Inequality is not a market destination, but a political choice

Abstract

Latin America is a region characterized by inequalities of all kinds. They are seen as a by product of the development process and, in this sense, it would be expected for development to be self-correcting at an advanced stage. By using the tools of the new institutional economics, this paper suggests that the distributive results of a society are not the consequences of the market, which will eventually self-regulate. The institutional structure that determines the kindof equality enjoyed by a society is the choice of those with the political power to do so. They do it consciously, by calculating the consequences of their actions.The conditions for certain types of economic and political institutions are analyzed, which provides a clearer idea of the non-randomness nature of the current economic inequality. The explanation provided in this article supports the thesis that the choices made by individuals within the powerful political elite have created the current state of distributive problems.