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A cure for our ills?

FOR the last few days, the media have been full of Hugo Chavez (just in case you’ve been on a trip to Bhutan or Nepal, the Venezuelan president finally lost his battle with cancer).

Some of the reporting has been negative – you’ll have heard him called a tyrant, you’ll have read about his close ties with nasties like Gaddafi and Castro – but I don’t want to get into that here.

I just want to look at these figures: “The United Nations Economic Commission for Latin America (ECLAC) found that from 2002 to 2010, poverty in Venezuela was reduced by 20.8%, dropping from 48.6% to 27.8%, while extreme poverty decreased from 22.2% to 10.7%.

“Chavez also made impressive inroads in terms of closing the gap between Venezuela’s rich and poor. According to the ECLAC report, Venezuela has Latin America’s lowest Gini coefficient at 0.394.

"The closer the Gini coefficient is to zero, the closer a country is to total socio-economic equality.” (James Bloodworth, Hugo Chavez’s legacy: the good, the bad and the ugly, March 6 2013).

Venezuela wasn’t alone: “Poverty in Latin America is at its lowest level for 20 years, the UN's regional economic body, Eclac, says. From 1990 to 2010, the rate fell from 48.4% to 31.4% [...]

"Poverty and inequality continue to decline in the region, which is good news, particularly in the midst of an international economic crisis," said Alicia Barcena, Eclac's executive secretary (BBC, November 30 2011).

What is THAT about? While the rest of the world goes to hell in a handcart, the continent which once defined "banana republic" is reducing poverty by huge amounts, and also inequality.

How’s Venezuela’s Gini coefficient, 0.394? Ours is something like 0.68, last I heard. (The highest in the world, according to Euromonitor International.)

How did they do it? On a World Bank blog, Otaviano Canuto wrote: “First, as compared with other regions, a stronger labour market has increased employment and raised wages for unskilled workers, especially those in the lowest deciles of the income distribution.

"Second, demographic shifts have allowed for greater female labour market participation in the region, growing from 35% in the 1980’s to more than 55% today.

"Third, progressive fiscal policy especially in the form of redistributive transfer programs - such as Oportunidades, Bolsa Familia, and the like - have greatly improved the opportunities of the poor.

"And last, governments in the region have taken a more pro-union stance which has raised minimum wages and increased pensions.” (June 6 2012) Eek, isn’t that heresy?

Canuto concludes: “I agree with Latin American governments that support policies to maintain macro-economic stability, expand access to education and health services, and strengthen social protections and safety nets.

"Only by doing so can the region sustain reductions in both poverty and inequality without compromising growth in the future.”

Oportunidades is a Mexican programme that’s become a model (they’ve even started one like it in New York) which provides cash incentives to poor families for attendance at health clinics and schools and other desired behaviour.

Bolsa Familia is a similar programme in Brazil – and by the way, the World Bank has taken a good look at Bolsa Familia and concluded that it does NOT discourage people from seeking work.

It alone is responsible for about 20% of the drop in inequality in Brazil – previously one of the most unequal countries in the world. (Brazil’s not all roses – but it’s still doing better than us on many counts.)

In a presentation at the Cosatu Chris Hani Institute last month, Joel Netshitenzhe highlights the role of Brazil’s Bolsa Familia and points out that we could use something similar to turn our massive social welfare programme to good account – imagine if we could chop our school dropout rate by making childcare grants conditional on school attendance!

Netshitenze adds:

The second lesson from Brazil, and the least talked about, is the minimum wage which has increased faster than inflation at 38.3% overall between 2003 and 2008.

Conventional economics has it that if you bumped up minimum wages in this way, the rate of labour absorption would decline, at the very least. Brazil avoided this through the holistic nature of their socio-economic policies [...]:

• Increased aggregate demand, in this case arising out of social and minimum wage policy, should be combined with industrial policy and a tariff regime that encourage purchase of local goods.
• Measures to incentivise labour-absorption should include lower pay-roll taxes and, for this, a healthy fiscus is critical.
• Economic and social infrastructure should be deliberately targeted; and in Brazil this included massive housing construction which has a major multiplier effect, and reduction in electricity prices (recently by 16% for households and by 28% for industry) [...]
• All these initiatives should be underpinned by a social compact of sector leaders, [...] popular engagement and mini-compacts across the society.
(My emphases.)

Clever. Is anyone in high places in South Africa thinking like this?

Are we just going to go on and on sending our precious tax revenue down the plughole of incompetence and corruption?

Or could we, for once, get real about using it for the betterment of our whole society (y’know, that much-punted "better life for all") - and reduce crime, road accidents, alcohol and drug abuse and much more as the proven side-effects of reducing inequality?

- Fin24

*Mandi Smallhorne is a versatile journalist and editor. Views expressed are her own. Follow her on twitter.


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