We are not a shitty country
In socioeconomic terms, Argentina ranks in the upper half of the world ranking. However, many of its inhabitants believe they are among the poorest and most miserable on the planet. Using data and comparative charts, sociologist Daniel Schteingart analyzes economic variables to demonstrate why Argentina is not “a shitty country.”
This article was originally published in Spanish in Anfibia in 2017. It has had more than 70,000 views.
We constantly hear that Argentina is a “shitty” country, unviable, where living conditions are poor, and so forth. It’s not just elevator talk, but a notion frequently implied in the media. A recent example: Infobae published an article titled “Argentina is now one of the countries with the highest poverty rate in Latin America,” based on a report from the University of Belgrano. Meanwhile, Clarín published a piece, based on a report from the University of Salvador, showing that Argentina ranks second in the world in the “Misery Index,” behind Venezuela. The “Misery Index” is calculated by adding the rates of inflation and unemployment, in such a crude way that if a country has 20% inflation and 2% unemployment, it would rank worse than one with 0% inflation and 20% unemployment. But is it really so? No. Socioeconomically, Argentina is more a mid-to-upper-tier country. It’s not River or Boca, but more like Lanús or Rosario Central. And depending on what it decides to do with its fate (through its political decisions), it can either compete for the championship or just try to avoid relegation.
Are we what we claim to believe we are?
Some time ago, I conducted an exercise on Twitter, Facebook, and even in some university classes. The exercise went like this (and I suggest you think about it for yourself): “The world has 7.5 billion people. Imagine we divided them into 100 parts of 75 million each and ordered them from lowest to highest in terms of income, so that 1 is the 1% with the lowest income in the world and 100 is the 1% with the highest income in the world. Where would you place yourself?”
I received a variety of answers: from those who believed they were in the poorest 1% of the world to those who thought they were in the top 1% of highest incomes, with others placing themselves in the middle, or in positions like 70 (above the middle) or 30, among others. On average, the response was 60.
Interestingly, 40% of those who responded (almost all from the middle to upper-middle class with high school and even university education, with a strong bias towards Buenos Aires City) believed they were in the poorer half of the world (in terms of income) and two-thirds placed themselves in the poorer 75%. Many who responded and positioned themselves far from the global elite told me on Facebook, referring to those who answered above 90: “Daniel, you have many friends who think they are Rockefeller.”
The following graph shows the average income decile of each country (horizontal axis) within the global income distribution (vertical axis). For example, the average income of the poorest 10% in Argentina (decile 1) is at the 25th percentile worldwide. In other words, there is 25% of humanity that is poorer than Argentina’s decile 1 (obviously, decile 1 might include individuals who are in even lower percentiles; the data refers to the average of the decile). Argentina’s decile 2 is at the 51st percentile, that is, in the middle of the global income distribution. Decile 3 is at the 60th percentile, decile 4 at the 68th, and decile 5 at the 74th. The top 50% of earners in Argentina (deciles 6 to 10) are in the top 25% worldwide in terms of per capita income. The 10th decile in Argentina (extremely heterogeneous, as it includes households that are well-off and ultra-millionaires) is, on average, in the top 4% worldwide.
In the table below, we can see the range of per capita income for each decile in Argentina as estimated in June 2017 and adjusted for under-reporting of income (generally, wealthier households tend to under-report their earnings to the household surveys). For example, if your household has 4 members and the total family income is ARS 50,000, you would be in the 7th national decile (since the per capita income is ARS 12,500) and around the 81st percentile worldwide (within the top 20% of earners globally). If your household has 3 members and the total income is ARS 24,000, the per capita income would be ARS 8,000, placing you in the 5th national decile and the 74th percentile worldwide. Additionally, the last column of the table provides a possible example of who might be in each decile, based on the occupational status of the household head. The fact that a household with an unemployed head is listed as an archetype in Argentina’s first decile does not imply that all households with unemployed heads belong to that decile. Rather, it is an illustrative stylization.
When I showed these data about Argentina in relation to the rest of the world, many — contrary to their self-perception and noting that they were in the top 25% (or even 15%) of global incomes — told me: “It can’t be, something is wrong.” This may be explained by several factors, but there are two I would like to highlight: a) titles like those from Infobae/Clarín contribute to a common perception of Argentina as a “shitty country”; b) the vast majority of the news we consume — and the tourist destinations we visit, comprising the top 20/30% income earners in Argentina — relate to some of our neighboring countries, Europe, or the United States. In doing so, we “forget” the following:
1. China is the most populous country in the world, nearing 1.4 billion people, nearly half of whom still live in rural areas. While China has been growing rapidly, it is still considerably poorer than Argentina (its GDP per capita today is 75% of ours, according to the World Bank).
2. India has 1.34 billion inhabitants, 65% of whom live in rural areas. Although it has been growing strongly, India is still much poorer than China, and, of course, Argentina. Its per capita income in 2015 was 30% of ours.
