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Globalization and Poverty in the AmericasRamesh MishraPublished online: 31 Jan 2008.

To cite this article: Ramesh Mishra (2002) Globalization and Poverty in the Americas, New Global Development,18:1-2, 37-49, DOI: 10.1080/17486830208412627

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GLOBALIZATION AND POVERTY IN THE AMERlCAS

Kcimcsh Mishrci --

Globalization - the increasing openness of nation states to supranational influences - is a multidimensional phenomenon. This paper will focus on the economic dimension which has the most direct relevance to poverty and social welfare. Economic globalization refers to the increasing integration of national economies into the global economy by way of freer trade and investment, intensified competition, and a general extension of the scope of markets. In so far as regional economic associations such as the North American Free Trade Association (NAFTA) and the proposed Free Trade Area of the Americas (FTAA) promote supranational economic integration, they may also be seen as a part of the process of globalization. However these associations will not be considered specifically in this paper. The removal of capital controls by industrialized and other countries, along with the incorporation of former communist countries into the global market economy, marks out the last two decades as a period of intensified globalization (Mishra, 1999). The paper will focus on this period.

'The implications of globalization for national economies and the living standards of the people vary widely across different types of societies. Elsewhere I have argued that it is useful to look at this relationship in ternis of at least four different groups of countries. viz. advanced industrial, newly industrializing (NICs), less developed (I,I>Cs), and former communist (Mishra, 2000). Of these the first three categories are relevant to the American Continent. We shall therefore examine poverty in the Americas under the two main headings: North America (i.e. IJSA and Canada, the advanced industrial countries) and Latin America and the Caribbean (which comprises NICs and LtX's, with the notable exception of socialistic Cuba).'

Poverty in North America.

We cxamine the influence of globalization on poverty along two dimensions: i ) the labour market, ix. employment and wages, and i i ) social policies and programs which help to prevent or alleviate poverty. Arguably these two are key determinants of poverty, and globalization impacts on both. I n general, the influence of globalimtion is mediated bq the nation state. While one can speak justifiably of the 'logic' of globalimtion, i.e. the logical consequences of greater economic and financial openness of societies, this logic may be reinforced, weakened or otherwise modified by the political econoniy of' the nation state. In short, while there. are general trends and tendencies associated with globaliLation their scope, form and strength vary from one country to another. 'The logic of globalization suggests the following developments in the case of labour markct and policies of social protection (Mishra, 1999).

' 111 many w a p . the ('uhan cconomy stil l reniains closed Cilohal izatm seems to have little dlrect relevance to the Cuball econonq

and society.

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The labour market. Economic openness and international competition demand labour market ‘flexibility’. Typically this involves the deregulation of the labour market resulting in the growth of a ‘non-standard’, i.e. temporary, contractual, part-time and self- employed, labour force as well as increased volatility and insecurity of employment. Greater differentiation and fragmentation of the labour force implies greater inequality of wages and working conditions. Increased freedom of business to hire and fire and to determine wages and working conditions puts a downward pressure on wages. Globalization also implies a weakening of union influence and the decentralization of collective bargaining which result in lower wages and greater inequality. In so far as labour markets approach these ‘ideal-typical’ conditions entailed by globalization, we can expect inequality of work incomes and insecurity of employment to grow. In the absence of compensatory action in the area of social policy it would mean greater inequality and poverty (Mishra, 1999).

With financial liberalization and openness of the economy, national governments are less free to follow monetary and fiscal policies for stimulating employment (large economies such as the US & Japan may be the exceptions). And such policies are unlikely to be effective in an open economy. Moreover global markets favour a tight monetary policy, in order to curb inflation and maintain the value of national currencies, strongly discourage deficit spending, and favour privatization. (Mishra, 1999) Governments have to rely chiefly on the market forces and the private sector to create jobs (Rifkin, 1995: 37-9; Osberg et al., 1995: especially Ch 5 ; Jackson et al., 2000: Chs 2-3). This could mean chronic high unemployment or plentiful employment but at low wages. In the US we see the latter; in many European countries we see the former (Esping-Andersen, 1996; OECD, 1999a). Again in the absence of compensatory action, e.g. adequate unemployment benefits or state supplementation of low wages, these conditions imply greater poverty (Myles, 1996; Jackson et al., 2000: Ch 6).

.

