Saturday, April 26, 2014

Latin America and inequality reduction

Kathleen Geier, who has a great blog on inequality, writes a blog on Latin America for The Nation that reflects a dangerous mixing of ideas about recent reduction of inequality in the region.  It is also a common position around some progressive quarters in the US.  Her title says it all "How Economic Populism is Transforming the Most Unequal Region in the World"

"Economic populism has swept the continent, leading to the election of left-of-center political parties that have implemented anti-equality [she most likely mean anti-inequality] agendas. Their efforts have borne fruit. During a decade when economic inequality grew by leaps and bounds in the rest of the world, it declined significantly in Latin America."

She starts with the example of Chile and then goes on to praise Evo Morales in Bolivia: "Between 2002 and 2010, the Bolivia’s poverty rate was cut by a third, and in 2009, UNESCO declared the country illiteracy-free. Economic growth was over 5 percent last year and has averaged above 4.5 percent during Morales’ presidency."

Several elements of this line of reasoning may be both incorrect and politically unhelpful. First, it is unclear that the term "populist" is helpful to refer to several of the governments in the region (maybe it is unhelpful in all cases). There is nothing populist about the Chile, Brazil or even Bolivia.  Yes, Evo Morales is an influential figure in Bolivian politics, but his party is a MAS movement, which links the electorate with policymakers in a more or less effective way. Second, few of the policies that Latin America have implemented are populist in true sense of the world; in fact, they are at best social-democratic and at worse liberal (in the European sense).  Brazil is undoubtedly the most interesting case of inequality reduction because the Gini has been decreasing for longer than in any other country, and Brazil has done it with a mixture of industrial policy to promote key sectors, formalization of the labour market to create more low productivity, low skilled but relatively well paid jobs and some new social policies.  Labeling Latin America's policies "social democratic" may be politically more useful, as it emphasizes the non-radical nature of the policies.

In fact, and this is my last point, policies in many Latin American countries may not have been far enough and the sustainability of recent reductions in inequality may be questioned.  In a paper Juliana Martinez Franzoni and I have just published here (and was facilitated by our work in the network Desigualdades), we call for a more detail discussion of policy variance in Latin America and try to show that several countries have not adopted enough policies to secure better, more productive jobs over the long run.

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