3. Sub-Saharan Africa is home to around 1 billion people, the vast majority living in rural areas and in conditions of extreme poverty. The GDP per capita of this region in 2015 was 18% of Argentina’s.
4. Asian countries such as Indonesia, Pakistan, Bangladesh, Vietnam, Myanmar, and the Philippines, among others, have populations much larger than Argentina’s and, although also growing at high rates in recent years, are still far behind in terms of development.
5. Within Latin America, countries such as Brazil, Mexico, and Colombia are more populous than Argentina, with smaller GDPs per capita (lower today) and more inequality (their Gini coefficient is significantly higher).
The countries and regions mentioned in the previous five points account for about 5 billion people, or two-thirds of humanity. Clearly, the poor in these relatively poorer countries have less purchasing power than the poor in Argentina, whose basic needs are already far from being met.
Let’s return to the previous graph. Look at the curve for the Democratic Republic of the Congo, one of the least developed countries in the world. Its first 7 deciles (70% of its population) are in the world’s poorest 10%, while on average, its 10th decile is at the 46th percentile. Obviously, there might be a handful of ultra-rich in Congo who are in percentiles higher than 99, but on average, its highest-income decile is poorer than our decile 2. The pie in Congo is so small that even the most fortunate within that country have a deplorable quality of life (except, we insist, a very tiny minority within its heterogeneous decile 10).
Now, let’s look at Brazil. Brazil’s first decile is at the 11th percentile worldwide (remember, our first decile was at the 25th percentile); in other words, Brazil’s poorest have it even worse than Argentina’s poorest. In contrast, their 10th decile slightly exceeds our 10th decile: the top 10% of income earners in Brazil apparently have similar or slightly higher purchasing power than our 10th decile. The remaining 9 deciles in Brazil have a per capita income lower than their Argentine counterparts. How can this be explained? Brazil is a country whose GDP per capita in 2015 was 75% of ours but much more unevenly distributed: the income gap between the 10th and 1st deciles was 17 times in Argentina and 34 times in Brazil.
What about developed countries? Here are two examples: the United States and Norway, both countries with very high GDP per capita, but one with levels of income inequality similar to those of Argentina (the United States) and the other with one of the highest levels of equality in the world (Norway). The first decile in the United States is, on average, at the 68th global percentile: it has a purchasing power similar to our 4th decile and higher than that of two-thirds of the world. Its deciles 6–10 (the top 50% of income earners) are in the top 5% globally in terms of income.
The situation in Norway — the country with the highest human development in the world since 1995 according to the United Nations Development Programme (UNDP) — is remarkable. The purchasing power of its first decile is, on average, at the 83rd percentile and is similar to our 8th decile. Then, 80% of its population is in the top 10% of global incomes. Note how the purchasing power of the first 6 deciles in Norway is higher than that of their American counterparts, despite the relative similarity in the size of the economic pie between both countries: this is explained by higher levels of equality in the Nordic country.
Norway is much wealthier than Argentina, but also much more egalitarian. This is evidenced by a compelling fact: while the purchasing power of Norway’s 10th decile is just over double that of our 10th decile, the gap climbs to 7 times when comparing their 1st decile to our 1st decile. In other words, the major difference between Norway and Argentina is not so much in their respective upper classes, but fundamentally in their respective lower classes.
A hot dog is not a hamburger
Let’s now return to a question: Why is it said — as occurred with the Infobae/Universidad de Belgrano report — that Argentina is among the worst in terms of income poverty in Latin America? The reason is that they make a serious methodological error: they compare hot dogs with hamburgers. Any data is always the result of a methodology that, here and in China, will always have a certain degree of arbitrariness (beyond technical robustness). The way we measure poverty is a clear example of this: How do we define what the threshold is from which we are above a “minimum threshold of well-being”? Who defines such a threshold?
While there are certain criteria, the fact is that such a minimum threshold changes over time within the same country and can be very different between countries (even today, in Argentina, the minimum threshold is more demanding in Patagonia than in Cuyo, and in Cuyo than in the NEA). All this explains why Nobel laureate in Economics Angus Deaton very lucidly states that “poverty lines are as much scientific as they are political.”
Today, Argentina by far has the most demanding poverty threshold in the region. Many people will wonder: Is such a threshold reasonable? Is poverty inflated? Which measure is more truthful? There is no “more truthful” threshold; in any case, today’s threshold represents the consumption standards of the “lower middle class” of Argentina (what is colloquially called “reference population”) from 2004/5, rather than the traditional threshold, which represented consumption standards of what was the “lower middle class” in the mid-1980s.
Therefore, the key issue is not to see the 30% poverty rate that Argentina has today in abstract, but in comparative terms, over time and space (always using the same standard, that is, comparing hamburgers with hamburgers). In the media — and even among political leadership, and more worryingly, in academic institutions such as Universidad de Belgrano — this fundamental fact and Deaton’s maxim are often overlooked.