Policies of social protection. Financial liberalization, capital mobility and international competition empower business interests and investors very considerably. As a result, government policies become much more responsive to the demands and perceived needs of business and financial interests. Governments come under pressure to eliminate budget deficits, reduce national debt and reduce taxes, especially on high-income earners and corporations. The emphasis is on the creation of an enterprise culture and a business- friendly environment to attrxt and retain investment and enhance profitability. Globalization favours privatization and the downsizing of the public sector. Overall, these developments exert a downward pressure on social spending. Moreover specific programs such as unemployment benefits and social assistance for employable adults which stand in the way of labour market ‘flexibility’. e.g. disincentives to job search, mobility. accepting low wage employment, become the targets of substantial retrenchment and restructuring. ’Passive’ income maintenance tends to be replaced by ‘active’ measures, e.g. workfare in various forms, as a deterrent to social assistance as well as a means of adjusting to the new labour market conditions (Mishra, 1999).

38 New Global Developrnant Journal oJlnlernatronal and Corn paratrve Social Welfare

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However, as far as anti-poverty policies per se are concerned the implications of globalization seem to be somewhat contradictory. On the one hand, freedom of the marketplace legitimizes greater inequality and poverty. On the other hand the downward pressure on social spending and on universality translate into greater selectivity and targeting of social programs. This can lead to the prioritization of income protection for the poor, at any rate the ‘deserving’ e.g. the working, poor. The Earned Income Tax Credit (EITC) program in the US and the targeted benefits for the aged and the children in Canada are prominent examples.

In sum, as far as the labour market is concerned, globalization points to a greater inequality of wages and working conditions. The kind of monetary and fiscal policies favoured by globalization is also likely to result in greater inequality of income and wealth. Thus social protection, in the main, comes under downward pressure but anti- poverty measures may be strengthened somewhat as a result of targeting and the shift from universality to greater selectivity. Finally, as mentioned earlier the ‘logic’ of globalization does not work in a ‘pure’ form. It is mediated by the nation state, i.e. by domestic economic and political factors. Moreover the influence of globalization tends to be ‘path dependent’, i.e. conditioned by existing institutions and patterns. In short, national differences in the response to globalization remain important (Sykes, Palier and Prior 2001). The contrasting situation in Canada and the USA underscores these points.

( I ) United States

The lubour market. Over the last two decades changes in the labour market in the US have followed closely along the lines of the logic of globalization sketched above. This is not surprising considering that the US is the leading economic and political power driving globalization. There is far greater polarization in the job market in terms of wages, benefits and working conditions compared to the early post-W.W.11 decades. With one of the most ‘flexible’ labour markets in the industrialized world the US has been successful in creating jobs and keeping unemployment rates down but at the cost of degrading the quality of jobs in terms of wages, benefits, working conditions and increasing insecurity (Mishel and Bernstein, 1994; Mishel et al., 2001).

t Social protection. While social security programs, which serve mainly the aged, have seen little impairment over the last two decades the Aid to Families with Dependent Children (AFDC), the social assistance program for poor families has been the target of various restrictions and cutbacks. In 1996 this program, which since the 1930s has assured the provision of welfare for the needy, was finally abolished and replaced by the Transitional Assistance to Needy Families (TANF) program. The latter restricts assistance to a period of two years at any time and to five years over an individual’s lifetime. The measure ctme into force only recently and at a time of economic boom with unemployment at record low levels. Thus although AFDC caseloads fell by 50% during 1993-9 the implications for poverty and hardship are not very clear (Scholz and Levine, 2000: 12). However as the US economy slows down and goes into a recession the

Glohalcaiion and Pov P rty in !he Americas 39

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consequences of the 1 IN1 i n ternlq 01' tnLreased po\wt> are lihcly to become more e\ ident.

