LATIN AMERICA

THE NEED FOR NEW
ECONOMIC AND SOCIAL POLICIES

Cecilia López Montaño
Washington D.C., March 21, 2013

 

There is a consensus about a new economic and especially social scenario in Latin America that must be recognized and analyzed by policy makers, politicians, the private sector and obviously, the international organizations. The facts are there: in 2013 the economy will be growing at 3,8% especially Brazil and Argentina, while the world rate is only 2,2%. This economic dynamism in the Latin American region occurs in spite of the difficult situation of the developed world.

However, the most significant change has occurred in the social situation. As it was mentioned in the document "Economic Mobility and the Rise of the Latin American Middle Class"1 of the World Bank, "After decades of stagnation, middle classes grew 50% from 103 million to 152 million; poverty fell from 44% to 30% and a new class emerged, the vulnerable the largest in the Region. " The document summarized the situation saying as follows: " A middle income region on a way to becoming a middle class region".

What is now more important is to analyzed both the economic and social policies implemented in Latin America during the last two decades, and even more important, which should be the new strategies that must respond to the new social demands of the population that should be also recognized by the macroeconomic policies. To begin with, there are four social classes, defined in income terms:2 the largest, 38%, the vulnerable; middle class 30%, poor 30% and upper incomes 2%.

Even though the social transformation according to the World Bank has occurred during the period 2000-2010 and it was faster during 2003-2009, it is important to recognize the impact of economic and social policies implemented since 1990, when the region started opening the economy and focalizing social strategies in the very poor. The general explanation for this big change, according to the document mentioned, was the growth in per capita income during this period, 2, 2% average per year. In the 80"s this indicator decreased and in the 90's it only grew 1, 9% average per year. More than 43% of Latin Americans changes social classes between mid-1990 and the end of 2000 and most of the movement were upward.

But maybe the most interesting result is that few move from poverty to middle classes. Since the big change in social policies was the generalization of Income transfers, conceived from the beginning as the way to get people out of poverty, which meant moving them to middle classes, what is clear now is that objective was not achieved. It is true that those policies alleviate poverty but the main result was to move them to what is defined now as vulnerable groups, those with a big possibility of becoming poor again.

So the time has come to really evaluate these policies that in many countries as in Colombia, they are still recognized as the core of the social policies that are being implemented. Even more important, it is fundamental to identify the new economic and social strategies that would guarantee the mobility of this vulnerable group to the middle class, the reduction in poverty and the goal of equality.

ECONOMIC AND SOCIAL POLICIES IN THE PAST

It is recognized in the document analyzed that economic growth, and not only income transfers, explains 65% of poverty reduction and 74% of the rise in middle classes. Of course income transfers played a role but now it is event some of its collateral problems that were denied for years.

No doubt, IT increased among the very poor the demand for social services. More children attended school, had access to health services, but at the same time very little was done in many countries, to improve the quality of the supply of those services. In a way poor education and poor health for the poor continued being the norm. Of course is better to attend a bad school that not have any kind of education, but much more could have being done, if governments had not abandoned universal policies in education and health. Middle classes were excluded from social policies and were forced to find education and health in markets of poor quality.  

Without a doubt, one of the main problems has been the reinforcement of women traditional roles as mothers and responsible of care, without any possibility of moving into the labor market that will give them real autonomy. This was not a policy for women; that must be clear. The other main issue in terms of the negative consequences of IT is the negative impact on the formalization of work. Given the situation of labor markets IT were an incentive to informality, the big drama of Latin America today.   It did help reduce levels of poverty but help create the vulnerable sector the largest in Latin America.

Given those results, will the actual economic and social panorama in Latin America require the same strategies? That is the million dollars question, and demands a million dollars answer.

ECONOMIC AND SOCIAL POLICIES FOR THE FUTURE

In many countries especially in South America, minerals and oil is the key for economic growth. It is being recognized that deindustrialization is a generalized problem in the Region with its negative consequences in the creation of decent jobs. Even more, in the Andean area, "de-agriculturization" adds up to the problem of very imbalanced economic development. So there is a clear need of diversifying again the production model in many countries of the Region. If this is recognized the labor market that has the highest levels of informal work in the world, would create more decent jobs with all its positive consequences in equality, and wellbeing.

Innovation, technology is a must to face one of the region's biggest problems, the lack of competitiveness, now that it has opened new markets in the world. Beside, more decent work would guarantee something that was dismissing up to now, the importance of the growth of internal demand. But probably one of the greatest changes should be in the nature of social policies. The time has come for universal access to social and economic rights, as many constitutions in Latin America establish since a long time ago. Social policies should be not only for poor people but also for vulnerable and middle classes. People should be considered as citizens not only as consumers, as it was pointed by Solimano3; a real way to improve Latin American Democracy, still weak in many countries.

This new type of strategies demand besides political support and social participation, the right institutions, a lot of resources and an agent to provide them, elements that have disappeared in many countries. It is not subsidies but even more, access and redistribution of assets and equal opportunities for all.

New concepts should be added to new public policies. In first place, a feminist economics contribution should be finally considered: the special content of economic policies.4 By now it must be clear that macroeconomic policies are not neutral in social and gender terms. It is evident that changes in the rate of interest, prices, productivity and employment generation affects in different manner different social groups, men and women. 

In second place, a very revolutionary one: the need to transfer care economy to mainstream economics. Now more than ever it has a meaning for Latin America: vulnerable and middle class women have higher labor participation rates than poor women. Now, 68% of the potentially economic active women are in this category. Certainly, they cannot suffer time poverty, overloaded by care economy. More than ever it is fundamental for the region, where women are in average more educated than men, live longer and have more healthy life, to recognize the contribution of care economy, done in about 85% per women. It is fundamental to make it visible; to measure it; and the most important step, to distribute it among the state, the market, the private sector and the men. 

How to do it? Obviously, through public policies and enrollment of the private sector that would find new markets for new care products and service. The results: more educated women working, with more autonomy, more demand for men and women care work, in the State, in the market in the private sector. The results will be better quality of care and new care industries with all its positive consequences on employment; for economist, more GDP, more taxes and the key element, finally on the way to gender equity.

New economic and social situation in Latin America cannot be seen as more of the same. Very significant challenges must be faced with creativeness, solidarity, efficiency, and especially, open minds. They must be assumed not only by governments in the Region, but by the society as a whole, and must start thinking about the need for a new social contract. We need less privileges for the 2% rich, an efficient State managing a very important role, a private sector committed not only to growth but to equality and social justice; and a middle class hopefully more generous than the richest Latin-Americans.
  


1. Ferreira, Francisco H.G.; Messina, Julian; Rigolini, Jamele; López-Calva, Luis-Felipe; Lugo, Maria Ana; Vakis, Renos. World Bank,  Washington D.C., 2013.

2. See op., cit., p.  

3. Solimano, Andres.  

4. Catagay, Nilufer and Diane Erlson. 

 


Cecilia López Montaño © 1999 - 2013 - Derechos Reservados

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