Social Policy and Inequality in Latin America Compared to Other Countries

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1 Social Policy and Inequality in Latin America Compared to Other Countries Author : Amanda DePue The United States can be considered one of the top advanced industrialized countries among many other countries in our modern world today. This is a fact that is evident and can be easily proven by looking at the economy and technological infrastructure of the U.S. Although no countries social structure is perfect or guaranteed to be one hundred percent equal all the way through, the United States is one country that is generally well balanced within its social system, from its lower, working class to its upper, more elitist class. Other countries, however, are not as lucky as the United States and are behind in their advancements: economically, politically, and socially. Modern Latin America is considered to be one of these less advanced countries for reasons that can be traced back even to before the nineteenth and twentieth centuries. Latin America differs greatly from that of other countries that are more industrially advanced, or in other words "more economically developed." Other countries have advanced technological infrastructure to a greater extent compared to Latin American countries and other less advanced nations. Democracy, social policy, and inequality have a significant historical role on the construction of the industrialization and development of the modern Latin American government. The development of social policy during the import substitution industrialization (ISI) period of the 1980s greatly contributed to the late and dependent development of Latin America. Democracy makes a difference for inequality and poverty by decreasing the inequality of political power distributions, allowing for more flexibility with policy options. It also allows for the expression and vocalizing of demands for these new policies and a better promise that these demands will be met. "Redistributive policies are a result of political action" but democracy is what actually makes this redistribution a reality [1]. Democracy is needed to create a system of social protection in countries where there is little to no economic development and low protection from other competitors in the international market. A good example of this would be Costa Rica. The modern Latin American social system can be split up into five distinct social classes: the informal and formal working/lower classes, the white-collar or non manual workers, the middle class, and the elitist or "dominant" class that consists of people such as executives and capitalists. The lowest class, or the working class, represents the highest percentage and make-up of the entire population of Latin America. A major reason for inequality in Latin America and its social system is the high concentration of income in the elitist social class [2]. Although this is the highest class of the social system, it is also the smallest one too. In the early 1900's, the agricultural system of Latin America was making dramatic changes regarding the participation of rural and urban areas. An emphasis was being made on stability and social control. Political stability was seen as an essential in the process of growing the economy. The export-import model changed society in Latin American countries. It created inequality in 1 / 5

2 landholding and a growth in the middle class. The export-import model excluded all rural areas from participation in the agricultural system and prevented peasant-workers from working alongside in support of broad-based social policies. The urban population was receiving all of the social protections. Governments were covering more land and continually spreading political influence. This was a result of the increasing economic security of the import substitution industrialization (ISI). The ISI allowed for employers to force high payroll taxes on their consumers as well [3]. In modern Latin America, the lower class, rural areas in the labor force are still significant political factors, however. Before the export-import model, the largest portion of the Latin American population came from the rural, lower class as shown in figure 1. Brazil Urban and Rural PopulationThe export-import model created growth in the middle class, evening out the social classes more. The equality within the social class systems of Latin America then looked more identical to the makeup of the social class system of America in the 20th century. The American Class Structure (1998) The unifications of all workers into modern political systems was the most significant influencer on social conflicts, such entitlement rights. These social conflicts have occurred in both the 19th and 20th centuries in countries such as Latin America and Europe. "In contrast to modern individual rights, claims of entitlement to social rights occur throughout the history of humankind" [4]. When the welfare state put the import-export model into play, it reorganized the social stratification of Latin America's social class system. In most advanced industrialized countries, the state would distribute at least half of its income through public services. The most efficient way to distribute income, however, would be to take the individual's income into consideration on top of the costs of public services. Social rights and public services have always been an essential factor to the labor market and more largely to the economy. These factors affect the organization of production and the agricultural system. The real question is if it is even possibly to develop social policies based off of fairness and equality with the growing demands and input of the upper class workers. The welfare state and the implication of the import-export model, excluding the rural lower class workers from the participation in agriculture and production during the ISI period, clearly shows that the state could not stand by these "ethical" social rights [5]. After the 1980's, a decade also known as the "lost decade," countries across the world were able to develop economic stabilization programs to help them rebuild. Latin America was one of these countries. Poverty, too drastically decreased in almost every country, especially in Latin America, in the last two decades. Latin American governments could finally develop efficient economic policies. "In previous crises, many countries in Latin America had weak fiscal positions, high inflation, or scarce access to international financial markets, constraining their ability to use fiscal and monetary policy to boost growth in the face of negative output shocks" [6]. Latin America lacked in more than one area compared to other countries during this time, and is still currently trying to catch up to other countries in modern-day. Figure 2Figure 2 shows a line graph of the factor productivity growth in East Asia, United States, and Latin America from the 1990s, "the lost decade," to the 2010s. In this figure, China has more than double the productivity growth than Brazil. Over the course of twenty years, Latin America has barely seen any improvement, compared to the United 2 / 5

