Transcript Challenges to the Global Economy in Uncertain Times. The Lessons

Challenges to the Global Economy in
Uncertain Times:
The Lessons from Latin America
Alicia Puyana
FLACSO
Presented at the IDEAs Tenth Anniversary Conference
The global economy in a time of uncertainty: Capitalist
trajectories and progressive alternatives
Two readings of Latin American
economic past and present
1. Latin American can teach Europe and the
United States how to solve the debt crisis and
how to introduce austerity programmes.
The region is resilient to external shocks, thanks
to austerity programmes and fiscal discipline.
The future is bright (Lagarde)
2. Latin America presents progressive
challenges to neoliberal doctrines
1. On how to introduce austerity programmes
Latin American countries were the pioneers in
liberalizing the economy under military dictatorships
and PRI perfect dictatorship (Vargas Llosa)
The more severe the dictatorship the more coherent
the reforms. Chile, Pinochet, Argentina, Videla,
Bolivia, García Mesa; Mexico: Patchy reformer
Others were late, tepid reformers (Colombia, C.
Rica). Others failed: Venezuela under the social
democrat Carlos Andrés Perez, the “Caracazo”….
1. On the nature of reforms
Austerity is a political shift transforming the relations
between the:
Society-state; capital-labour; social groups.
Redistributes income and wealth and discriminates
labour: political economy of liberalization; revaluation
privatization.
Such a drastic changes need special political climate:
Deep economic and political crisis: War of attrition
(Alesina)
Is the European crisis deep enough to allow reforms
without political repression?
The effects neoliberal model
GDP growth insufficient to generate employment to absorb the
growth of labour force.
Unfavourable Structural change: tradable sectors fall
Decreasing share of wages in national income;
Growth of income elasticity of imports; decreasing income
elasticity of employment: jobless growth.
Expansion of informal employment
Drastic fall in labour intensity of GDP:
Weakening of the relation between the growth of exports and
GDP; growth of GDP and poverty reduction;
Increasing Social debt up to 1995.
Latin American Countries
Annual Average Rates of Growth in percents
1900-2010
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Uruguay
Venezuela
8L. América
EUA
1.4
2.2
2.0
1.9
1.7
2.0
1.7
2.7
1.7
2.0
1900-45
1945-82
1982-2010
2008-2010
1.18
1.71
1.55
1.55
1.11
2.48
1.58
4.61
1.72
2.63
1.32
3.35
1.36
2.18
2.98
2.15
1.36
2.21
1.92
1.17
1.47
1.27
3.55
1.89
0.58
0.97
2.24
0.20
1.52
1.88
1.05
2.62
0.75
1.23
-2.06
3.19
4.30
-3.27
0.98
-0.85
The conferece Board, 2011. Projections to 2014 show feeble and
Unstable growth. Mexico suffered the most from the crisis and will
Have mediocre growth
Chile: Agriculture: Productivity per worker and
participation in total employment and total GDP.
1960-2008
7000
28
6000
23
5000
18
4000
13
3000
2000
8
1000
3
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Productivity (left)
GDP
Employ
Productivity increases due more to the reduction of employment than to increases of
value added per worker. Chile has comparative advange in agriculture, forestry and
fishing
The trajectory of the concentration of Income
GINI
1945
1960
1970
1980
1990
2000
2009
Argentina
35
37
39
41
44
50
58
Brazil
54
53
57
56
60
59
58
Chile
40
45
50
52
54
57
52
Colombia
51
59
52
52
54
57
58
Mexico
52
52
49
52
52
54
52
Source: Own Elaboration based on ECLAC, SEDLAC, National Statistics.
