Latin America: Societies on the Move

The Economist’s coverage of the Latin American middle class emphasizes that the continued expansion requires better schools.

““Middle class” is a slippery concept. What is clear is that Latin American societies are changing rapidly in response to urbanisation, democracy, economic reform and globalisation. Poverty has declined almost everywhere. Just as important, income distribution has been getting less unequal in many countries. In Brazil and Mexico the Gini coefficient, a measure of inequality, has been falling since the mid-1990s. According to a new study by Luis López-Calva and Nora Lustig, between 2000 and 2006 the Gini coefficient came down in 12 of 17 countries for which there are comparable data, including all the larger ones. Even so, income distribution in Latin America remains the most unequal in any continent (see charts 3 and 4). Such extreme inequality causes many problems. It is almost certainly a factor in Latin America’s alarming crime rates, for example (see article). The decline in poverty is a result of faster economic growth and the conquest of inflation (which eroded the incomes of the poor), but also of better social policies. In particular, conditional cash- transfer (CCT) programmes—an invention of Latin America’s democracies—have proved effective in helping the poor. Under these schemes mothers receive a small monthly stipend (ranging from about $5 to $33 per child) as long as they keep their children at school and take them for health checks. Some 110m people in the region now benefit from such transfer schemes, according to the World Bank. Most of the schemes are well- targeted and relatively cheap, costing around 0.5% of GDP. Mexico’s Oportunidades programme is estimated to have reduced poverty by eight percentage points. Brazil’s Bolsa Família has made millions of extremely poor people less destitute. There is evidence, too, that such programmes have raised school enrolment and attendance and reduced drop-out rates, as well as increasing take-up of pre- and post-natal care and vaccinations. The CCTs and longer attendance at school have helped to reduce income inequality. A better-educated workforce has been able to command higher pay. Income distribution has become more equal in countries with governments of both left and right, though Mr López-Calva and Ms Lustig found that social democratic governments (such as Lula’s in Brazil and the Concertación coalition that governed Chile between 1990 and March 2010) are more redistributive than those of the centre-right or populists such as Mr Chávez.”

Published by Janar Wasito

Janar Wasito is the manager of Magis Capital in San Diego, CA. He is a graduate of Harvard and Stanford Law School, and a former Marine Officer.

3 thoughts on “Latin America: Societies on the Move

  1. The article makes an excellent point: “middle class” is indeed a slippery concept. Taking Brazil as an example, most of the middle class is a bit less “middle” than a North American or European would expect. They typically don’t have all the things a North American would expect them to have (e.g., houses, multiple cars, a *lot* of electronics, vacations in Cancun, college education, etc.). And yet, by my observation, much of the middle class lives a somewhat more genteel life than much of the middle class in the US. And while it is quite true there is extreme poverty here (a Brazilian friend of mine has said “Brazil has everything from the top of the First World to the bottom of the *Fourth* World … “), there is quite a bit of genteel poverty; poverty by American standards, but nonetheless a reasonably high quality of life (e.g., adequate healthy food and water, housing … though basic education and health care seem a bit lacking).

    My belief is that countries like Brazil must be very careful that they don’t trade their genteel poverty for “economic growth”, as implicitly defined by North Americans. The trick will be to use their resources to create wealth and alleviate abject poverty; all without trading their “genteel poverty” for the “squalid wealth” of North America. Unfortunately, the US seems very good at exporting consumer credit-fueled economic expansion and monetary inflation to other parts of the world and this has the possibility of making abject poverty in Latin America much more abject, and genteel poverty less than genteel.


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