Despite much debate about the outlook of the region -and enough reasons for concern- economic growth and support for democracy present much of Latin America with an opportunity: to deepen democracy, strengthen economies and improve social policy in a fairly stable environment and with relatively abundant resources. Will the region seize the moment?
After decades of being oppressed by authoritarianism, broken by populism, or disappointed by poorly-calibrated liberalism, the Latin American region now finds itself in decidedly greener pastures. Where inflation and deficit pervaded, prices are stable and budgets balanced. Where stagnation came to be expected, now we see continued, robust growth. Where once conflict was the norm, now peaceful democratic governments are the rule. And where poverty and inequality were sharpening, now we have better chances of progressing toward human development. It is time to see this region’s glass, perpetually half-empty, as finally at least half-full.
Take a look at Latin America, and you will see a region that has plenty of reason for optimism. Eleven presidential elections were held from November 2005 to the end of 2006, presenting citizenries across the region with a wide range of platforms to choose from. Latinobarómetro2006 data shows that average voter turnout for the 11 processes was 72.1%, the highest collective suffrage rate the region has ever seen. Five incumbent governments retained power, the opposition carried the day in the remaining six and despite tight electoral results, only one election was disputed to any disruptive extent. Indeed, the perception that “elections are clean” is growing amongst Latin Americans. The years 2007 – 2009 will bring nine presidential elections, and signs are that this positive trend will continue.
At the same time, more Latin Americans than ever say that their national economies are on the right track – and they are right. A recent study by the Economic Commission on Latin America and the Caribbean (ECLAC) shows a region that averaged over 4% growth over the last four years. It is clear that the region has benefited from global growth, but domestic demand has been strong, too. Moreover, the region would not have been able to take advantage of the supportive global environment were it not for foundation of macroeconomic stability it has won over recent years. Indeed, the IMF expects regional inflation to drop to 5% in 2007; many countries are increasingly seeing primary fiscal surpluses, and public debt ratios are on the wane. Although growth is not as strong as in other developing regions, for the first time in its democratic history, Latin America is enjoying growth without being saddled by external or internal imbalances. It is a rare moment for this region, and it must be seized if it is to be prolonged.
Nonetheless, the glass remains dangerously dry for many. Elections and growth alone are not automatically translated into improved living conditions, and today some 40% of the population in Latin American lives in conditions of poverty, and 20% in extreme poverty. That’s four out of every ten without enough income to care for basic needs, who suffer daily the indignities of malnourishment, ignorance, ill health, and exclusion. One out of 4 young people in the region neither studies nor works, having no opportunities for social inclusion. In tandem is widespread inequality – the most pronounced in the world. These 239m poor citizens see growing material wealth around them but find no way to achieve economic improvements in their lives; they participate in elections but yet feel estranged from the state, and marginalized from society. What’s more, the middle classes are ever more tenuous, increasingly losing ground. These men, women and children are still waiting for the good times they have been promised.
But how long will they wait? Even amid increasing support for elections and economic performance, there is considerable discontent simmering close to the surface. While optimism toward democracy in principle is high, and hope is in the air around election time, according to Latinobarómetro only 58% of Latin Americans feel that governments seek the people’s welfare and 14% percent who feel that protest movements are the best way to effect change. Even still, half of this 14% supports democracy in principle -- they only wish that it would work in their interests. That is, like so many others in the region, they want development that encompasses political reforms that deepen democratic institutions; economic reforms that promote stable, dynamic and inclusive growth; and social reforms that tackle poverty, inequality, and exclusion.
This will be a welcome change. For too long, the development debate was distracted by a misleading question: State, or market? Not only is this notion misguided, but it is also counter-productive. The market cannot function without state institutions that guarantee stability, lawfulness and fair competition. And a state with no market soon finds its coffers dry. Either way, institutions are disregarded, leaving social development in the lurch.
Combined political, economic and social development depends on a State with institutions that set the rules of the game --legality, legitimacy, independence of powers, and universality. Latin Americans know this, and it is with optimism for such a state that they head to the polls in record numbers, even after so many letdowns. What they are asking for when they pull the lever is simple: They want a state with a capable and just presence that guarantees a fair chance at living a decent and healthy life. They want good political institutions. They want economic and social development. The sensible optimist would seek to improve these all at once.
Through a more balanced approach to policy and politics, some governments are beginning to meet these demands. Take Chile, which has neither pursued unfettered free-market policies nor attempted to radically control the economy. Instead they have privatized, but with strong regulation; opened to trade, but while keeping the mining sector for the state; and liberalized the financial sector, but without forfeiting capital controls. Brazil is another example. At the last change of government, many observers expected a radical agenda of nationalization, land seizures, fiscal waste and monetary madness. Instead, the Brazilian state has emphasized economic stability while attempting to advance the design and targeting of social policy – and with positive results. Politicians on both sides of the aisle have taken note, and leaders in other countries are following suit, to the extent that resources allow – to a varying degree indeed. All in all, there is hope that a consensus is forming that recognizes macroeconomic stability coupled with an active state as not only compatible, but, indeed, the optimal combination for the construction of institutions that allow the state and the market to support one another, and social development to receive the attention it deserves.
There are positive signs that this attention will bear fruit. Inequality in Brazil fell four percent between 2001 and 2004 while five million Brazilians escaped extreme poverty, according to the Instituto de Pesquisa Econômica Aplicada. IPEA attributes this development in part to social programs like Bolsa Escola, which provides cash transfers to families provided they invest in their children’s own human development. A similar program in Mexico, now serving some 25m people, is partly responsible for an important reduction in the poverty and extreme poverty rates between 1990 and 2004, and improved health and education outcomes among children. With such results, it is no wonder that Mayor Michael Bloomberg recently announced he would adapt the program to New York City.
These are specific examples, but social policy goes much further. To be effective and sustainable, social policy has to be matched by economic opportunity and improved education so that people can participate in the market. It also must be universal, to meet the needs of populations richly diverse in terms of cultural background, language, gender, income, education, location of residence, and more.
Growth, institutions and social policy can all be supported as well through increased regional integration. Latin America’s countries are diverse, but there is plenty that they can learn from one another, and much to be gained from cooperation. Regional blocks including MERCOSUR, the Andean Community, and Central American Common Market must be strengthened so that their constituent countries can work together to devise solutions and implement programs to stimulate their joint competitiveness in the global economy. This means working together to produce public goods, foment technological and scientific innovation, and strengthen production chains and infrastructure to add value. In other words, it implies integration beyond the realm of trade.
The governments of Latin America now have a propitious moment to fulfill the promises they have made to their people. We have missed out on previous opportunities, so it is a moment that must be seized. The task will take hard work, but we should be determined. It was not it easy to arrive where we are today – but we managed. If we have filled it this far, we can fill the glass even more.
Con la presencia de los ministros de desarrollo social y altas autoridades del ámbito de las políticas sociales de la región, se llevó a cabo el 2do. Foro de Pensamiento Social Estratégico en Nueva York el 26 y 27 de noviembre . El discurso inaugural estuvo a cargo del Premio Nobel de Economía Joseph Stiglitz. Más información >>
"Latinoamérica: la clase media es clave" - Bernardo Kliksberg (.doc)
