Friday, July 23, 2010

Latin America and inequality: Tough reality for public policies (I)

The recent financial crisis (2008),has made of Latin America economies the focus of attention because of its strength to cope with the effects of such situation, keeping the fundamental for steady economic growth . However, unemployment (10 million people in these economies), poverty(higher in countries which were on top of the list, because of its progress to reduce poverty), and inequality are at the core of the real impact of the global crisis.
It is clear that those well endowed with education and financial resources did not feel that much the burden of the crisis, as those less protected did. Thus, all social achievements since the nineties, have become obviously too fragile to overcome the wave of output losses starting in 2008, and no matter the success in terms of growth for more than twenty years inequality is still the big issue.
There are different approaches for inequality. The Gini coefficient, is a statistical measure widely accepted to get a more precise evaluation of the magnitude of the problem, and to make comparison. Thus , while Portugal has an index of 41,Chile,Colombia,Paraguay has an index of 55,just one point below Uganda.
A recent UN report, suggest that inequality depend of public policies design, such that good public policies can do better to reduce inequality, than bad public policies do. Besides, it states the argument that inequality goes from generation to generation, which might be relevant for those people historically displaced from social net work in theses economies .We might distinguish different groups and characteristics.
First, the native population and their civilization, who might be considered a “displaced civilization” by the new sixteen century culture ,which either they did not have a chance to assimilate or they could not properly integrate themselves to it. Anyway, since then on, one way or another, they have been outside of the new institutions including public policies design. Thus, It is not surprising that Latin America countries with higher share of native population, are among the ones with the higher level of poverty and inequality. The UN report, reinforce indirectly this argument with the fact that 10 out of 15 most unequal countries in the world are from Latin America
The second group comes from those who migrated from the country side to urban cities, pushing up the demand for services provision to such a level ,that the system can not afford to provide, creating the so called “ urban poverty bag” These groups are the direct demand for public policies outcomes, and the main variable to measure its effect and impact, but also the main focus of public policies . So, in this case Urban poverty is a consequence of State failure to improve the quality of its services, and lack of Social responsibility in public policies. So, it is the recent increase in these social cost of the global financial crisis.-