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Central American University - UCA  
  Number 149 | Diciembre 1993



Why are More People Poor?

After a decade of structural adjustments and application of IMF and World Bank recipes, there is an ever increasing number of poor people in the world, and their poverty is ever more humiliating. The people who propose the adjustments and recipes got together in Oaxaca with other sectors to reflect on why this is happening.

Oscar Neira

The Conference on Social Development and Poverty, in preparation for the World Summit for Social Development to be held in Denmark in 1995, was held in September in Oaxaca, Mexico. It was sponsored by the World Bank, the United Nations Development Program (UNDP) and the Mexican government. Nearly 300 people participated, including government technicians and workers, non government representatives and academics from over 150 countries.

Parallel meetings took place in the same city. One of them was made up of diverse Mexican social organizations, under the theme The Poor Building their Social Policy. Another, on Alternatives to Neoliberal Adjustment, was organized by Development Gap from the United States and the People's Team from Mexico, with representatives from diverse Latin American NGOs. The Mexican government also celebrated the Fourth National Solidarity Week, headed by President Salinas de Gortari, which evaluated the Mexican program to combat poverty.

The main event and the parallel meetings were broadly covered by national and foreign press, and motivated a wave of reports, studies, panels and interviews. The information flood has now dissipated, the waters have returned to their rivers and the lacerating theme of poverty and the urgent changes needed to overcome it remain relegated to their corner until the next call.

Lack of Development: Who Is Responsible?

The Oaxaca event was relevant because of its magnitude. It became clear that, despite all efforts to combat it, poverty has intensified throughout the world. The programs to fight poverty, often disconnected from the real processes that cause it, forced the Oaxaca debate.

The Conference organized its discussions around various themes:
*Characterization of poverty
*Current situation and tendencies
*Strategies for vulnerable groups and policies of social and community participation
*State reforms for social development and to combat poverty
*Advances in productive projects and job creation
It is not clear what impact a Conference of these proportions will have on the general orientations of international financial organizations and on the governments committed to the so called Washington Consensus. According to the Consensus, the lack of economic growth in Latin America is due to the development model adopted in the 1940s, which stressed domestic development and the role of the state as a direct producer.
"The problems and policies of economic order that preceded the neoliberal adjustment process made that process inevitable," explained Shahid Husain, vice president of the World Bank's Regional Office for Latin America and the Caribbean.

There is some truth to this: the earlier development model, now discarded, did not overcome the key problems of poverty, the inequalities, or the social exclusion. But it is also true that now, after more than a decade of neoliberal adjustment, of accelerated changes, of Monetary Fund and World Bank recipes, of the announced arrival of a new millennium and the end of history, those problems have still not been resolved.
The repetitive technical discourse of the neoliberal bureaucracies has produced more heat than light.

Poorer and poorer

Disaster? At the very least one must admit that it is not working well. Poverty not only persists, it is growing, and precisely as a product of structural reform. The medicine has been worse than the illness. In the best of cases, structural reform has meant that the countries that adopt it get trade surpluses that allow them to pay their foreign debt. The reforms fail not only in the social and productive realms, but also in their own goals: achieving fiscal adjustment to lay the foundation for a new pattern for financing spending, and a reform of the state aimed at greater democracy and a new state role as coordinator of economic activity.

Shahid Husain accepts this, but only partially. In his presentation at the Oaxaca Conference he pointed out that one third of Latin America lives in poverty. That 70 million Latin Americans survive with incomes of less than a dollar a day. That in Bolivia, Guyana, Haiti, northeast Brazil, central Guatemala and the Peruvian highlands, poverty resembles that of Africa's South Sahara.

