, but taking a look at the data makes it clear he was careless in drawing comparison with Argentina, a country that has seen its Gini coefficient — a widely accepted measure of inequality — drop from 0.5102 in 2004 to 0.445 in 2010, according to World Bank figures. In June, President Cristina Fernández de Kirchner celebrated that the coefficient had decreased even further, to 0.410.

Jamaica’s Gini coefficient weighed in at 0.455 in 2004, according to the latest figures available from the World Bank.

The coefficient, with zero represents hypothetical perfect distribution and one the highest proportion of inequality, and contemplates household income both before and after taxes.

The United States, on the other hand has seen its Gini coefficient rise over the last decade, albeit slightly.

A survey by the OECD published in 2010, the latest available data, shows the US’s coefficient at 0.499, rising from the 0.486 registered in 2005.

Obama would have been better off choosing other countries, including Chile, for whom the World Bank reported a coefficient of 0.51 in 2006, as better examples of unequal nations.

Despite the widespread scepticism of the government’s inflation statistics, its Gini coefficient has more relative credibility.

Yet this marks another example of how INDEC’s overt manipulation of growth and inflation data means that all of the government’s statistics can easily be put into doubt, leaving room for misguided comparisons that cannot be refuted by any credible numbers.

The figure alone does not tell the full story, some argue.

Despite the rather narrow gap between Argentina and the United States, “the US is much more productive, and therefore salaries go further there,” Jorge Molina, an economist at the Institute for Argentine Social Development (IDESA), told the Herald.

What about poverty?

Measuring poverty in Argentina causes far more controversy than the level of income distribution, with diverse sectors either understating or exaggerating it to different ends.

Indec’s rate of 4.7 percent of the population below the poverty line seems an example of the former, while the Argentine Catholic University’s (UCA) index of nearly 27 percent the latter.

The UNECLAC, which conglomerates countries’ official data, shows Argentina at the top of the list in the region, followed by Uruguay with 5.9.

But UCA’s figure of 27 percent places the country on par with Peru and Venezuela, the former of which used 9.9 percent of GDP on public spending in 2009, compared to the Argentine government’s 27.8 percent.

The fundamental difficulty in determining a general poverty rate is that each region’s basic shopping basket prices vary so much, Colina told the Herald.

Official statistics are based on outdated regional studies, as well as the international poverty line of US$1.25, which roughly equates with the official exchange rate.

Human development

The United Nation’s Human Development Index is another way to measure a country’s economy that measures “average achievement in three basic dimensions of human development — a long and healthy life, knowledge and a decent standard of living.”

Taking into account this criteria, the US is far ahead in third place with 0.937 compared to Argentina’s 45th place with 0.811 and Jamaica’s 85th slot with 0.730.

@franma1990

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