Friday, June 22, 2007

Income Distribution in Latin America: How to take one step forward? (II)

In practical terms ,Education seems to be complementary with other goods, such as social background, social network, and quality of jobs rather than the other way around. It follows than the true nature of education is connected to be s kind of screening device to keep some quality standard at society level, whatever that standard might be. To understand this statement, let us ask ourselves the following question?. What is the real chance that a student with weak social background ,and an average education level ,can get to the top of a business management?. For this matter any student in such a situation ,will have a lower chance than another one with a better social background ,and above average education level . In this later case ,the screening device mechanism works better than in the former. Therefore, the impact of education on income distribution ,even assuming equal talent endowment for all, will be negatively affected. So ,because of the talent for education is distributed among few people, or because of high quality needs for the screening device , education by itself in Latin America, would not be sufficient to get substantial income distribution improvement.
On the overall aggregate impact, education is important to improve economy competitiveness, as long as it improves the qualification level for different jobs , and productivity is higher. However, the overall impact of education on income distribution is somehow conditioned to complementary policies designed to get better quality of jobs accessible for every one, or a better quality of entrepreneurial programs within the education curricula. .-
The other alternative is to support entrepreneurship among young people ,specially those who have entrepreneur potentials. When we are born, all of us have a potential for learning and adventure. In Peru, 50% of its population is engaged in business activities which require entrepreneurship abilities, so does Colombia with 30% of its population,(Global entrepreneurship monitor , june 2007). Traditional education though ,somehow neutralize those potentials because it is not designed to do anything different than to prepare people for public management kind of jobs, whose basic characteristic are to be stable, predictable , self disciplined by fear .- Therefore, it is important to have an educational system designed to improve those potential, instead of nullify them.-
After the new educational system does its job for improving the entrepreneurial potential, those entry barriers for new business should be eliminated or reduced .To start a new business in Chile requires more that 10 days of waiting time for different approvals, and more than U$$ 500 in legal procedures. Some preliminary research has shown that at local communities level, more than 50% of the total financial resources needed for a new business ,comes from requirements arising from the State involvement on different aspect of any new business, such as sanitary requirement, safety standards and the like. The argument goes into the idea of promoting a kind of “ownership society” different to the concept of “income dependent society”. Every one should be able to get a fair access to property, throughout entrepreneurial activities , as a way of getting personal prosperity, which will pave the way to improve income distribution. The idea it is not a recent one. In the eighties, Chile started out a program of promoting the access to ownership ,throughout the so called “popular capitalism program”. Within this program, in those companies which were privatized ,it was allowed to ordinary citizens, to buy a proportion of its stock options, supported by State subsidised loans, payable with the annual return coming from those stocks. Moreover ,those who bought those stocks had a tax credit as an additional incentive.Unfortunately, the program has not been implemente again.
We need more owner than workers,becasue that way , capital accumulation will allow its benefits , to make its way through for everyone, not just a few..

1 comment:

  1. Erico;
    very interesting poit of view.
    Only an additional comment: “The target group’s needs in a society are not uniform. They are composed of the variable needs of many subgroups. This multilayered structure of every target group allows any person, business, organization or state departement to focus on one or the other subgroup and develop a considerably more attractive special solution for that narrow interest.” The key will fit all the better solution into the lock.
    The highly developed human instinct to seek new pursuits distracts us from the narrow strategies involving weak links, cybernetically most effective points, minimum factors and minimum groups, and potentially useful innovations in our sector. We are drawn to the bright lights elsewhere, frittering away our energies. Our innate urge to impress others is also a distracter with negative repercussions.
    Offering your target group a distinct advantage over the competition (only working out your real strengths) boosts attractiveness and creates greater demand (products, services, social solutions, etc.). More units and increased productivity lead to corresponding cost degression, higher profits, more liquidity and freedom of movement, and to more rapid growth. Passing these successes on to the target group keeps the positive development in motion.