3 States and Brazil, although United States has not seen a incredibly significant amount of growth [7]. Along with factor productivity growth, investments rates and savings rates have been significantly lower compared to the rates of Asia. Savings rates in Latin America average to about twenty-one percent of GDP while savings rates in Asia have an average of roughly thirty-nine percent of GDP. Along with this, Latin America is still proven to be one of the most unequal countries there is. As a result of this, the poverty rates are through the roof compared to other regions [8]. "For growth to be both faster and more equitable, Latin America needs to focus sharply on accelerating productivity growth; on raising its savings rate to sustain a larger investment effort (particularly in infrastructure); on increasing the human capital of its workforce; and on new policies to reduce inequality" [9]. Latin America had significant issues with social policy, inequality, and democracy during and before the 1980s ("the lost decade"). However, since then, Latin America has made several achievements, such as forming an economic program to help facilitate stability. In order for these accomplishments (that have been made over approximately the last two decades) to be maintained, "special attention" must be directed towards social policy, and more specifically social insurance and redistribution. [10] Although, Latin America was less advanced than most countries decades ago, it is on its way up now. Latin America is now creating tools for themselves to improve their economy, technological infrastructure, social structure, and other such areas. The lack of policy regimes and massive amount of inequality contributed profoundly to the late and dependent development of Latin America in the 1980s and previous decades. Footnotes: [1] Huber, E., & Stephens, J., Democracy and the left: Social policy and inequality in Latin America. (Chicago and London: The University of Chicago Press, 2012), pg. 11. [2] Huber, E., & Stephens, J., Democracy and the left: Social policy and inequality in Latin America. (Chicago and London: The University of Chicago Press, 2012), pgs. 16,22. [3] Huber, E., & Stephens, J., Democracy and the left: Social policy and inequality in Latin America. (Chicago and London: The University of Chicago Press, 2012), pgs [4] Sorj, B. Latin America's Elusive democracies [online]. Rio de Janeiro: Centro Edelstein de [5] Sorj, B. Latin America's Elusive democracies [online]. Rio de Janeiro: Centro Edelstein de [6] Levy, S., & Schady, N., Latin America's Social Policy Challenge: Education, Social Insurance, 3 / 5

4 [7] McDonough, Michael, (2015). Depressed Brazil needs a positive productivity shock. Bloomberg L.P. [8] Levy, S., & Schady, N., Latin America's Social Policy Challenge: Education, Social Insurance, [9] Levy, S., & Schady, N., Latin America's Social Policy Challenge: Education, Social Insurance,, pg. 196 [10] Levy, S., & Schady, N., Latin America's Social Policy Challenge: Education, Social Insurance,, pg. 196 Bibliography: secondary sources: Huber, E., & Stephens, J., Democracy and the left: Social policy and inequality in Latin America. (Chicago and London: The University of Chicago Press, 2012). Levy, S., & Schady, N., Latin America's Social Policy Challenge: Education, Social Insurance, Sherraden, M. S., Social policy in Latin America: Questions of growth, equality, and political freedom, Latin American Research Review(1995): 30(1), 176. SORJ, B. Latin America's Elusive democracies [online]. Rio de Janeiro: Centro Edelstein de primary sources: "Bank Of London & South America." Times [London, England] 29 Nov. 1948: 8. The Times Digital Archive. Web. 1 Oct "Finances Of Chile." Times [London, England] 21 May 1936: 18. The Times Digital Archive. Web. 1 Oct Illustrations: 4 / 5

5 Powered by TCPDF ( Gilbert, Dennis (1998). The American Class Structure. New York: Wadsworth Publishing Fig. 1: Valores, Caiman, Important Considerations When Investing In Latin America And Other Emerging Markets. Fig. 2: McDonough, Michael, (2015). Depressed Brazil needs a positive productivity shock. Bloomberg L.P. 5 / 5