Concentration of income as in Latin America is destructive: eliminates social mobility,
inhibits emulation, constricts growth and poverty reduction and restricts democratic
action. Bridsdall, N. (2005) "… the most pernicious price of inequality is the
intensification income concentration and the calcification of the political system
Ramcharan, R. (2010)
Poverty incidence in Mexico: a stubborn
problem
Thousands persons
Año
1992
2000
2004
2005
2006
2008
2010
Δ 06 - 2010
Food*
18,579
23,722
17,915
18,954
14,743
20,215
21,204
6,461
In % of total population
Capabilities** Capital***
25,772
31,216
25,435
25,670
22,073
27,768
30,030
7,957
46,139
52,701
48,625
48,896
45,502
52,294
57,708
12,206
Food*
21.4
24.1
18.2
17.4
13.8
18.4
18.8
5.0
Capabilities** Capital***
29.7
31.8
24.7
24.7
20.7
25.1
26.7
6.0
53.1
53.6
47.0
47.2
42.7
47.7
51.3
8.6
The analysis of the trajectory of income concentration and poverty
requries a long term perspective. Even before 2009, the reduction of
poverty in absolute numbers and in percentages was reversed. Between
2006 and 2010 a total of 6.4 million inhabitants fell into food poverty.
Reading No. 2 Alternatives
Democratic governments had to introduce
reforms to alleviate some effects of the model:
enlarged coverage of social security, direct
employment programmes and programmes to
improve employability,
conditioned focalized cash transferences,
universal rights, popular health insurance.
A new social pact on the way?
To introduce alternative models it is required a
social pact, new forms of social relations, new
rules for capital accumulation.
Distribution can be achieved by:
new fiscal policy: taxation and expenditure.
Labour regulations equilibrating the power of
caital (concentrated) and labour (disperse).
Is there a new social pact?
What does fiscal policy tell?
Little impact of transfers (assistance plus insurance) on
income inequality. Negative in Peru; Brasil 0.5%;
Argentina 3% in average in Latin America 1%.
The impact of Taxation on GINI income concentration is
low: 0.012 in Chile which has the most progressive tax
structure
Improvements in Brazil does not alter the GINI
significantly
In Ecuador, Bolivia, Mexico and Colombia, transfers are
finance mainly out of oil and gas rents (national
property) and does not imply taxation.
New fiscal pact
• Increase fiscal revenue and reduce
dependence on natural resources
• Ensure progressiveness in taxation and
expenditure
• Strengthen capacity to instrument
counter cyclical policy.
Deficit in taxation as % of GDP
Country
Total
Argentina
-12.3
Bolivia
-3.6
Brasil
-0.7
Chile
-3.6
Colombia
-8.6
México
-5.2
Paraguay
-8.0
Venezuela, R.B. de -6.4
Median
-4.0
Corporate
Personal
Goods
services
Internati
trade
Property
-1.2
-1.5
-1.3
-2.4
1.6
-2.4
-0.6
6.0
-1.0
-4.4
-1.5
-3.7
-4.0
-2.7
-3.6
-2.6
-3.5
-2.9
-3.4
1.5
-0.8
2.9
-1.7
1.0
-1.5
-3.4
-0.6
-1.1
-2.7
-1.9
-0.4
-1.7
-1.9
-1.0
-0.9
-1.2
-0.3
1.1
-0.5
-0.5
-0.3
-0.5
-0.1
-0.1
-0.3
Low taxation constraints the reduction of poverty and income
concentration. So far taxation has not been improved. Honduras
Nicaragua and Uruguay collect taxes above the expected level: Brazil is
below that level by 0.7%
Trajectory of real wages
Argentina
250
200
150
100
50
Real Min wage
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
0
Real M. Salary
Brazil
Real Min wage
Real M. Salary
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
190
170
150
130
110
90
70
50
Index of real wages. 2000=100
Chile
130
110
90
70
50
20
06
20
08
20
08
20
04
20
02
20
06
Real Min wage
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
30
Real M. Salary
Mexico
350
300
250
200
150
100
Real Min wage
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
88
19
86
19
84
19
82
19
80
50
Real M. Salary
CONCLUSIONS
Latin America in the 70s and early 80s
shows that austerity needs non
democratic regimes.
Democracies had to instrument reforms
to reduced negative social effects of
the neo liberal model.
Improvements have taken place in the
region reducing poverty and less in
income concentration and to
recuperate the loses since 1982.
CONCLUSIONS
Social debt is large, income
concentration too high, taxation too
low and public expenditure unable to
significantely reduce poverty and
inequality
Political developments will determine how
much social solidarity the region is
capable to accept
¡GRACIAS POR SU
PACIENCIA!