He admitted that the persistence of poverty in Latin America is linked to a disproportionate and unequal income distribution: the poorest 20% of the population receives less that 4% of the region's income while the richest 10% appropriates more than 30%. And he recognized that in the 1980s, when the neoliberal adjustment was employed, poverty increased to embrace 40 million more people. But for Husain this is due to the "accumulated effects of previous misguided policies." Ten years later and despite the new and "correct" World Bank policies?
This diagnosis allowed Husain to assert that the same "correct" path of applying economic stabilization policies should still be followed. "The basis for long term sustainable development have been laid," he stated optimistically, "setting the conditions for advances in the battle against poverty."

What Governments Should Do

The World Bank official detailed his view of the basic functions of Latin America governments. "In the first place, they should facilitate respect for law and order, respect for property rights and fulfillment of contracts. A free market system cannot function without such a base. The imposition of law and order can do no less than favor the poor, both by protecting their rights and by allowing economic growth.

"It is also crucial that governments apply liberalizing economic policies and eliminate distortions in the economy. In the third place, governments should offer, in the most efficient manner possible, the necessary physical and social infrastructure for private sector growth. Adequate measures to recover costs also have to be promoted."
In terms of education and democracy, he stated that it is necessary to invest in "the perfecting of human resources." "Democracy itself is not a panacea," he noted," and at times it can complicate or slow down decision processes. However, if the goal is real growth, sustainable reduction of poverty and community participation, government democratic systems facilitate the process."

Reality v. Recipes

Reality is stubborn and contradicts these recipes. Structural adjustment has not had the expected results and it is absurd to keep on trying until there is some success in the expected direction. In addition, the successes in Chile or in Mexico depart substantially from these recipes. In fact, the implementation of the neoliberal adjustments in the different countries all diverge from stabilization and growth doctrines.

In their inaugural addresses, the UNDP regional director and Mexico's President Carlos Salinas de Gortari sought to distance themselves from the more orthodox World Bank positions. The World Bank officials tried to turn the criticisms around by talking about the "human face" of the adjustment and human development as the central element of necessary reforms.

But just clarifying the distance does not get to the core of the problem. The problem is not only the recessive and socially exclusive bias of the neoliberal model, what the World Bank calls the "inevitable costs of reform," which they try to "compensate for" with social policies. It is that the adjustment is even inefficient in dealing with the problems it proposes to resolve.

As was analyzed in the parallel seminar organized by Development Gap, the massive and indiscriminate trade and financial opening has generated or reinforced critical economic inequalities, because the countries carrying out the reforms did not first achieve solid stabilization and growth, and their economies were not correctly inserted in the world market. Price stabilization, combined with the structural adjustment at any cost in Bolivia, Nicaragua, Peru and the three big ones Brazil, Mexico and Argentina has led to overvalued exchange rates, de industrialization and excess demand for consumer goods imports, which leads to disequilibrium in the balance of payments and provokes a permanent fiscal adjustment and credit restriction.

The Ivory Coast: A Dramatic Example

René Segbenou, general director of the Institute for Social and Economic Development of the Ivory Coast, related how successive development models pacted between his country's government leadership and the multilateral lending agencies without the people's participation, have brought experiment after experiment without any improvement in the situation of the poor.

"In the 1960s," he said, "both the government elite of the Ivory Coast and the World Bank technicians thought that the country could be developed by substituting its traditional crops: coffee, cotton, rubber and oil. But after ten years of efforts with other products, development had not arrived. `This is not a way to reduce poverty,' they said.

