Poverty, Inequality, and the Policies of the 'New Left' in Latin America

Poverty, inequality, and the "new Left" governments that now govern much of Latin America were the focus of an international conference in Santiago on December 4–5, 2008. Co-sponsored by the Latin American Program and FLACSO Chile, the conference brought together scholars and public officials from eight countries in the region to explore to what extent left governments are adopting different approaches than their predecessors regarding to reducing poverty and inequality and if so, whether those policies were effective and sustainable.

Nora Lustig, Shapiro Visiting Professor of International Affairs at the George Washington University's Elliott School of International Affairs, indicated that an analysis of inequality and poverty indicators demonstrates that leftist governments tend to be more redistributive than their predecessors. Even within the Left, there is a marked distinction: the rate of reductions in poverty and inequality have been much greater among the populist left than among their social democratic counterparts. However, regression analysis suggests that, when you control for rising commodity prices and income per capita, the social democratic regimes are more redistributive. Ana Sojo of the Economic Commission for Latin America and the Caribbean (ECLAC) highlighted the impact of rising food prices on current efforts to reduce poverty. She outlined the importance of government action to expand productive opportunities, promote capacity development, and provide social protection against vulnerability and risk.

Discussing the case of Argentina, Rosalía Cortés of FLACSO-Argentina noted that during the 1990s era of privatization and market liberalization, social policy in Argentina functioned as an instrument of social control. The era of privatization nonetheless paved the way for civil society organizations to serve as protagonists in the elaboration and implementation of poverty reduction programs. With the depth of the economic crisis in 2001-2002, Argentina faced not only unprecedented levels of conflict among organizations of unemployed workers but also increased demands on the state. Initial assistance was so limited that it had only a small role in reducing poverty, at the time more than 55 percent of the population. By 2003, some 2.3 million families were receiving assistance from the government in exchange for four hours of work or worker training. The increase in employment as the economy recovered, coupled with increases in the minimum wage, occasioned a significant reduction in poverty and inequality between 2003-2006.

Uruguayan political scientist Rossana Castiglioni of Chile's Universidad Diego Portales argued that in Uruguay, the Left's victory is at once a new and old phenomenon: new in that 2004 marked the first time the Left has come to power, yet old in the sense that the party was founded in 1971. When the Frente Amplio took office, their central policy focus was the reduction of poverty. A new emergency plan included a broader definition of poverty and had as its central element a conditional cash transfer program that by 2006 covered 90,000 households. Castiglioni noted that while inequality may have modestly increased, Uruguay has seen a reduction in poverty and extreme poverty, a recuperation of real salaries, and a decrease in unemployment.

María Herminia Tavares de Almeida of the Universidade de São Paulo emphasized the continuity of Brazil's social policy between the Cardoso and Lula administrations. Social reform was part of the agenda of Brazil's democratic transition, and envisioned broad changes to make the systems of social security, health, and education universal. Programs of social protection including direct cash transfer programs started during the Cardoso years and were subsequently expanded during the Lula da Silva administration; the signature program, Bolsa Familia, grew to cover more than ten million people. The Lula government has continued universal policy reforms, extending both basic education and health care coverage. The government has also focused on reducing inequality and on the recognition of minorities. Inequality in Brazil has fallen during the Lula years, and the per capita income of the lowest deciles has risen the fastest.

In Bolivia, according to George Gray Molina of Oxford University, poverty and inequality have remained high and virtually unchanged since Evo Morales assumed office in 2005. Bolivia's per capita income has increased 0.5 percent in 50 years, he said, and rates of extreme poverty—38 percent—have remained the same. Two external shocks—the rise in food prices and the contraction of remittances—neutralized the effect of 6 percent growth in 2008, largely a result of increased income from the hydrocarbons sector. Social policies under the Morales government have included programs aimed at children and at providing minimum pensions, which have been coupled with successful measures to control inflation. Public investment, however, remains in the hands of governors (prefects) largely opposed to Morales. Gray Molina indicated that 70-80 percent of the population remains optimistic about what is occurring in the government and in society. But, he said, while the country has seen impressive social transformation, there has been little change in traditional indicators.

