Essay: Is poverty reduction an appropriate indicator of the success or failure of contemporary development strategies in Latin America?

Key words: poverty, development, inequality.
After the period represented by the Cold War and the polarization of the world between the USA and USSR, some aspects of the overall arrangement has changed, for example, the so called ‘developed’ and ‘underdeveloped’ countries classification. Subsequently, the great depression of 1929 brought a decline on the credibility of the liberal economic model. Therefore, the period between 1930 until 1970 was characterized by state intervention, import-substitution industrialization (ISI) and a progressive process of urbanization on the developing countries. Hence, it is clear the rise of neo-liberal precepts in the late twentieth century as pointed by Veltmeyer (2011):
‘From the late 1970s to the end of the 1990s, almost all countries of the region were force-marched through a transition from an import-substitution industrialization to an export-oriented model of capitalist accumulation. This passage was conceived by the World Bank as entailing three stages: (1) stabilization (‘shock therapy,’ i.e., eliminate government intervention in markets); (2) deep structural reforms (i.e., inject the logic of the market into all institutions through privatization of social security, education, health, etc.); and (3) consolidation of reforms’ (p. 247).
These transformations throughout neoliberalism and global capital restructured capitalism as well as the relations between capital and labor in Latin America. This paper argues, shortly, how the neorealism, capitalism and the aspects of global economy have influenced the entire world, especially the called underdeveloped countries. Furthermore, shows the poverty reduction as an inappropriate indicator of the success or failure of contemporary development strategies in Latin America. Though, the inequality index can indicate the factual consequences of globalization process in the underdeveloped countries as the inaccessibility to education and fair opportunities.
The Issues Around Poverty
The neo-liberal practice in fact was a throwback of the times when Latin American countries, exporters of primary products, imported manufactured goods from industrialized countries (Hoffman; Portes, 2003, p. 41). The industrialization and urbanization process are one of the most important factors in the description of modern society. In the liberal view, society is formed by selfish and competitive individuals. However, liberals argue that there is a balance between the interests of individuals who generally tend to promote harmony (Heywood, 2011, p.139). The rise of production and the trade relations has changed the structure of society, resulting on the emergence of social class as the central organizing principle of society, and as consequence of this class structure, it intensified social problems such as poverty and inequality (Heywood, 2011, p.137). The conservative poverty line determinate by the World Bank suffers from conditions of material and intellectual deprivation and this problem is fixed in the economic and social structures of this ‘new’ globalized society (Veltmeyer, 2010, p.123).
Moreover, from 1990 to 2014 the poverty rate tends to remain stagnant, close to what it was before the rise of neoliberalism and the consequences of globalization, as it is showed in Table 1 from ECLAC (2014). It is possible to note that the high level of poverty during the developed years tends to stagnate in a same level to the numbers that was before of this era. The stagnation can be compared to the premise of the World Bank of increasing the influence of globalization on developing countries yields a larger development and consequently, less poverty. However, in reality this premise has not made poverty rates lower. (ECLAC, 2014, table 1)
Therefore, in order to understand why this situation is accepted by society in general, the principles of the World Bank for development can be directly linked to the framework established by the constructivist Antonio Gramsci. The author argues about the imposition of the ideology, where developing countries have to accept the global hegemony and its consequences as the cheap exploitation of labor. Moreover, as the World Bank stands as strong advocate against poverty, it was the major driver of the causes of this fact (Veltmeyer, 2010, p.124). However, the ECLAC approach shows that the more the world becomes globalized, the higher the levels of inequality. The contemporary definition of social class refers to the categories of population that have a differential access to the life development chances and power-conferring resources. Consequently, this paper will aim to establish the main causes of the inequality between the new class structures. In this sense, social classes are the main source for understanding the conflict and the power in the strategic relations of social groups. Also, the constant struggle regarding the accessibility of their members is visible and concerning (Hoffman; Portes, 2003, p. 43).
Inequality as a better indicator
Taking poverty reduction as an indicator of the success or failure of contemporary development strategies in Latin America (LA) is not an appropriate measure. However, the inequality index is a better approach to show what is necessary to achieve development in the global and capitalist world. Thus, poverty is a consequence of social inequality and its ramifications. The first evidence is the fact that several countries from LA has improved an income distribution between 2008 and 2013, but because of economic aspects as the financial slowdown, the maintenance of this decline is more difficult, even with the fact that this economic problem in a great extent affects not only the poor people, but also the entire society. This reality can be analyzed in table 2 from the Gini indices presented by the ECLAC social panorama.
The U.N.’s 2005 report shows that in the countries that joined the neoliberal doctrine, the income inequality has grown comparably faster than in countries that did not. In these neoliberal countries, analysts have documented the growing gap between the very rich and the very poor, with a rapidly shrinking middle class (Veltmeyer, 2010, p.126).
(ECLAC, 2014, table 2)
One of the most aggravating facts about the class structure is the control of the rich and powerful governments over the labor of others, control over scarce intellectual assets and over the means of production that makes them even more powerful and do not give the chance for the rise of the marginalized poor. The dominant classes are comprised for professionals, senior executive and large and medium employers in all Latin American countries (Hoffman; Portes, 2003, p. 43).
The unequal access to society’s productive assets as education, land, health and social security is common within the developing countries. This situation creates a “vicious circle” because inhibits that the index of inequality changes. The rise of social public spending can be one way to reduce the distance between the dominant class and marginalized population (Veltmeyer, 2010, p. 128). Therefore, is possible to realize in table 3 how the investments in social expends keeps stagnated since 1990 until 2013 with the largest rise was in social security and assistance. This happened because, the rising of inequality between wages and the lack of employment for regulated jobs associated with the neoliberal economic model and other factors, resulted in the increase in crime, insecurity and possible reactions against the system, especially in large cities in Latin America (Hoffman; Portes, 2003, p.66)

