Rich world, poor world
By BARBARA J. FRASER
Special to the National Catholic Reporter
Rodrigo and Danitza just turned 5.
They were born two days and a few miles apart in Lima, Perus capital, but
they may as well have started life on different planets. And it is increasingly
unlikely that their worlds will ever collide.
Rodrigos father, a lawyer, receives a regular salary and
benefits. The childs mother, a computer programmer, has opted to stay
home with him and his younger sister.
Danitzas mother, like her grandmother, was only 17 when her
first child was born. A single mother, Esther spent several months sewing jeans
in a small factory -- essentially a sweatshop -- that paid minimum wage (about
$110 a month) for a nine-hour workday with a half-hour lunch break. By the time
she had subtracted bus fare of about 75 cents a day, the day-care fee for the
kids and rent for the single small room she shares with them, there was almost
nothing left for food and other expenses. And the six-day workweek left her
little time to sew on her own to make up the difference.
Esther quit her factory job when her 3-year-old became ill with a
stomach infection complicated by malnutrition. Now she sews at home, selling
childrens clothing to small shops in a working-class district. With no
health benefits or social security, she is one more drop in Latin
Americas ocean of informal workers.
To hear most Latin American leaders tell it, the 1990s have been a
miracle decade. Inflation is down in countries where it was once rampant,
although Venezuela and Ecuador will register annual inflation of more than 40
percent this year. Democracy is back in vogue everywhere except Cuba, although
Bolivia is governed by an elected ex-dictator, the presidents of Venezuela and
Peru have an autocratic bent, and Argentina and Chile still chafe under amnesty
rules laid down by their existing military juntas.
To a certain extent, the leaders are right. Foreign investment in
Latin America rose during the past decade, largely in response to the
perception that the region had gained stability. Macroeconomic indicators for
most countries improved, at least until last years worldwide financial
crisis, which rocked Latin Americas largest economies and fueled a
region-wide recession. And figures compiled by the Economic Commission for
Latin America and the Caribbean show that the proportion of Latin Americans
living in poverty decreased from 41 percent in 1990 to 36 percent in 1997.
Look below the surface, however, and another truth emerges. While
percentages are lower, the real number of people living in poverty is higher
today than in 1990. And the percentages are only now dropping back to their
level of almost 20 years ago, after a sharp rise during the 1980s, which have
become known as the lost decade.
More important, say many observers, while the percentage of Latin
Americans living in poverty is inching downward, the gap between the rich and
poor is growing. According to the Inter-American Development Bank, the
wealthiest 10 percent of the population receives 40 percent of the
regions income, while the poorest 30 percent shares only 7.5 percent. If
Latin Americas income distribution were similar to the worldwide average,
bank studies show, the regions poverty rate would be half the current
level.
Inequality in income
Its reason for concern, because this inequality in
income is a cause of poverty, said Ismael Muñoz, an economist at
the Bartolomé de las Casas Institute in Lima. To overcome poverty,
its not only necessary to have economic growth, its also necessary
to have redistribution policies, especially in taxation and social spending,
that tend to decrease the inequalities in income and wealth.
Inequality of income distribution increased to varying degrees
between 1990 and 1997 in Argentina, Brazil, Costa Rica, Ecuador, Panama,
Paraguay and Venezuela, but held steady in Chile. The gap narrowed in urban
areas of Bolivia, Honduras, Mexico and Uruguay, and in many countries the
disparity also decreased in rural areas.
Uruguay has the most equitable income distribution in Latin
America, according to the Economic Commission for Latin America and the
Caribbean, which attributes this achievement to the dedication of public funds
to retirement and pensions, and an infrastructure of social services accessible
to all citizens. The poorest 40 percent of Uruguayans receive 22 percent of the
income, while the richest 10 percent receive 25.8 percent.
At the opposite end of the scale is Brazil, where the richest 10
percent of the population receives 44.3 percent of the income, while the
poorest 40 percent share only 10.5 percent.
Disparity, authoritarianism
linked
The problem isnt only one of economics or even ethics.
Various studies have shown that in countries with a greater disparity between
the haves and have-nots, there is greater tolerance of authoritarian
governments. Thus the income gap becomes a weight dragging at the heels of a
democracy that is still incipient in most Latin American societies. Surveys
have shown the greatest preference for democracy in Uruguay and Costa Rica,
countries with more equitable income distribution, and the greatest tolerance
for authoritarian rule in Brazil, Guatemala, Paraguay and Ecuador, where wealth
is concentrated in the hands of a small percentage of the population.
The numbers themselves and the plight of the growing number of
people like Esther, have been a wake-up call to officials of international
financial institutions, which recently did a bit of public soul-searching at
conferences around Latin America and admitted that their watertight solution to
world poverty -- open markets and austere economic policies -- had finally
sunk.
Flush with petrodollars from the oil boom, during the late 1970s
and 80s lenders offered easy credit to less-than-scrupulous borrowers.
Some of the money went into the pockets of those in power and some was invested
in poorly planned projects. Most economists say that very little, in the end,
was invested in programs that really benefited most Latin Americans.