"If we had kept to our own techniques of cultivating traditional crops, at least we would have saved our natural resources," lamented Segbenou. "The international organizations then told us, `We will solve your problems.' And they gave us loans. They gave us lots of money because loans were cheap in the 1970s. But that decade passed and we realized that the money had gone into other pockets and that the loans had not brought us development either. At the beginning of the 1980s, and because of the sins of the past, they gave us the penitence of the neoliberal structural adjustment programs.
And our governments had to ask for new loans, now more expensive and with many conditions. At the end of the 1980s it was clear that this had not resolved the problem of development, and now we had more poverty and more debts to pay. In the 1990s, again without taking into account the people's considerations, they convinced our governments that we can resolve our social and economic problems with democracy. The slogan was, `Without political parties there's no democracy.' So political parties were created. In my country, the Ivory Coast, there are 55 or 56 political parties. We held elections, but poverty continues."
Ela Pamfilova, Minister of Social Protection in Russia, pointed out how radical reforms applied in her country since January 1992 have brought a general drop in Russia's living standard, with a large gap in income distribution.
Forty five percent of families with children under 16 are below the poverty line, as are 70% of families with three or more children. Maternal infant mortality has also increased, children's nutritional conditions have worsened, crime and drug consumption has increased, as has the number of homeless children. "An economic reform carried out at the cost of social development is absurd," concluded Pamfilova.

Ever More Humiliating Poverty

The central challenge looked at in the Conference was whether Latin America will be able to promote its own social development policy, based on population needs, with population participation and therefore choose an appropriate development style. Or will the options continue to be imposed from outside, with the pressure of financial organizations?
Gert Rosenthal, Executive Secretary of the UN's Economic Commission on Latin America, emphasized that his organization does not accept the World Bank idea that first comes growth and then comes the flood of benefits for all sectors of the population.
The last 40 years of economic evolution in the region, he said, demonstrate the unreality of this proposal. He pushed for a scheme of complementary policies: those oriented to greater efficiency and greater growth and those with a goal of greater wellbeing and better income distribution. "Public policies that permit growth and equity," explained Rosenthal. "If this is achieved, economic integration can be an outgrowth of social policy."
For his part, Julio Bolvitnik, researcher at El Colegio de Mexico, pointed out that the indicators developed by financial organizations are inadequate. The poverty line that the World Bank draws for Latin America is of "infra subsistence." They do not do this innocently; they want to stress the problem, and condition the solutions by marginalizing a good part of the population, which, though poor, has productive potential and with support could be immediately profitable.

Do More and Differently

Armando Labra, of the Solidarity Consultative Council in Mexico, noted that there are more poor people today than ever before. "Instead of reducing their number by improving their conditions, development programs and residual actions against poverty have modernized those conditions," he said, "in many cases making them more dramatic and humiliating. In the last ten years Mexico has registered a generalized deterioration in living standards for the majority of the population, despite a commitment to intensify the solidarity tasks dedicated to combating impoverishment. It is more and more evident that the problem concerns the nature of reforms and state policies. Everything indicates that more needs to be done and it needs to be done differently. It is not enough to channel more resources to the needy, however necessary this is. It is not even enough to alter how the resources are channeled. It is also not recommendable to increase the battle against poverty within the limited sphere of residual government programs.

"Given the level of poverty, the reforms of the Mexican state that are being carried out, while notorious and important, are not enough," noted Labra. "With an unstable and increasingly unjust world situation, it could even be counterproductive, unless the state extends its social commitments." He put great value on "grassroots instincts to make the transformations that are needed," as a way to propose new state reforms and policies as viable alternatives and effective for developing a social economy and the battle against poverty.

Produce to Distribute

In economic terms, Labra insisted that it is crucial to maintain a balance in orienting the destination of production without falling in the trap of foreign markets or in an undesirable and sterile self sufficiency. "Production should be to distribute income and wealth, generate jobs on a large scale, and also try to produce for export." The proposal is to generate hard currency and be effectively inserted in the foreign market, but based on solid domestic equilibrium that to date is unexplored.

Victor Tokman, Director of the Regional Employment Program for Latin America, proposed that "there is no effective substitute for employment generation and stability in promoting growth," making it clear that for these measures to be effective they have to work together. This analyst noted that the poor in the region are mainly "employed" in the rural and urban informal sectors, forced to generate some kind of income, no matter how squalid, to survive. The informal sector has no social protection safety net or unemployment insurance to facilitate the search for work. It is made up of especially vulnerable groups, such as women. Tokman noted that between 1980 and 1992, 80 of every 100 new jobs created in Latin America were in the informal sector. The rapid growth of informal work demands an urgent change in focus of the strategies to combat poverty. The change must go beyond specific isolated programs and redefine overall policies to strengthen the productive and technical capacity of the informal sector.