Ángel Saldomando of the Centro de Investigación de la Comunicación (CINCO) in Managua indicated that between 1990 and 2006, the Nicaraguan economy was transformed in accordance with the Washington Consensus, albeit with high levels of corruption. Poverty reduction as an issue was marginal, reappearing on the country's political agenda after Hurricane Mitch. Since coming to power in 2006, the Sandinista government has acted pragmatically in the economic sphere while advancing an authoritarian and clientelistic political agenda. Venezuelan support has helped offset the crisis in energy prices, while the government has concluded a fifth agreement with the IMF. According to Saldomando, the FSLN has also undertaken to improve the coverage of the health and education systems and to launch new programs aimed at combating hunger. The Sandinistas' economic pragmatism contrasts markedly with the fomenting of extreme polarization in the political sphere, as President Daniel Ortega attempts changes in the political system to allow his continuance in power.

Discussing the case of Ecuador, Carlos Larrea of the Universidad Andina Simón Bolívar noted that between 1982 and 2006, Ecuador experienced weak economic growth, minimal diversification away from oil exports (which constituted 60 percent of exports in 2007), and increased social inequality. Since taking office in 2007, the government of Rafael Correa has succeeded in reducing levels of poverty, indigence, and unemployment; inequality, however, has continued to grow. The new constitution conceded a central role to the state in development, Larrea said, but the current model of reliance on oil exports is unsustainable. Ecuador's reserves will be depleted in about 25 years, and mining for copper or gold in the Amazon carries with it a substantial environmental impact. With the decline in oil prices and reserves, Larrea argued that Ecuador needs to define a new model of sustainable development.

Analyzing the Venezuelan case, Father José Virtuoso, S.J., of the Centro Gumilla asserted that the fight against poverty and inequality has been at the heart of Chávez government policy since 2001. The Bolivarian Revolution has had two principal stages. At first, social policy was subordinated to a process of change in the political-institutional sphere, marked most prominently by the drafting of a new constitution. A second phase, marked by the launching of the National Plan for Economic and Social Development, has seen improvements in social indicators between 2004-08, including broadened access to education and health services lower levels of illiteracy, and overall reductions in poverty rates. The distribution of oil rents has made these improvements possible, even if there are still serious problems regarding the quality of education, the formation of teachers, and the stubborn levels of unemployment in the informal sector. A more basic problem, he said, is moving from an economic system based on the redistribution of oil income and to one based on productive capacity.

A second part of the conference examined the Chilean case in greater detail, given the significant reductions in poverty under the civilian governments of the Concertación. Clarisa Hardy, former Minister of Planning and Cooperation, pointed to the systematic and sustained reduction in poverty levels in Chile, from 38.6 percent of the population in 1990 to 13.7 percent in 2006. She emphasized that there was no necessary relationship between economic growth and reductions in poverty and inequality, and that the role of the state was un-delegable. Key to understanding the "new Left," she said, was the definition of social policy not in terms of needs but rather, in terms of guaranteed rights. Osvaldo Larrañaga of the United Nations Development Plan echoed Hardy's emphasis on economic growth and social policy in the reduction of poverty. He underscored advances in access to education but ongoing problems with its quality. Social policy had had little impact in reducing inequality, he added, and workers in the informal sector were still largely unprotected by government safety nets. Patricia Roa of the International Labor Organization pointed out that more than half of Chilean workers early less than twice the minimum wage, and that women continue to earn less than men despite frequently higher levels of education. She emphasized the role of collective bargaining in reducing income disparities among workers and the importance of gender equity in reducing levels of inequality overall. Patricio Meller of CIEPLAN said that in a globalized world where capital, technology, services, and investment are highly mobile, development strategies had to emphasize capacity-building. Social spending needed to move from an assistance-based model to one focused on improving employability and the quality of services such as education, health, and housing. In Chile, the labor market is at the center of the development debate, and key tasks are to create good jobs, increase productivity, and reduce the level of conflict between workers and management. Progress in social policy should not be measured in terms of the percentage of GDP spent, but rather, on such key questions as to whether spending was progressive or regressive and whether or not it increased capacity.