Another program which ha\ been L \ I I .tib,trintiaIl> in terms 0 1 reduced cligibilit! and lower benefits is unemplo> nicnt in\iii;tixc. I'he proportion 01' thc iinemplo> ed receil tng benefits fell from around 50'0 in late 1070\ to 36% in 1 WO (131,iu. 1 999 170) Spending on the food stamp prograni ibhicli aid\ lou-income popidation increased i n the 1 %Os, stabililed in the early 90s and t h c ~ declined 1)urtng 1 9c)0-cl tht' nuniher of people receiving food stamps tkll b! more than a qii;irtcr ( J'al'etti, 2000:49). One program that has expanded very substantially is the 1;I'l c' l\hich provides income supplementation to low income working families via tax credit. I t has undouhtedlq helped to sustaln living standards and to reduce p o \ ~ r t y (Misliel et al . 2001: 3 1 1-3). 'Ihe same is true of the increases in minimum wage in the 1990s. Since the late 1960s minimum wage began a secular decline. with a steep drop of 3 1 ? 4 during the 1980s. 'I he four increases during the 90s have helped although in 1999 it was still one-fifth lower than its 1979 value (Mishel et al, 2001 : 186).

Poverfy. Perhaps the most conspicuous impact of globali~ation on poverty has been through labour market developments. As noted above the American worker, especially the low wage earner, failed to share in the economic growth of the nation over the last two decades. Between 1973-99 real GDP grew at an average annual rate of nearly 2.8% yet real average hourly earnings of production and non-supervisory workers (who account for more than 80% of wage and salary earners) declined over the period. Indeed despite a rise in the late 199Os, earnings in 1999 had not yet caught up with the level of 1973 (Mishel et a]., 2001: 120). The point is that income distribution over this period favoured profits relative to wages and top deciles of wage-earners relative to the rcst. 'Thus while most Americans suffered a wage decline the compensation of chief executive officers of corporations skyrocketed (Mishel et al., 2001 : 88-9, 124-5. 21 1 ) . During 1947-73 economic growth had benefited the American worker. Average hourly earnings grew at a rate of over 2.0% per year. I t has been a different story since the mid-70s. Trickle down seems to have stopped working (Mishel et al.. 2001). Poverty statistics reflect this. Poverty declined from 22.4 YO in 1959 to an all-time low of 11 .1% i n 1973. This trend then came to an end and poverty hovcrcd around 1 1 .~?J'o for the rest of the 1970s. During the last two decades it has fluctuated with the economic cycle. rising above 15% during recession years and falling during economic upturn but remaining well above the average of 1970s. l!ven in 1999, after one of the longest periods of economic growth i n the history of the nation and with unemployment rates below 5% for some years, the poverty rate o f 1 1.8% was still higher than that of' 1973 (ibid. 221, 288). What is more. the poverty gap has increased a good deal. Persons K i t h income below 50Y0 oi'the poverty line increased from 30%) in 1975 to 380,h i n 1989 and 39'% in 1999 ( Mishel et al., 2001: 302).

It is important to note that this povertq line is not a relative measure, linked to rising per capita income of the country, but an absolute standard which is adjusted to changes in consumer prices only. Thus, economic growth in itself' should have reduced the poverty rates substantially for households with wage or salary earners. 'That this did not happen is 40 h ~ w Glohul /)el rlupmutir Joiittiul o/ lniettiutiotiul utid ( 'otapurutitc .\OLINI ICi~l/urr

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clue in large part to greater labour market -Ilcxibility,’ inclucling the substantial deiinionimtion 01’ thc Icibotir t ime , :tlthough higher unemployment during rcccssion years tias also contributed. On the other hand poverty among the aged, who are outsidc the labour t ime and relatively well-provided fijr in terms of social security and occupational pensions. continued to dcclinc ovcr the last two decades I’alling from 15.296 in I079 to 9.?”0 in 1099. At the s~imc time, family povcrty rose from 9.2‘56 in 1979 to 10.3% i n 1089 and 12.3?4 in 1993. At 0 . 3 % in 1999 i t was still higher than the 8.8% reached in 19’7;. I’hc child poverty rate, which is of course much higher (16.W0 in 1909), shows a similar trcnd (Mishel ct al., 200 1 ) ” It has to be pointed out, however, that the sharp fall in poverty in the 1960s and early 1970s was due to a combination of factors which included not only substantial trickle down 01. economic growth but also low unemployment as well as improvements in income support and other social programs. In the 1980s and 90s social protection measures, with the exception of I ~ I ‘ I T and minimum wage, remained unchanged or were cut back (Scholz and Levine, 2000; Pavetti, 2000). On thc other hand neither economic growth nor full employment helped the American workers enough to make a substantial difference to family poverty. Undoubtedly the latter would have been worse but lor the fact that two-earner households increased substantially over the period to compensate for stagnant or falling wages. In the mid-90s nearly half of the family’s financial support was coming from working wives (Blau, 1999:15). It took its tol l , however, on family life i n terms of stress and overwork.

