With different levels of development, Latin America had distributive policy attempts in the mid-twentieth century, which failed to survive beyond the 1970s. In these circumstances, it became apparent that the region’s main weakness was its source of income and its dependence on international trade of primary goods. This structural constraint says a lot about the problems of inequality, both because the primary export model creates few jobs in some countries, and because it generates low-skilled and low-paid jobs.
A path worth to be explored by policymakers is the improvement of public policies that support social welfare. Education and health are the two central pillars in terms of quality of life and no substantive improvements have been made in this area beyond specific investments in some countries. It is difficult to overcome assistentialism policies and move to the concretisation of improvements that translate into better jobs, greater appreciation of the qualification and regulation of the labor market. The region is working on that, but dependence on the economic model is strong and limits achievement.
Silvia Otero Bahamón
Policy-makers need to recognise that inequality is multi-faceted and convoluted. Gender, race, regional, income inequality, they all interact with and contribute to one another. But perhaps more concretely, they have to stop looking at national averages and start seeing that there are lots of variations between groups at the sub-national level. A national average can be deceptive if development is focused on your capital, but at the same time you might be reproducing and increasing other types of inequalities.
The role of bureaucrats and technocrats in inequality reduction is huge. In my work, I observe how particular technocrats are quite capable of reducing sub-national inequalities without having necessarily significant political support. So they have a lot of power in this. They can be creative, and get a lot done on the fringes.
We’ve now established that growth itself isn’t going to get you to where you need to go. You need to do something with that growth. I think the priority is state-building. If we want to think about development in the robust sense, we need institutions that can do things, such as guarantee access to health care, to education, guarantee a safe working environment, protect clean water, clean air! We don’t have a historical example of places doing these things without the state being involved.
Social policies need to address not only the population living in poverty, but also the non-poor population who are at a high risk of becoming poor. So policy makers should consider a more dynamic approach, not a static one. This means using historic data to understand the behavior of households, to see the evolution of their welfare and the realities of this ‘vulnerable non-poor’, or transient poor population.
But one thing that can be done is providing insurance and protection mechanisms against adverse shocks to the system, such as natural disasters. Being covered by health insurance has an important reduction effect in the household’s risk of falling into poverty. The big challenge, though, is finding a way of implementing these mechanisms for the majority of households whose income comes from informal employment and does not provide this health coverage.
Well, there are of course are some policies that have proven to reduce inequality, such as conditional cash transfers, or increasing access to education. But to target economic growth, as a policy, is tricky because what we saw in the years of significant economic growth and industrialization was the creation of both opportunities and informal economies. The latter translated into forms of exclusion, and so if you’re targeting economic growth, this has to be inclusive growth. This is complicated, but it is linked to labour rights, social rights, expanding access to education, access to health – with social policies that are designed to address inequality.
Take for example the Kirchner years in Argentina who saw creating jobs, not developing social policies, as the solution. But halfway through, they realized that there weren’t enough jobs to address questions of social exclusion. And so, only then, they developed the Asignación Universal por Hijo, a very effective cash transfer policy which, despite not transferring much, contributed to inequality reduction.
But you need both. Again, in Argentina, the policies were about strengthening labour unions, and collective bargaining, but that was not enough, so the Kirchners also developed specific policies for the informal labour force. Now, that was possible in Argentina because of a large formal sector and strong unions, but elsewhere it’s different. In Brazil, for example, it was about the minimum wage, job creation, the Bolsa Familia, conditional cash transfers, a real combination of policies. So every country has its variations. But the problem is that you need to address both the formal and informal labour forces. In the latter, it is about creating specific transfer policies, public services, policies like the Solidarity Economy – which I’m currently working on – that promote associationism, cooperativism, the economic activities of the poor, creating opportunities for gainful forms of making a living.
This is one of the most difficult questions. Because I guess every country will have to find different strategies. I find it very difficult to find a formula for the region. I sometimes think it will come down to the middle class, which has been growing substantially: Now about 45% of the population of Latin America is middle class, far from what it used to be 30 years ago. The middle class in Latin America will play a significant role in this transformation, as it has happened in other regions. If you think about the history of Britain, it was the middle class who actually transformed the country to a large extent.
Get our weekly email