(ECLAC, 2013, table 3)
In fact it is very important that public investment rates not only expand, as are also, be well distributed. The marginalized class must have access to productive assets as credit, reform of the legal system, a fair competition, education and even a land reform. This can create more opportunities towards a real change in the context of inequality and consequently poverty generated by the contradictions of the neoliberal globalized capitalist system.
The neoliberalism in the governance and the inequality
As important as the economic and social issues are around the system, the neoliberal reform has a great influence in the governance aspects. As Kay and Gwynne (2000) said
‘During the late 1980s and 1990s, the link between neoliberal policies and democratic governance has become particularly strong in Latin America (Haggard & Kaufman, 1995) ‘ particularly through transitions to democracy in former authoritarian governments.’ (p. 143).
This political transition from authoritarian governments to democratic governments often represented not only a simple change, but also as an act of aiming the maintenance of neoliberal practices in the country. However, this transition does not occur immediately. There was an attempt to implement plans to stabilize democratic regimes, for example, the case of Brazil (the Plano Cruzado) and Argentina (the Plano Austral de Alfonsin). However, this plans failed because it was not able to contain inflation due to weak and inefficient fiscal policies. This attempt and its failure served to show the people that they had to accept the situation as there was no other option. High inflation at that time harmed all classes, especially the poorest class, and further it intensifies social inequality. Then comes the transition to democracy and democracy itself, both of them have their own contradictions. Even if political parties defend their democratic government, by saying that is the best way to provide a great representation, and public participation to the people. Nevertheless, it is important to point out that very often corruption is behind the political process, making democracy a superficial title, and inequality a more visible reality (Gwynne; Kay, 2000, p. 143)
The point is that many changes are happening worldwide. But the question is whether this change is good or bad for everyone. Thus, for a rich country to exist, a poor one must also exist. Furthermore, poverty becomes a problem, but inequality can be generally more representative. That is what visibly happens on the developing countries, especially in Latin America. As a conclusion to all these points raised on social inequality and consequently the poverty, it is clear how unfair capitalist neoliberal system is. The export and accumulation model dramatically changed the social structure of the underdeveloped countries. Moreover, this division of society into class prevents access of the poor to quality education, decent health care and equal job opportunities. With unequal relation, the rich minority becomes increasingly powerful. Consequently, there is no chance for the poor people to improve life. Nevertheless, a country becomes more developed when the citizens have the same opportunity to get a decent job and provide for their family confortable conditions of life. Several factors such as unequal income distribution, inefficiency of government public policies and corruption are responsible for this situation.

B??rcena, A. (2014). Social Panorama of Latin America 2014. Retrieved from
Gwynne, R. N., & Kay, C. (2000). Views from the periphery: Futures of neoliberalism in Latin America, Third World Quarterly, 21:1, 141-156, DOI: 10.1080/01436590013279.
Heywood, A. (2011). Global politics. New York, NY: Palgrave Macmillan.
Portes, A., & Hoffman, K. (2003). Latin American Class Structures: Their Composition and Change during the Neoliberal Era. Austin, TX: The University of Texas Press.
Table 1 – Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulation of household surveys conducted in the respective countries. a/ Estimate for 19 countries, including Haiti. b/ The 2014 figures are projections.
Table 2 – Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulation of household surveys conducted in the respective countries. a/ Urban areas.
Table 3 – Source: Commission for Latin America and the Caribbean (ECLAC), social expenditure database. a/ Weighted average for the countries.
Veltmeyer, H. (2010). Tools for change: A handbook for critical development studies. Winnipeg, Manitoba: Fernwood.

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