(2) Canada

The Luhour Murket. Labour market developments in Canada have followed along the lines of greater differentiation, growth of ‘non-standard’ employment and increased wage differentials. For example between 1989-98 self-employment, most of which is very poorly compensated, accounted for more than half and part-time employment for nearly a quarter of all job growth. By the late 1990s some 45% of the paid work force consisted ot‘ ‘flexible’ workers of one kind or another. During 1980-98 Canadian economy posted an annual growth rate of over 2.5%. Yet the average annual earnings of 90% of male workers declined during 1981-1995 with the bottom decile suffering a loss of 31.7% (Jackson et al., 2000:20). Although female workers did post an increase over the same period the market income share of the majority of Canadian workers declined during 1980-98 while that of the top 20% increased from 44.4% to 49.5%. l h u s as in the 1JS the days when the rising tide was lifting all boats were gone. The increase in inequality was especially dramatic. For families with children the ratio of income differential between the top and bottom decile increased from 39: 1 in 1989 to a whopping 11O:l in 1997 (Jackson et al, 2000: 12 1-2). Although taxes and transfers do a great deal to reduce the differential in disposable income the fact remains that compared with 198 1 the disposable income share of all but the bottom and top quintile decreased in 1997 (Ross et al., 2000: 58).

In contrast with the US, unemployment in Canada has remained high. Despite strong economic growth during 1993-8 (3.1% annually) unemployment fell by less than 3‘%) - from 1 1.2% in 1992 to 8.3% in 1998. After dipping below 7% in 2000 it is once again o n

Glohalizalion and Poverty i n tkr ilnierica.\ 41

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the rise. As we shall see cutbacks in unemployment benefits have made the unemployed more vulnerable to poverty.

Social protection. In the area of social protection Canadian developments have been along the lines suggested by the logic of globalization. Since the mid-1 980s the system of social protection has undergone substantial changes resulting in a squeeze on social spending, greater selectivity in income security programs and a divestment of federal responsibility for financing programs and maintaining national standards. This trend which began in the 1980s intensified greatly during the mid- 1990s as a part of the agenda of reducing the budget deficit in response to pressures from the global markets and the International Monetary Fund (IMF). Apart from drastic cuts in federal social spending the unemployment insurance program was scaled back severely, especially in terms of eligibility. In 1989, for example, 74% of the unemployed received benefits; in 1997, only 36% (Jackson et al. 2000: 153). Social assistance benefits for the working age employables have also been scaled back by provincial governments and various forms of workfare have been instituted. Minimum wage shows a pattern not dissimilar to that of the US. It has lagged well behind inflation in most provinces and was lower by 11%-37% across Canadian provinces in late 1990s compared with twenty years earlier. (Jackson et al., 2000: 150).

Poverty. Unlike the US, Canada has no official definition of poverty. But Statistics Canada’s low-income cut-off, a relative measure of low income, is generally used as the poverty line.2 By this standard poverty rates over the last two decades have fluctuated with the economilc cycle, reaching a high of 18.2% in 1983 and a low of 13.6% in 1989. In 1998 the rate was 16.4%. These fluctuations, however, mask a more general trend, viz. a continuous decline in age poverty (for those aged 65 and over) and a rise in family and child poverty. While age poverty fell from 34% in 1980 to 18.7% in 1997 child poverty rose from 14.9% in 1980 to 19.9% in 1997 (Ross et al. 2000). Indeed what is distinctive about the 1990s is the fact that poverty rates have responded poorly to rates of economic growth and the fall in unemployment. Moreover the poverty gap has increased substantially (Ross et al. 104). The nature of jobs created, the downward pressure on wages and the reductions in transfers such as unemployment benefits and social assistance seem to account for much of this (see e.g. Jackson et al.: Ch 1). In short, as in the US trickle down has not been working. Living standards of the majority of Canadians have stagnated or even declined over the last two decades despite the fact that the economyposted an overall annual growth rate of over 2.5% during 1980-98.

