Home Topics Poverty & Inequality LATIN AMERICA'S INEQUALITY TRAP

LATIN AMERICA’S INEQUALITY TRAP

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portada_infoThis important report, written by Luis Felipe López-Calva and Isidro Soloaga, addresses what it describes as ‘a significant and persistent inequality, accompanied by low social mobility, [which] has led the region to fall into an “inequality trap”; a vicious circle that is difficult to break.’ This is familiar ground, but the report’s aim is to discover ‘what public policies can be designed to prevent inequality being transmitted from one generation to the next. Why have the political system and the redistribution mechanisms not been effective in reversing this pattern?’

The report argues that ‘…A sustained reduction in inequality means impacting the poor quality of political representation, the frailty of public institutions, unequal access to influence specific policies, and institutional shortcomings that lead to corruption and the state ending up in the hands of minority groups. A first step towards achieving this goal is to establish the reduction of inequality as an explicit objective’ (p. 109).

In other words, you need political will. Related to the question of political will is that of the ‘regulatory capacity of the state’, and the report examines at length why the regulatory capacity of Latin American and Caribbean states is, in general, so poor.

As its main analytical tool, the report uses Amartya Sen’s concept of capabilities: ‘In this Report, the approach is to measure equality in terms of capabilities, i.e., people’s effective freedom to choose between options they consider valuable and have reason to value’ (p.18). The authors’ focus is on ‘inequality in human development, the links that make such inequality persist from one generation to the next, and the conditions necessary for ensuring that public policies break the cycle of inequality… This Report aims to extend the outlook of human development inequality analysis in LAC countries in order to pinpoint the underlying factors that allow inequality to pass from one generation to the next’ (p. 20). The authors argue that the traditional human development approach ignores equality.

Another important theme of the report is that eliminating poverty is not the same thing as eliminating inequality: ‘Although inequality reduction is directly related to combating poverty, an inequality approach requires the development of a distinct perspective and the application of specific instruments that are different from those used to fight poverty. Curbing inequality requires the development of a fully-comprehensive public policy aimed at bridging the huge gaps between the different strata within LAC societies’ (p.114). The report argues that ordinary social programmes do not take account of ‘constraints’ that increase levels of inequality: ‘These constraints include poor quality in the provision of healthcare and educational services, as well as institutional and regulatory aspects, among others, which disproportionately affect lower-income groups, including issues relating to property security, personal safety and access to justice’ (p.109). What these constraints can mean in practice for the poor is explained in a telling footnote: 20 schools in San Salvador had to be closed in 2010 after three teachers were murdered.

Conditional cash transfers

The report devotes considerable attention to what are known as ‘conditional cash transfer’ (CCT) programmes, the best known of which is the Brazilian family allowance, the Bolsa Família, paid to poor families on condition that children go to school and are vaccinated. The report defines these programmes as follows: ‘These types of programmes serve two major purposes: first, to transfer income flows to households in poverty, and, second, to promote investment by households in the human capital of the youngest generation in order to increase their capacity to generate income in the future and break the cycle of the intergenerational transmission of poverty. Thus, these programmes were explicitly designed to combat structural poverty’ (p.111).

According to the report, ‘Nearly 26 million households in the region are benefitting from this type of programme, with Brazil (with over 15 million beneficiaries) and Mexico (with more than 5 million) as the countries where CCTs have achieved the greatest coverage’ (p. 111). Other programmes of this type praised by the report are Chile Solidario and Comunidades Solidarias Urbanas in El Salvador. Despite the successes of these programmes, the inter-generational effect on social mobility is limited: ‘While, on the one hand, there have been modest increases achieved in levels of education and health, it has also been observed that the programmes do not manage to increase children’s learning levels. These findings indicate that the levels of achievement in well-being of the new generation of beneficiaries will likely be similar to those achieved by their parents, and that these achievements will continue to be low in comparison to those seen in the most favoured sectors of society’ (112). The reason for this is that the overall situation of these families remains precarious, and they are liable to be thrown into crisis by shocks such as unemployment, illness or natural disaster. Another weakness of these programmes identified by the report is that they do not form an effective route into employment.

If these weaknesses could be eliminated, the report concludes, ‘CCT programmes are likely to have a greater impact on reducing persistent levels of poverty experienced in LAC countries. This, per se, however, does not make them instruments for reducing inequality, although these programmes can have positive effects in this regard.’

The political challenge

What it would take to have a significant impact on inequality is an intervention, perhaps not only of a different scale, but of a different order: ‘Although inequality reduction is directly related to combating poverty, an inequality approach requires the development of a distinct perspective and the application of specific instruments that are different from those used to fight poverty. Curbing inequality requires the development of a fully-comprehensive public policy aimed at bridging the huge gaps between the different strata within LAC societies… Attention to geographic inequalities and to inequalities relating to gender and racial or ethnic origin should be a priority for public policy planning, given that the specific institutional, cultural and historical factors of each of the countries in the region raise particular challenges’ (p.114).

This is undoubtedly a valuable report, which LAB and its partners will need to unpack over the next few months, and any general summary such as this must be inadequate. Nevertheless, one is left with an uneasy feeling that when the authors identify the scale and the nature of the changes required to make a significant impact on inequality in the regions, and the radical political nature of those changes, they retreat into jargon: ‘Thus, by implementing reforms that help the system of political representation and state action respond better to the demands and interests of groups with lower levels of relative influence, it will be possible to enhance the progressivism of public dynamics.’ Is what they really mean: ‘Power to the people!’?

Read the report

English

http://hdr.undp.org/en/reports/regional/latinamericathecaribbean/idhalc_en_2010.pdf

Spanish

http://hdr.undp.org/en/reports/regional/latinamericathecaribbean/RHDR-2010-RBLAC.pdf