Below, we can see the somewhat “relative” nature of poverty figures. If Argentina used the methodology that the USA uses to measure poverty, we would have a poverty rate of 66% (the USA has 14% with its own threshold). If we used the Chilean methodology, we would have 12.7% (they had something similar, 11.7% in 2015, with their own threshold). If we used the Brazilian methodology, we would have 6.7% poor. If we used the methodology that the World Bank uses to measure extreme poverty in Sub-Saharan Africa or South Asia, it would be 1.7%. Note that, if we did not compare hamburgers with hamburgers, we would fall into the absurdity of thinking that Chile has fewer poor than the USA (11.7% versus 14%).
Conversely, what would poverty look like in different regions and countries around the world if everyone used the Argentine standard? In 2013, Argentina had a 27% poverty rate (today 30%). South Asia (India and its neighbors), 96%; Sub-Saharan Africa, 95%; developing East Asia (China plus Southeast Asia), 72%; Latin America, just over 50%; the developed world (the United States, Western Europe, Japan, Israel, Australia, and New Zealand), 4%. Globally, two-thirds of the population would have been considered poor in 2013 if poverty were defined everywhere with the rigor used by Argentina’s INDEC today. This is completely consistent with something we mentioned earlier: our 4th decile (already above the Argentine poverty line) is on average at the 68th percentile worldwide.
If we looked at individual countries instead of regions, we would find a similar situation. Using the current Argentine standard, Chile would be very similar to us, and Uruguay would be the best in the region (it has a slightly higher GDP per capita than Argentina and slightly less than Chile, but a slightly more equal income distribution than Chile), with 20%. The rest of the region (notably Brazil, Mexico, or Colombia in terms of size) would have much higher monetary poverty figures than Argentina, while countries like the Congo would have 99.9% poverty. In contrast, Germany, Norway, or Switzerland would have a poverty rate of less than 1%.
If Argentina isn’t that bad, then what are we?
If we shifted focus from purchasing power to other socioeconomic variables, we would see that Argentina is also well above the median. The United Nations Development Programme’s Human Development Index (HDI), which includes GDP per capita as well as life expectancy and years of schooling, ranks Argentina 45th out of 188 countries, second in the region only to Chile (7 places ahead). If we consider the inequality-adjusted HDI, which accounts for income, health, and education disparities, Argentina appears at 42nd out of 141 countries, just above Chile. Other indicators show a similar story: for the “percentage of the population that uses the internet,” Argentina ranks 65th out of 205 countries and leads in Latin America, according to the World Telecommunications Indicators Database. Similar trends are observed with indicators like “cars per 100 inhabitants” or “electricity coverage,” for example.
Warning: the fact that Argentina is not a “fourth-rate” country should not lead to complacency of “well, we are not that bad after all.” On the contrary, a 30% poverty rate (by our standard) shows significant challenges ahead for our country’s development. The key is, regardless of the yardstick we use to measure poverty and development, how to make us live a little better every day and, particularly, how to improve the living conditions of our lowest deciles year after year. There are two keys to this: growth (to make the pie bigger) with higher levels of income distribution (to make it more evenly distributed).
The last quarter of the 20th century was a major setback for our country: in absolute terms, Argentina was the most deindustrialized country in the world (Argentina’s industrial GDP per capita was halved) between 1974 and 2002. In the latter year, the country’s GDP per capita (considering not only industry but the entire economy) was 14% lower than in 1974, with a dramatic distributive deterioration (the gap between the top 10% and the bottom 10% of income went from 10 times to 44, according to INDEC’s EPH -without adjustment for underreporting of income-). This meant that urban poverty went from 16% (with the current yardstick) to 69% in that period. There, Argentina came close to Latin American levels of poverty: the region as a whole had 72% poverty.
The economic growth phase from mid-2002 to 2011 was prolific: GDP per capita recovered strongly, and the income gap between the first and tenth deciles fell from 44 times to 18 during that period. The corollary was a poverty that dropped 40 percentage points (25 points more than the region, which had not suffered a crisis-rebound-recovery like the one we experienced between the end of the Convertibility and the first post-2002 years). Since 2011, Argentina has entered a path of economic stagnation and increased difficulty in improving income distribution. That is why poverty in 2016 was similar to that year (the minimum was 2013), which contrasts with what happened in other countries in the region (Uruguay, Chile, Peru, Bolivia, Colombia, or Ecuador, for example), which have continued to reduce it since then. Despite the socioeconomic rollercoaster, the stagnation of the last five years, and the yellow journalism in favor of “we are a shitty country,” monetary poverty in Argentina today is the lowest of any year between the late ’80s and 2011.
As we said, to reduce it sustainably implies growth with income distribution. Social policies are more than welcome and necessary in this process, but for the dynamics to be sustainable and for Argentina not to run out of fuel, it is essential that our productive structure — as a upper-middle income country — shift towards a higher technological density than it currently has. Hence the unavoidable need for policies such as productive development, science and technology, or education, which allow us to fight for the championship instead of just avoiding relegation.