(3) Poverty in Canada and United States

Poverty, as measured by the percentage of individuals with less than 50% of median disposable income, is lower in Canada than the United States. In the early 199Os, the percentage of Canadians in poverty, after taxes and transfers, was 1 1.7% compared with 19.1% in the United States; the percentage of the aged was 5.7% compared with 19.6%

7 For a discussion of attitudes towards, and definitions and iiieasttres 01: povert) in the two countries see Mishra ( 1996)

42 h”V’iv Glohul l)evf,/oprnant Journal o / ~ n i r r n u t f o n u ~ unti ( ‘om purutfvc Social Welfure

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(Ross, 2000: 148-9). Significantly, there was less difference in market income poverty between the two countries than in disposable income poverty. ‘Taxes and transfers seem to do more in Canada to reduce poverty. l o r example, the EI’TC in the IJS is meant for working faniilies only whereas the Canadian income-tested child benefit (Canada Child Tax Benefit) is not restricted to working families. More particularly the Canadian Guaranteed Income Supplement (GIs) does far more than the American Supplemental Security Income program to lift low-income seniors above the poverty line. Thus, despite many similarities in trends affecting the labour market, social protection, and poverty differences in taxes and transfers continue to yield different outcomes regarding relative poverty.

Latin America and the Caribbean

The countries in Latin America and the Caribbean range from LIICs such as Ilaiti and Nicaragua with a per capita income of less than $2,000 to advanced NICs, e.g. Chile and Argentina, with a per capita income of more than $10,000. Nonetheless there are some general characteristics and trends which are relevant to these developing countries as a whole. In short as in North America, there are comnion themes with national variations.

As in industrialized countries, globalimtion affects pnverty through the influence 01’ trade and financial openness on the labour market and social welfare policies. However some 25% of’ tile population of tlie region is rural and the proportion is much higher in some countries. Thus the implications of globalization for the agricultural sector and for economic development as a whole are also relevant for poverty. Moreover there are two other aspects 01‘ globalimtion that come into play in these countries. ‘The first concerns the influence of international financial institutions, notably the IMF and World Hank, on economic and social policies associated with structural adjustment programs (SAPS). The second concerns the destabilization of tlie economy as a result of the inflow and outflow of ‘hot money’, e.g. portfolio investment. Destabilization affects the NICs or emergent market economies of the region in particular. Given the importance of these two aspects of globalization for this region we begin with a look at their rclevance to inequality and poverty.

,Ctr.irc./ur.trl Au’jjustmetit Programs. /he IY8O.s The general conditions which led to the “debt crisis” in the early 1980s are well-known and need not be rehearsed. Management of the debt problem by the IMF involved arranging or rescheduling of loans for countries unable to meet their debt obligations or experiencing serious balance of paynients problems. In exchange the debtor countries were required to carry out a comprehensive restructuring of the economy which typically involved a sharp reduction in pub1 ic spending, reduction or elimination of consumer subsidies on food and other necessities, retrenchment of social programs, e.g. health and education, privatization of state enterprises and reduction in wages in order to make exports more competitive. In place of the import-substitution strategy that many developing countries had been following they were advised to shift to a strategy of export-led growth. Structural adjustment also

Glohulrruiron und Poverty i n ihe ,,fineric us 43

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involved making the economy more open in terms of trade and investment (McMichael, 1996).

In 1982 Mexico and Brazil - both heavy borrowers - agreed to the rescheduling of loans in this way, soon to be followed by many other countries. Some countries embarked voluntarily on similar programs of fiscal austerity, privatization and export-led growth under the influence of the IMF and the Washington Consensus. Although the consequences of the structural adjustment programs (SAPS) have given rise to much controversy and debate there is little doubt that adjustment policies reduced economic growth substantially, exacerbated inequality and led to a worsening of poverty and deprivation throughout the region (McMichael, 1 996). During 1 950-80 1,atin America, much less globalized and following autonomous development strategies, had posted an annual growth rate of 5.5% and during the 1970s a rate of 5.8%. By contrast annual growth during the 1980s was barely over 1% and per capita income declined, in some countries sharply (Ocampo, 1998b). Poverty which had fallen from 40% of households in 1970 to 35% in 1980 climbed back to 40% in 1990 (Ocampo, 199th). Naturally conditions varied and while in some countries economies were managed in a somewhat pro-poor fashion in others there was a serious worsening of living conditions and poverty. For example in Mexico the poverty population rose from 32.1 million in 1983 to 41.3 m. in 1989 (McMichael, 1996: 130). Malnutrition, estimated already at 40% of the population in 1984, got worse. In 1992, by conservative estimates, 44% of Mexicans were poor and 18% 'extremely poor'. These figures were higher than in 1984 (Latapi, 1996: 556). Income inequality in Latin America, which had been declining during the 197Os, rose sharply during the 1980s (UNDP, 1999:39).

