Latin American Research Review 40.1 (2005) 207-222
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Poverty in Latin America1
Tim H. Gindling
The five books reviewed in this essay bring together work by respected researchers on poverty and income inequality in Latin America from academia and the multinational institutions most involved in the design of policies for poverty alleviation in Latin America. These books are a high-quality representative sample of state-of-the-art empirical analysis of the incidence and the determinants of poverty in Latin America. The contributors to these books (mostly economists) also suggest new policies for reducing the vulnerability of Latin American families to poverty. These well-organized and well-written books are valuable both to the non-specialist and to the specialist interested in a) understanding the causes of poverty in Latin America, b) new strategies for reducing [End Page 207] poverty and c) measurement concepts and techniques for the analysis of the causes of poverty.
Economic crisis in the 1980s was accompanied by falling per capita incomes and increasing poverty rates throughout Latin America. With a resurgence of economic growth in the first eight years of the 1990s, per capita incomes rose and poverty rates fell. With stalling growth rates in the later 1990s, poverty reduction also stalled.2 Accompanying these changes in economic outcomes in the 1980s and 1990s were significant changes in the economic environment, in that the rules of the game have changed regarding the level of protection afforded by governments to the jobs and earnings of workers. Broad structural adjustment policies have led to a restructuring of production and employment. These policies reduced the import-substitution protections against foreign competition, reduced subsidies for agriculture, reduced public sector employment, and generally increased reliance on private investment and market forces. A greater reliance on market forces in product and labor markets created new opportunities within a new economic environment intended to reward hard work, innovation, productivity and talent in order to promote economic growth. At the same time, this restructuring reduced the number of jobs where one could expect stable, long-term (perhaps even lifetime) employment, increasing feelings of insecurity among workers throughout Latin America.
It is generally agreed among academics and the editors of and contributors to the books reviewed here that economic growth contributes in an important way to the reduction of poverty. However, it is also noted in the books reviewed here that in the 1990s the rate of decline in poverty was not commensurate with the rate of growth of aggregate income. Moreover, economic growth in the 1990s was not accompanied by improvements in the distribution of income, which had also worsened throughout Latin America in the 1980s.3 One potential explanation for the increase in inequality is the change in the structure of employment and pay brought about by technological changes and structural adjustment reforms. These factors increased returns to assets (for [End Page 208] example, skilled labor) that are most productive in the modern, globalized economy. One indication of this change is the increase in returns to education (the wage gap between those with less and more education) observed in Latin America in the 1980s and 1990s.4 However, the research presented in...