Poverty and the state in Latin America

Arthur Ituassu
8 August 2005

Why are there rich and poor countries? Why are there rich and poor continents? Why are there rich and poor ethnic groups? Why are men usually richer than women? An entire field of social science tries to answer these questions, which encompasses academic disciplines like economics, politics, international political economy, and international relations.

In Latin America, including my own country, Brazil, a vibrant argument has focused on such questions for four decades. The pioneers of “dependency theory” in the 1960s, Argentinean professor Raúl Prebisch (1901-85) and Brazilian scholar (and future president) Fernando Henrique Cardoso, strongly advocated the idea that some regions of the planet were rich precisely because others were poor. For the dependentistas – represented later by the work of the Brazilian geographer Milton Santos (1926-2001) – this is an intrinsic quality of capitalism.

Also by Arthur Ituassu in openDemocracy:

“Lula and Brazil: new beginning or dead end?” (May 2005)

“A big mess in Brazil” (June 2005)

If you find this material valuable please consider supporting openDemocracy by sending us a donation so that we can continue our work and keep it free for all

“Dependency theory” lost power in the last years of the cold war as some dynamic east Asian economies (the “Asian tigers”) appeared to break down the rigid global dichotomy between the “centre” and the “periphery”; but the issue of worldwide, systemic poverty persisted in Latin America, Africa and many parts of Asia itself.

A generation on, and after liberal policies and their associated doctrines have been tested to destruction, the search is on for a new model capable of understanding and accommodating the experience of Latin American economies in the context of new forms of globalisation. The Inter-American Development Bank (IDB) has just released in Brazil a publication, Social Inclusion and Economic Development in Latin America, which presents seventeen case-studies of social development and excluded populations in Latin America – among the latter, descendants of Africans, indigenous people, women, the elderly and handicapped people.

This work, which acknowledges the reality of large-scale impoverishment in the region by using categories of “included” and “excluded”, is a valuable contribution to a crucial debate about Latin America. It is also flawed in two important ways.

First, it makes generalisations across a very large geographical area, ignoring structural differences between different sub-regions (for example, it is hard to make meaningful comparisons between the signatories of the Central American-Dominican Republic Free Trade Agreement and the Mercosur regional bloc).

Second, it ignores a vital concern in most Latin American countries: the quality of the “public realm” and “public goods”, and consequently the effects of public allocation of resources.

A problem of generations

The reality of social exclusion is wide-ranging. Many of its aspects – racial or sexual prejudice, age or physical discrimination, even traditional dichotomies like native/foreigner or religious/secular – carry political and cultural consequences.

Yet as the IDB suggests, the most tangible evidence of social exclusion in Latin America does lie in the economic sphere, in a highly unequal income distribution. This both reflects and reinforces a situation of poverty far worse than that suggested by overall indices of economic development. In the last five years, poverty has affected 44% of Latin America’s population of the region – higher than in the “lost decade” of the 1980s, when the then-dominant debt crisis helped drive income differentiation.

In Brazil, for example, the Gini coefficient – the leading measure of inequality used by professional economists – rose (according to federal data) from 0.584 in 1981 to 0.636 in 1989, and was still 0.589 in 2002. United Nations figures reveal (as I mentioned in an earlier openDemocracy article) that Brazil’s richest 10% today receive 46.7% of the country’s income, while the poorest 10% of people get only 0.5%. This is one of the most unequal income distributions of any country in the world. More alarming is the fact that in a similar period (1980-2000), public social expenditure in Brazil grew 43.4%, showing that the public provision of resources is not diminishing economic inequality.

Brazil, though an extreme case, is not alone: none of the region’s countries have better levels of income distribution than those verified three decades ago, and some have worse. This is true even where, as in Brazil, there has been progress at a macroeconomic level.

Also on Latin America’s politics and social divisions in openDemocracy:

Guy Hedgecoe, “Losing Ecuador” (April 2005)

Ivan Briscoe, Nèstor Kirchner’s Argentina: a journey from hell” (May 2005)

Arthur Ituassu, “A big mess in Brazil” (June 2005)

John Crabtree, “Bolivia’s retreat from civil war” (June 2005)

Sergio Aguayo Quezada, “America’s protean left: José Miguel Insulza and the OAS” (July 2005)

But Latin America was already, before the liberal framework began to guide policy, the region of the planet with the worst income distribution; thus, as the IDB suggests, income inequality has no relation to the development models popular in the region since the 1990s, or the passionate debates between liberal, Marxist and nationalist frameworks of political economy. The high levels of social inequality in Latin America and the Caribbean, rather, are rooted in structural problems inherited and transmitted across generations.

Where is the public?

The IDB’s diagnosis leads it to commend Brazil’s National Programme of Affirmative Action, created by a presidential decree in 2002, and the new system of quotas in the country for federal jobs and universities, which guarantees vacancies for members of some minorities. It also supports anti-discrimination laws in Mexico and Peru, and development projects working to include the Garifuna in Honduras, Mapuche in Chile, Afro-descendents in Colombia, and handicapped people in Nicaragua.

The bank correctly identifies exclusion as itself a source of poverty that carries economic costs for the region: lack of investment in human capital, cycles of human dependency and permanent diminution of individual and national incomes.

But solutions that involve affirmative action in Latin America can also be problematic, tending to privilege some sectors and interests – a distortion rather than a true manifestation of public power. Again, the Brazilian example is notorious. In the history of the republic since 1889, public power in Brazil has never generated any public benefit for the citizen, even when it retains (as at present) almost 40% of national income. There is no universal basic education; there is no public health; there is no public security; there is no equal access to justice.

Public power should come first, affirmative action later. Latin American countries should preserve their economic stability while allocating public resources to the provision of public benefits. Otherwise, Latin American politics will always generate violence, corruption, and social and economic discrimination.

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