The destuhilizution of the economy As a part of the structural adjustment process and also as a part of the uorldwide agenda of liberalization promoted by the Washington Consensus' (3) more and more NICs and other developing countrics have been under pressure to open up their economies to foreign trade and investment. The process of financial liberalization has exposed these countries to the risk of a serious destabilization of the economy due to the sudden inflow and outflow of short-term capital and its consequences for the currency and stock market. Mexico, once again, provides a dramatic example of this in the mid-90s. Moreover the 'contagion effect' of the Mexican crisis spread to other countries of the region. Significantly this 'tequila effect' u a s much less in evidence i n Chile and Columbia - two countries that have maintained some degree of regulatory control on short-term flow of capital (Griffith-.lones and Kimmis, 1999:80).

I he Mexican case - one ofthe uorse - shows very clearly what financial openness can do to developing economies and espcciall~ to the living standards of the people. By early 1090s Mexico had opened up its financial marhets a great deal and was being seen as a11 ad\anccd emerging market economy b\ foreign inkestors. F3y 1994 it mas not only a member of' NAI- I A but also of the Organization for Economic Co-operation and

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Development (OECD). These developments led to a large inflow of foreign portfolio investment and a skyrocketing stock market. However the bubble burst in 1994. By the end of the year the country was in the throes of a serious financial crisis with a sharply devalued peso, a stock market in free fall and foreign capital fleeing the country. The contagion effect was spreading to other emerging market economies resulting in capital flight, plummeting currencies and plunging stock markets. A bailout loan of $50 billion. was put together by the G-7 nations with US in the lead to bolster the Mexican peso and restore investor contidence. ‘The loan, supervised by the IMF, involved conditionalities similar i n many ways to those of the earlier loans (Grabel, 1999).

The financial crisis, high interest rates and the austerity policies required by the IMF resulted in massive inflation, sharp fall i n consumer demand. 1 king unemployment and falling wages. However the austerity program and other measures helped Mexico’s economy to recover within a couple of years. The loan was repaid and foreign investors returned. But it was a different story as far as the large majority of the people were concerned. Their living standards, which in the early 1990s had yet to regain the level of 1982, suffered a further decline. During 1993-8, for example, average wages fell at a rate of 1.6% per year while prices rose by an average annual rate of 19.7% (OECD, 1999). In the late 1990s nearly 80?4 of the country’s population was still worse OK than in 1982 (Pieper and Taylor, 1998:50). Moreover membership of NAI‘I’A and the loan conditionalities meant that the economy was more open than before to global investors and presumably at a higher risk for a repetition of 1994-5 crisis. Thus financial liberalization and greater integration into the global economy and its economic consequences provide the context for the chronic poverty, high rates of crime and economic insecurity of Mexican people (Greider, 1 997:259-84). They help explain the desperate attempt on the part of Mexicans to escape these conditions by crossing the border into the US. I t is important to remember that the bail out loan was meant to rescue the investors (primarily foreign) and not Mexican people who nonetheless have to bear the brunt of repaying the loan.

Afier the ‘lost decude ’: powrty in the nineties. Compared with the 1980s - known in 1,atin America as ‘the lost decade’ - economic growth picked up in the 1990s averaging 3.3% annually. However the restructuring of the last two decades has meant greater labour market flexibility, increased wage inequality in thc fi)rmal sector, the heavy informalization of labour and the growth 01’ insccure and low paid cmployment. ’fhus 7 out of 10 jobs generatcd in the 90s in the cities were in the int’ormal sector. Moreover open unemployment in the region grew from less than 6% in lCN0 to 9% in 1999 (ECLAC, 2001a).

