By Eric Hershberg

“Projeto Contrastes.” Photo Credit: Gabriela Sakamoto / Flickr / Creative Commons

The significant decline in poverty rates and income inequality in Latin America over the past two decades – driven by a combination of sustained economic growth and intelligently designed social policies – may slow or even be reversed as economic conditions deteriorate across much of the region.  Poverty had begun to drop in most countries even before the commodity boom accelerated growth rates in South America beginning around 2003.  The “Washington Consensus” policies of the 1990s impacted wage income and employment negatively, but other factors diminished their impact on poverty.  By overcoming profound macro-economic instability, which among other things produced hyperinflation that devastated disadvantaged sectors of the population, the economic adjustments of that period were not entirely regressive.  Moreover, a concurrent shift toward targeted social programs – which redirected subsidies away from less vulnerable segments of the population in order to protect the poorest of the poor.  By 2002, the number of people living on less than $1.90 a day had declined 4.6 per cent from where it had been at the beginning of the 1990s, according to the World Bank, while the number living on less than $3.10 stayed flat and actually rose (from 135.6 million to 138.1 million).  Performance varied across countries.  By 2012, after a strong decade of growth and a wave of progressive governments, the progress was much more impressive, with poverty dropping to 33.7 million ($1.90/day) and 72.2 million ($3.10/day).

Inequality declined also – a different challenge in the region that Kelly Hoffman and Miguel Centeno aptly labeled the “lopsided continent.”  Measured by GINI coefficients, income inequality in Latin America, which exceeded that of any other world region at the beginning of the century, grew less pronounced under governments of various ideological proclivities.  A substantial body of research shows that this was a product of two factors.

• Investments in primary and secondary education, which accelerated during the neo-liberal years, meant lower wage premiums for those with more than basic skills: near universal attendance in secondary school reduced the significance of gaps between workers who had secondary education and those who had little schooling.
• Innovative social policies – particularly conditional cash transfers – meant that the lower rungs of the income ladder received meaningful transfers from the state, enabling them to narrow the income gaps vis-à-vis less disadvantaged sectors. Less frequently acknowledged was the positive impact of reforms on minimum wage policies and the creation or expansion of non-contributory pensions, both of which were pushed aggressively by several governments associated with the “Left Turns.”  Non-contributory pensions were especially important since the most vulnerable of Latin American aged populations, having spent their working years toiling in the informal sector, had previously lacked any sort of retirement pension.  (Read further analysis of pension reform.)

The region’s slowdown in economic growth and the pressure on public finance brought about by the end of the commodity boom – and the infusion of cash into state coffers that it afforded – raise questions about the sustainability of these advances.  The benefits of investments in education will endure for some time.  Even if education budgets decline, the costs in terms of lower educational achievement would take years to become evident, and it is not at all certain that the funding will decline.  However, the social programs are much more vulnerable, as are the ambitious efforts to increase minimum wages and labor protections more broadly.  Should the economic contraction underway in some countries and on the horizon in others generate an increase in informality, the labor market achievements of recent years could be quickly eroded.   This would impact inequality, and it might soon exacerbate poverty as well.

June 3, 2016

By Rodrigo Arocena*

University students in Monterrey, Mexico. Photo Credit: ·júbilo·haku· / Flickr / Creative Commons

As the latest commodity boom winds down, universities in Latin America can play a leading role in helping the region rebound from the resulting economic slowdown and build itself a more prosperous and equitable future.  The consequences of the boom for economic, political, and social conditions in the region are hotly (and rightly) contested.  But one inescapable conclusion is that inadequate attention was paid to raising societies’ knowledge and qualifications in the production of goods and services.  This matters greatly, because knowledge gaps and skill deficits lie at the heart of what underdevelopment means today.  If the focus in the decades following World War II was on addressing disparities in industrialization, one of the challenges now is over-specialization in productive activities with low added-value of knowledge and qualifications.  When such specialization persists, social and environmental problems are not manageable in the long term.  Differences concerning knowledge and higher education are also one of the main factors behind inequality, in both North and South.  In Latin America, traditionally considered the most unequal region in the world, inequality in recent years has been reduced in a handful of countries and so has poverty in almost all of them.  But such social progress may be jeopardized soon not only because of economic and political changes but also because of quite weak progress made expanding knowledge capabilities and applying them to collective problems.

Universities are at the heart of the solution.  In the knowledge-based and innovation-driven economies that emerged in the North during the last decades of the 20th century, universities obviously made a difference.  They were fundamental actors in the accelerated expansion of advanced education that is closely connected with that type of economy.  They generated new scientific and technological knowledge and often channeled its use into productive activities.  Even then, in the advanced economies of the North private sector firms perform a quite larger proportion of total research and development than universities.  Moreover, Northern universities are mainly oriented by market demand, meaning that actors who are already knowledge-strong obtain most of the benefits of what universities do, fostering what could be called knowledge-based inequality.  This is different from Latin America in several ways:

• Public universities in Latin America are the main generators of new knowledge, which is why they should get priority when thinking about the future of the region’s development.
• They are frequently well plugged into National Innovation Systems, the web of actors and institutions responsible for upgrading productivity through the generation and effective use of new knowledge.
• They represent a continuation, although at a weakened level, of the tradition of the socially committed university forged by the Latin American University Reform Movement.

In any country of the world, knowledge democratization deserves high priority in every progressive agenda – and Latin American universities are, at least potentially, fundamental actors in this task.  Democratizing access and success in higher education, and thus trying to overcome an ancient social divide that stymies development, is key.  The task also means fostering research in all disciplines and applying it to collective problems, as has occurred with research and innovation oriented to social inclusion.  The Latin American ideal highlights merging the modern university’s two long-established missions – teaching and research – with a third one, called “extension,” which entails cooperation with external actors in knowledge generation, cultural creation, and problem-solving, with priority given to the situation of deprived sectors.  As motors for knowledge expansion, and thus for social inclusion, Latin American universities make an invaluable contribution to development and the deepening of democracy.

April 28, 2016

* Rodrigo Arocena served as Rector of the Universidad de la República, Uruguay, from 2006 to 2014.