Environmental Deterioration and Poverty

Enrique Leff, consultant for the United Nations Program for the Environment, stated as a personal view that poverty not only results from applying an economic model that generates general unemployment and social marginalization. It also emerges from the environmental imbalance provoked by modern technologies, "isolated from rural ecological and cultural conditions."
In the past, the economic and environmental conditions of poverty were not looked at: the destruction of natural resources, the uprooting of the population from its surroundings, the dissolving of collective identities, social solidarity and community practices. Developmentalism not only failed economically, it provoked the massive destruction of the natural resource base. Currently, neoliberal policies have been implemented pragmatically, without questioning the causes of poverty that emerge from the dominant development models, and "without trying to find a productive rationale in sustainable ecological bases and in principles of community equity and self management."
Although it is often said that the poor pollute the most, Enrique Provencio, an academic from the Metropolitan Autonomous University of Mexico, noted that the link between poverty and the environment does not have only one interpretation. This is because there is not only one type of poverty, there is great environmental diversity and many varieties of production systems. "The primary explanations of environmental degradation in rural areas are related to other relevant processes: the expansion of cattle and the large scale exploitation of agroindustrial, mining and energy production." Provencio noted that the environment is the resource and productive base for primary producers, but until now relief from rural poverty has been sought only by trying to promote other components, those of economic capital. Any productive effort to overcome poverty should now aim to raise productivity with new criteria based on sustainable production.

Women: The Poorest

The Conference confirmed once more that "women are the poorest of the poor," and that social exclusion and margination have increased the "feminization of poverty." Far from incorporating women in development, the neoliberal policies have left them out and lengthened their work days. Ela Pamfilova, of the Russia Federation, said that the feminization of poverty in her country since the January 1992 reforms has been very pronounced. Almost 70% of the unemployed are women, even though two thirds of Russian women have some higher education or professional training. Small businesses have proliferated and there is an increasing informalization of labor, skilled or not.

Margaret Lycetter, of the International Center for Research on Women in the United States, recounted the situation of women on the different continents. They have little access to credit and little contact with agencies that could provide it. When they do get credit, their lack of training impedes their taking full advantage of their opportunities.

Despite the rhetoric, there is still no gender focus in policy reforms or in structural adjustment. It was concluded that legislative reforms are needed to offer women access to land, credit and training programs. So are educational changes that revalue women's role in the communities and their own self confidence.

Let the Poor Decide

The closing of the Conference, grandiose like its inauguration, gave the sensation that, despite everything said, the interests of economic policy designers prevailed. They emphasized a better characterization of poverty as a prerequisite to drawing up programs to combat it.
It was agreed to coordinate international organizations so that together they can uniformly characterize and measure poverty, in order to present suggestions to the World Summit on Social Development in Denmark in 1995.

The Mexico Conference could not be expected to emerge with clear strategies to combat poverty. The diversity of viewpoints and heterogeneity of the participants did not allow it. It was impossible; each country's reality cannot be treated with a single recipe, the way the financial organizations do.

But it was possible and desirable to expect a definition of how to pursue a dialogue mechanism among international organizations, governments, and social and academic organizations. In particular, it would have been good had it been decided to take social organizations into account so they could influence government programs to combat poverty. This was a fundamental issues in the meeting, but was diluted in the conclusions.

The participants in the parallel seminars called by Development Gap concluded that democracy and poverty are incompatible and that civil society's organizations should support the poor in drawing up a social policy. Market logic will not prevent the current social disintegration and economic crises. Each country needs integral national development programs. Without them, Latin America will not only lose another decade, it will probably give up its place in the world in the coming millennium.

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