ECLAC, poverty, inequality and the importance of social spending

Ok, so before you ask... no, this isn't the beginning of a regular maladjusted feature on poverty and inequality... or is it?

The Economic Commission for Latin America and Caribbean (ECLAC) has a great brief on poverty and inequality in Latin America over the last 30 years. Long story short, there’s been tremendous progress in fighting poverty since the 1980s. You know, those 1980s, when every country on the block was getting structurally maladjusted, discovering their love for free markets and hatred for import substitution and, oh, failing to achieve even the most minimum levels of per capita income growth.

As can be seen below, during this lost decade—as economists refer to the period—the regional poverty rate rose from 40.5% in 1980 and peaked at 48.3% in 1990. At the same time, indigence rose from 18.6% to 22.5%. But then, beginning in 1990, poverty and indigence rates began to drop.

[Latin America: Poverty and Indigence, 1980-2008 (percentages)]

This huge drop in poverty and indigence rates since 1990 was first and foremost driven by GDP growth. However, as the brief notes, starting in 2002 another significant factor came into play: a decrease in inequality. As can be seen below, between 2002 and 2008 most countries in the region became more equitable.

[Latin America: Gini coefficient, 2002-2008]

See that? The countries below the 45-degree line are those where inequality decreased. And also, note which country is the farthest away from the line… starts with a "V", just sayin'.

In any case, the brief offers a nice little explanation for why inequality has been decreasing since 1990, which takes me to this last graph below:

[Latin America: Total public spending and social spending, 1990-2008]

That red line on the top is total public spending and the bottom blue line is public social spending, which has more or less steadily increased from 12.4% of GDP in 1990 to 17.9% in 2008. However, more to the point, is the line in the middle, which shows the “fiscal priority of social spending.” This is basically the ratio of social spending to total spending. In other words, governments in Latin America have increased the priority of social spending, a lot, and it is showing results in the reduction of both poverty and inequality.

There’s a lesson to be learned somewhere in there.

The Second Most Unequal Country in the Americas?

I've seen this article from Mercopress a few places today, where it says that Latin America is the most unequal region in the world. The article is quoting from a UN-Habitat report, but unfortunately the report seems to have been released down at the World Urban Forum and isn't available online. The report looks at the what percent of all income goes to the top 10%. The article says that Brazil is the worst, with 50.6% going to the top 10%, followed by Mexico and Argentina, although in a later paragraph it appears that the numbers for Colombia and Chile are both higher than in Mexico. First off, I don't even think the report is looking at overall levels of inequality, the paper was presented at the World Urban Forum, and based on this IPS article from a few days ago, what the paper looks at is inequality in urban areas. But hey, for the purpose of this post lets assume these numbers are right. Based on a paper last year by a Emmanuel Saez from Cal Berkely, this would actually make the US the second most unequal country in the study. Using numbers from 2007, Saez finds that the top 10% in the US get 49.7% of the income. Pretty god damned amazing. Now not all measures of inequality are created equal, so this is a dangerous game, but I really wanted an excuse to post this graph, so there you have it.

Clearly, inequality in LatAm is still really bad and no doubt one of the main issues that needs to be confronted, but following the development path of the US and the economic policies that have been pushed on the region for far too long is not gonna get them there.

Also, I'd like to point anybody looking for good numbers on inequality in Latin America to the Socio-Economic Database for Latin America and the Caribbean (SEDLAC), and they just updated their database too!

OAS: Venezuela has made "major achievements" on socioeconomic rights

Last week the the Organization of American States' Inter-American Commission on Human Rights (IACHR) released a scathing report on the supposedly grim state of democracy and human rights in Venezuela. Buried in the 300-plus page report, in between page after page of criticisms towards the government, the IACHR admits that the Chavez' administration has made remarkable progress on the socioeconomic front, promoting literacy, reducing poverty and lowering inequality, among other things. Here's the excerpt:

"On the other hand, in this report the Commission highlights the Venezuelan State’s major achievements in the fields of economic, social, and cultural rights, through legally recognizing the enforceability of the rights to education, to health, to housing, to universal social security, and other rights, as well as by implementing policies and measures aimed at remedying the shortcomings that affect vast sectors of the Venezuelan population. The Commission emphasizes that the State has succeeded in ensuring the majority of its population is literate, reducing poverty and extreme poverty, expanding health coverage among the most vulnerable sectors, reducing unemployment, reducing the infant mortality rate, and increasing the Venezuelan people’s access to basic public services.

The IACHR also congratulates Venezuela on being one of the countries that has made most progress toward attaining the Millennium Development Goals. It has also brought about a major reduction in the disparity between the groups at the extremes of income distribution, to the point that the country now reports the lowest Gini coefficient in Latin America, according to the Economic Commission for Latin America and the Caribbean (ECLAC). In addition, according to the United Nations Development Programme (UNDP), Venezuela moved from having a medium level of human development in 2008 to join the group of countries with a high level of human development in 2009. In the IACHR’s opinion, the priority the State has given to economic, social, and cultural rights is fundamental in ensuring the decent existence of the population and is an important foundation for the maintenance of democratic stability."

Now, everything in this report should by no means be taken seriously, but this admission on the part of an institution that in the past has been largely hostile to the Chavez government underscores how difficult it is to deny the recent social gains in Venezuela. A grain of truth, as they say.