A Quiet Revolution

The strengthening of institutions, Reid points out, extends far beyond just macroeconomic policy. Latin America returned to formal democracy in the 1980s, and the quality of democracy there has been steadily rising since then. Enfranchisement is now universal throughout the region, and rates of voting are sharply up. This is true even of long-excluded indigenous populations in countries such as Bolivia and Peru, which has helped leaders of indigenous heritage (Evo Morales and Alejandro Toledo) get elected. Election fraud is largely a thing of the past -- a particularly notable achievement for Mexico, where the reformed Federal Electoral Institute has cleaned up the country's notoriously corrupt presidential election process (notwithstanding irresponsible charges to the contrary made by last year's losing candidate, Andrés Manuel López Obrador). There has also been decentralization in Colombia, Brazil, and other countries, bringing democracy closer to the people. A series of reformist elected mayors in Bogotá, for example, have implemented innovative programs to deal with drugs and gangs, sharply lowering the city's murder rate and improving public services. In Brazil, long dominated by traditional patronage politics, "voters have developed a habit of using the ballot box to punish mayors or governors who devoted a disproportionate share of their revenues to public employment rather than services or investment." Much of this deepening of democracy was made possible by the fact that since the end of the Cold War, the United States has no longer prevented left-leaning leaders from coming to power.

The most interesting developments have come in the social sector. Latin America was born with a birth defect: a highly unequal initial distribution of resources that dates back to the colonial era. In some countries, inequality was rooted in slavery; in others, it overlapped with stratifications based on ethnicity and race. This inequality has perpetuated itself over the generations in a remarkably durable fashion. That is why the region's economic performance has never matched that of the United States, or of the fast-developing countries in East Asia, over the long run. Oligarchic societies may be able to achieve high rates of growth for a period of time, but continuing inequities in distribution lead to political instability and populism, which then undermines growth. This story is being played out today in Andean countries such as Bolivia, Ecuador, and Venezuela.

But there is a great deal of social change brewing under the surface. Reid points out that across the continent there has been considerable de facto social mobility as societies have urbanized and become better educated. In 15 years, the percentage of Latin American households with electricity has gone up from 83 percent to 90 percent; rates of primary school attendance have shown similar increases. Globalization and emigration have exposed people to new places and ideas, and remittances from emigrants now far outstrip incoming foreign investment as a source of foreign exchange.

The most interesting innovations in the region are in targeted social programs that deal directly with the problem of poverty. These began during the 1990s with Mexico's Progresa, a conditional cash transfer (CCT) program that gave small stipends directly to poor people on the condition that parents sent their children to school. Under the name Oportunidades, the program was vastly expanded under President Vicente Fox after 2000 to cover the whole of Mexico. This approach was copied by Brazil in its Bolsa Família program, which now reaches one Brazilian family in four. Between 1996 and 2005, poverty in Mexico was cut in half, and between 1995 and 2004, Brazil's notoriously high Gini coefficient (a measure of economic inequality, with zero being absolute equality and one being absolute inequality) dropped from 0.599 to 0.571. These results were partly due to an extended period of economic growth underwritten by sensible macroeconomic policies and also partly to social programs that directly addressed the problem of inequality. CCT programs are far more sustainable, Reid points out, than Chávez's oil-financed top-down welfare programs.

It is interesting to note that innovative social policy has come from Latin America, not from Washington. The Washington consensus paid lip service to the need for a social safety net, but social policy was never at the core of U.S. policymakers' concerns. Indeed, many economists would argue that the best antipoverty program is rapid economic growth. They tend to regard new social programs with suspicion, since it was the old welfare-state entitlements in Latin America that led to fiscal bloat, oversized bureaucracies, and the debt crisis of the early 1980s.

The degree to which countries should emphasize targeted poverty programs rather than all-out growth is a policy discussion that needs to come out into the open much more than it has to date. It is true that rapid economic growth reduces poverty: some of the largest gains in poverty reduction have come in recent decades in China and India, where policy has focused on cutting back overgrown state sectors. In Latin America, however, only Chile has been able to sustain a long-term rate of growth that has made serious inroads into poverty, and still it remains a highly unequal society in international comparisons. Many growth advocates forget how important social policy -- in the form of early land reform and heavy investments in basic education -- was to East Asia's success. It is unrealistic to think that democratic politicians in Latin America can win electoral contests without having programs that specifically target the poor and excluded, which is perhaps why many CCT programs were initiated by centrist or center-right leaders, such as Mexico's Ernesto Zedillo and Fox and Brazil's Fernando Henrique Cardoso.