A significant feature of thc 1990s has been a substantial rise in per capita social spending over the decade -up from 10.4% to 13.1 YO of GDP (ECIAC, 200 1 b). Much of this was a result of a shift in spending priorities rather than an increase in public spending as a whole. Also to some extent it represents a process of catching up on the siyable reductions in social spending in the 1980s. The new orientation in social policy thinking in the region, geared to market-based economic reforms and increasing globalization,

45 Glohalizaiion and Poverfy in [he Americas

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emphasizes targeting social expenditure on the vulnerable and poorest groups in society. Across the board subsidies and price controls are definitely out of favour. Overall however, economic growth rather than redistribution or substantial social spending is seen as the principal means of poverty reduction (Solimano, 1998:39).

Meanwhile income distribution in the region - one of the worst in the world - remains highly unequal. In this respect there was little improvement and in some countries inequality worsened. Indeed a study which examined 17 countries found that in only one of these had inequality declined during the 90s (ECLAC, 2001~) . However helped by economic growth and higher social expenditure household poverty declined from 40% in 1990 to 35.3% in 1999 but was still slightly higher than the low of 35% reached in 1980. . Likewise, the percentage of population in poverty declined during 1990-9 hut at 44% in 1999 still remained higher than the low of 41% reached in 1980. Moreover nearly 1 in 5 of the population was living in a state of indigence or extreme poverty (ECLAC, 2001d). Indeed currently more than a quarter of the population in Latin America lives on less than a dollar a day (Echeverria, 2000:152). Rural poverty is much worse - 64% of the population compared with 37% in urban areas is poor (ECLAC, 2001d). Naturally the extent of poverty varies greatly from country to country and within large countries such as Brazil, where 15% of the population lives below the $1 a day poverty line, regional variations are also substantial (UNDP, 2000).

I n sum, greater global economic integration and subjection to supranational bodies such as the IMF resulted - or at the veq least contributed - to economic decline in the 1980s and serious destabilization of individual economies in the 90s. Moreover inequality and poverty increased sharply in the 1980s as a result of structural adjustment and other policies. Indeed despite some improvement poverty - and it is measured by absolute not relative standard - figures in the late 1990s are still worse for Latin America as a whole compared with twenty years ago. The 1990s have seen an improvement in growth and social spending and a greater awareness of the social consequences of structural adjustment and the marketization and liberalization of economies. ‘There seems to be a greater recognition of the need to provide some protection to the vulnerable and the underprivileged. Overall the region has seen a good deal of democratization of politics in the 80s and 90s. Nonetheless in conditions of economic openness the population will remain more vulnerable and reducing poverty will be a greater challenge.

We must note that parallel with economic globalization there is also a social globalization in progress. It takes the form of initiatives by the UN, the NGOs and social movements to address poverty, social justice and environmental issues worldwide. Anti-globalization movements are underlining the need to address social issues in trade agreements, e.g. the proposed Free Trade Association of the Americas. The idea of social rights being a part of human rights is also making some headway. Thus in so far as social globalization gains in influence the prospects of poverty reduction in Latin America will be better. However as in other developing regions economic growth and equitable distribution of resources will both be important for the reduction of poverty. In any case national political economy will also remain important in mediating the process of globalization and its consequences. 46 New Global Developmant Journal of lnternafronal and Cam parative Social Weyare

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Concluding Remarks

Globalization affects poverty through its influence on the labour market and on social spending and social protection. In the industrialized world of North America this has meant a downward pressure on social protection and on wages and working conditions generally. ‘Thus the long boom of the 1990s has been of limited benefit for the large majority of the population. Wage and poverty rates have responded poorly to economic growth leaving a higher proportion of population in poverty in the late 1990s compared with the 1970s. Also the poverty gap has increased - the poor are poorer.

In the rest of the American Continent, which comprises developing countries, globalization has taken a somewhat different form. It has influenced the economy and living standards of the people through i) structural adjustment programs and ii) the destabilization of economies. Structural adjustment contributed to economic stagnation and resulted in a marked deterioration in living standards and a rise in poverty in the 1980s. The last decade has been punctuated by crises in a number of countries resulting from the destabilization of the economy which has in turn led to structural adjustment loans and the attendant deterioration in living standards and a rise in poverty and deprivation. However with the revival of economic growth in the 1990s social spending has increased and poverty rates have declined although still remain slightly higher than twenty years ago. More than a quarter of the population of the region still lives in conditions of extreme poverty or indigence, i.e. on an income of less that $1 a day. As in North America growth under globalized conditions is no longer translating into higher general wages and better jobs for all. Inequality remains high and poverty is likely to increase unless appropriate compensatory social policies are put in place.

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