As variable interest rates began to rise, governments were forced
to borrow more in order to pay earlier debts, or restructure their economies
with assistance from the World Bank and International Monetary Fund, which
insisted that countries open their markets, sell their state-run businesses and
clamp down on spending.
While the measures stopped hyperinflation (Perus inflation,
which topped 7,000 percent in 1990, was in the single digits a year later) and
eliminated bloated state enterprises, they also swelled the unemployment rolls
and opened the floodgates to a deluge of cheap imports with which outdated
national industries could not compete.
The immediate result was the lost decade of the 1980s,
when the proportion of the regions population living in poverty rose from
35 percent to 41 percent, and those in extreme poverty from 15 percent to 18
percent.
Even as these percentages have inched downward in the 1990s,
however, the legacy remains. It is estimated that nearly half of all working
Latin Americans are in the informal sector of the economy, eking out a living
as street vendors or in other off-the-payroll jobs, with no benefits, social
security or safety net. Ironically, the regions informal economy grew by
4.1 percent last year, while job creation in the formal economy was
stagnant.
The growing external debt has contributed greatly to the
inequitable distribution of wealth, Muñoz, the Lima economist, said.
Countries have had to raise taxes and reduce spending, and the areas that
have suffered most are in social spending, mainly health and
education.
As governments cut back on spending on social programs in order to
meet their debt payments, low-income Latin Americans suffered most. According
to the Inter-American Development Bank, education is the single best investment
for breaking the cycle of poverty. But during the 1990s, many low-income Latin
Americans have had to drop out of school to work or take their children out of
school.
Debts paid by the people
The debt isnt paid by the government, said Fr.
Gregorio Iriarte, an Oblate priest who for years has been writing and teaching
about the connection between global economic policies and poverty in Bolivia.
Its paid by the people through the progressive and serious
weakening of social services, especially in education, health care, roads and
potable water in rural areas. All of this has been reduced because money has
been taken away from it to service the debt. Money to pay the debt hasnt
come out of the pockets of politicians or government officials -- who, on the
contrary, make more now than they did before -- but from the people, who have
been weakened by it.
The people, however, are beginning to demand that their voice be
heard. The international Jubilee 2000 campaign for debt relief has taken root
in a number of Latin American countries, and one promising element is a call
for public participation in monitoring of borrowed money and funds freed up by
debt-relief programs.
In Argentina, Jubilee has taken the form of Dialogue 2000, an
ecumenical campaign sponsored by the Catholic church and the World Council of
Churches. In other countries, it has been more an initiative of the Catholic
church, which mobilized its resources to collect signatures on petitions that
were presented at the meeting of G-7 countries in June in Cologne, Germany.
Perus Jubilee campaigners collected 1.8 million signatures, more than any
other country, while activists in Tarija, a city of 60,000 people in southern
Bolivia, gathered 48,000 signatures.
Economists, church people and other activists hope that the
awareness raised during the petition drive will now translate into civil
society participation on a broader level. International lenders, including the
World Bank, International Monetary Fund and G-7 countries, are beginning to
speak in terms of poverty reduction, rather than debt
sustainability, as the goal of their debt-relief measures. Debt
activists say this means greater accountability on the part of lenders and the
governments that use the money.
Importance of good government
There will be little benefit from debt cancellation unless
there is also involvement of society, said Ann Pettifor, one of the
cofounders of the Jubilee 2000 campaign. This means strengthening of
democratic institutions, this means greater transparency, this means good
government. And what form that takes will be different in every country. But we
believe that economic health is dependent on democratic health.
In Bolivia, a small commission of church people and economists is
already working with the Ministry of the Economy to monitor the investment of
funds that have been freed up by debt relief. Iriarte hopes the commission will
expand to include representatives of the labor movement, campesino
confederations and the Human Rights Ombudsmans office.
This is being done because of conditions set by the IMF and
World Bank themselves, Iriarte said. Surprisingly, they now are
placing a great deal of emphasis on public participation and saying that there
must be representation of civil society to guarantee that there isnt so
much corruption and that the funds go directly to fight poverty.
To Pettifor, this change in the attitude of international lenders
is a response to public pressure. Many in Latin America, however, fear the
structural changes will come slowly. The large numbers of people laboring in
the informal economy are at the greatest risk.
In Lima, where a taxi sign on the windshield turns any
car into a cab, a 54-year-old business administrator spends 12 hours a day
roaming the streets in the family car, looking for fares. He lost his job when
the company for which he worked went bankrupt, a victim of Perus nagging
recession. I have two kids in college. I have bills to pay. At my age, I
have no hope of finding another job, he said.
If new global lending policies begin to close the breach between
the Latin Americas wealthy and impoverished extremes, it is likely to be
years before the results trickle down to the taxi driver and the millions of
people like him.
An economic system which leaves huge sectors of society on
its margins will always be fragile. A global economic system which leaves huge
sectors of the world on its margins will neither be global nor stable,
said Bishop Diarmuid Martin, head of the Vatican Justice and Peace Commission,
during a recent visit to Peru. Were moving in with this idea of
forging the link between debt relief and the fight against poverty into a new
model of development which challenges the donor countries, the international
organizations and the developing countries themselves. Its the only model
thats going to work in the long run.
National Catholic Reporter, January 14,
2000
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