The significant gains made in Latin America in reducing poverty, especially in countries led by left-wing governments that reject the neoliberal economic prescriptions that Washington continues to promote, proves that not only are there alternatives to free market capitalism, but that these alternatives are more humane and effective in creating egalitarian societies.
In the 1980s former British prime minister Margaret Thatcher famously coined the phrase “There Is No Alternative,” also referred to as TINA. Thatcher was talking about how free markets, free trade, and capitalist globalization were essential if countries wanted to achieve economic development and lift themselves out of poverty.
However, as the world celebrates International Day for the Eradication of Poverty October 17, Latin America proves otherwise.
The significant gains made in Latin America in reducing poverty, especially in countries led by left-wing governments that reject the neoliberal economic prescriptions that Thatcher praised and Washington continues to promote, proves that not only are there alternatives to free market capitalism, but that these alternatives are more humane and effective in creating egalitarian societies.
“After a two decade period of extremely low growth, characterized by a deepening of neoliberalism, the region has pursued more independent economic policies, with tremendous results,” said Jake Johnston, a research associate at the Center for Economic and Policy Research (CEPR). “The resulting higher growth rates and increasing emphasis on addressing the needs of the most vulnerable has lifted over 60 million out of poverty in the last decade.”
According to a United Nations Development Program (UNDP) report released in August, Latin America cut poverty almost in half from 2000-2012, reducing poverty from 41.7 percent to 25.3 percent of the population.
One country singled out by the UNDP as a success story was Bolivia, which reduced poverty by 32 percent during this period. The South American nation just reelected President Evo Morales on October 12. His socialist government serves as an example of how nationalizing strategic industries, increasing social spending, increasing the minimum wage, and investing in infrastructure are more effective in reducing poverty than neoliberal alternatives.
While the minimum wage increased 87.7 percent during the last 10 years, Bolivia has reduced extreme poverty by 43 percent, according to a research compiled by CEPR.
CEPR also published a report in October which tracked the success of the successive Workers Party governments in Brazil, which began in 2003 with the election of Lula da Silva and continues today with President Dilma Rouseff who is looking to be reelected to a second term on October 26 in a tight contest with her neoliberal challenger, Aecio Neves.
According to CEPR, Brazil, led by the Workers Party, reduced poverty by over 55 percent and extreme poverty by 65 percent, lifting 31.5 million Brazilians out of poverty and 16 million out of extreme poverty.
Bolivia and Brazil are part of the region’s “pink tide” that began with the election of Venezuela’s former president Hugo Chavez in 1998 and saw left-wing and center-left governments elected in a number of countries that include Ecuador, Uruguay, and Argentina.
“What these countries show is that a stronger presence of the State is possible provided certain conditions, and that putting the poorest at the front of the priorities in the agenda is mandatory,” said Alfredo Gonzalez, Poverty and Human Development Specialist at UNDP’s Latin American bureau in New York. “What they and many other countries in the region and all over the world are proving is that free market/free trade policies are not sufficient to reduce poverty.”
However, even a few of the more conservative governments have performed well, such as Peru, which according to the UNDP reduced poverty by 26.2 percent. CEPR’s Johnston said that this actually illustrates how the region’s leftist shift has even impacted even more conservative governments.
“Many governments throughout the region have increased social spending significantly, but one of the most lasting impacts of the region’s ‘turn to the left’ has been that all governments, right or left, have been pushed by the electorate to pursue more pro-poor policies,” said Johnston. “The region’s citizens simply expect more.”
The middle class in the region also grew by 82 million people; although the UNDP warned that there is a significant portion of the population that remains vulnerable to falling back into poverty — something the region still needs to overcome.
Another reason that Latin America was able to make these economic gains, especially in countries like Bolivia, Venezuela and Ecuador, is that these governments deliberately closed what Uruguayan author Eduardo Galeano referred to as “The Open Veins of Latin America” — meaning that they refused to continue to allow their country’s wealth from natural resources to flow out of their respective countries to the north via transnational corporations.
Johnston added that “the biggest change has been that throughout the region countries are demanding that more of the money earned from extractive industries stays within their countries instead of being shipped overseas as had been done historically. By capturing a larger share of the profits, governments have been able to pursue significant public investments and to increase social spending.”
While Latin America has made significant gains, there are still challenges moving forward to maintain and build on those gains.
“The first and most important challenge is to reach the poorest of the poor, those that the conditional cash transfer programs have not been able to reach and traditionally suffer from many forms of exclusion, who typically also are women, young people and/or part of an indigenous people,” said the UNDP’s Gonzalez. “The second challenge is to protect what has been gained until today by building or strengthening universal social protection systems covering not only the poorest, but also the vulnerable … those who are not poor and still not middle class either, whose vulnerability put them at risk of becoming poor if faced with economic, environmental or some other forms of shocks.”