Tag Archives: Wealth gap

Peru and the condition of the developing country

What comes to mind when you think of Peru? Is it mountainous ruins? Is it fresh ceviche and cheap pisco sours? Or is it a façade of happiness set in place to mask the despair of being trapped in a developing country with very limited social mobility?

I spent four weeks in Peru on a service-learning program with my university, and during the course of my stay I volunteered at an all-girls orphanage, visited a small village on an island in Lake Titicaca, and stayed with a very hospitable local family in Cusco. Although my time was limited, I learned more in the month I was there than I would have during an entire semester at school.

What I want to focus on in this article is the economy of developing nations verses the economy of the United States. I’ve seen poverty in the last 28 days that would shock any member of my social class (the 10%) but what shocked me wasn’t the condition of Peru’s poor; It was the condition of their middle class. It appeared to be identical to the middle class of the United States!

I was fortunate enough to stay with families that were considered middle class by Peruvian standards, and what I realized during my stay was that the quality of life I was experiencing was virtually the same as the quality of life for many of my middle-class American friends. When I say quality of life, I’m referring to housing, transportation, food budget, and clothing. It was all the same as in the States.

So what does this mean? Has Peru improved so much over recent years that they have caught up to the American class structure? Or has the United States seen a decline in its middle-class so gradual that we’ve failed to notice the Third World countries whose standard of living we’re rapidly approaching? After my time in Peru, I’m convinced it is the latter.

Let me give you an example: In Peru, specifically in the city of Cusco, the poor and the middle class are mixed into the same neighborhoods. There is no clear physical divide between upper and lower income housing like there is in the U.S. No gated communities, no private neighborhoods, no guard houses to raise the mechanical arm that allows your car to pass through. It’s all so integrated because the position of the middle class in Peru is not far removed from that of the poor, again just like in the U.S.

In the United States, as with Peru, the line between the poor and the middle class is vanishing, and it has been for some time. The gated comminutes we see in America are not actually home to our middle class, they are home to our upper class.

This brings me to the sobering realization that I’ve come across during my time abroad: with the ever-widening wealth gap in the United States, we have gone from a nation of lower, middle, and upper, to a nation of poor and rich, with little to no in-between. Worse still, the poor outnumber the rich by a staggering ratio.

Below I’ve linked a video explaining the situation in detail. It’s well worth the six minutes it takes to watch.


What’s more, I learned from local guides and academics one of the primary reasons for Peru’s status as a developing country: The Spanish stripped the land of the vast majority of its gold and silver deposits during colonization. And judging by the advanced state of the Incan society around the period of Spanish arrival in Peru (1532) it’s fair to say that in all likelihood Peru would be a developed nation today had the Spanish never landed there.

So what has been going wrong for Peru lately? The Spanish were thrown out in 1824 and Peru has had nearly 200 years to reinvent itself as a thriving country. Well, the short answer is international corporations.

Perhaps the most important thing I learned during the program was the story of how big businesses take advantage of developing countries to boost their bottom line. Evidently, although the wealthy countries of the world give a total of about $130 billion in aid every year to developing countries, international corporations secure $900 billion annually by taking advantage of corporate tax loopholes.

By setting up shop in Peru and other developing nations, big businesses have been able to avoid paying massive amounts of taxes due to a form of tax avoidance called trade mispricing. So even though poor countries receive $130 billion annually from their wealthy counterparts, those same countries are losing nearly eight times that amount of money to corporations who take advantage of them. But that isn’t even the full extent of it.

Trade mispricing and multiple other factors such as debt service and trade rules lead to $2 trillion flowing from poor countries to rich countries every year. And the situation is getting worse. Rich countries are 80 times richer than poor countries today, while they were just three times richer 200 years ago.

This begs the question: Who’s developing who?

This concise and highly informative video brings the issue into focus. https://www.youtube.com/watch?v=uWSxzjyMNpU

A couple more discouraging facts about the injustices of global trade and business: