Cheerless report card for economic reform

Oisín Coghlan finds that even The Economist, that bastion of liberalism, had difficulty in putting a positive spin on two recent reports on the social impact of economic reform in Latin America.

A recent article in The Economist concedes that the UN Economic Commission for Latin America and the Caribbean (ECLAC) is correct when its 1997 report states that economic reforms are "exacerbating the already pronounced inequality in the region". Latin America and Africa rank much the same on the standard measure of income inequality. South and East Asia, the US, Canada and Australia do much better (and roughly the same) and Europe better still. Equally, ECLAC reports, and The Economist does not demur, that economic growth has not brought jobs, and itself cites Mexico and Argentina where "privatisation and competition were causing layoffs, and private employers (let alone the state) did not rush to rehire as the bad times went away".

So when the Inter-American Development Bank (IDB) claims that "a decade of reforms" is slowly paying off you would expect The Economist to be eager to endorse this view, or least to take comfort from it, but it does neither. True, the IBD figures would be cold comfort at best. There may have been a slight fall in the ratio between the incomes of the top fifth of the population and the bottom fifth in 1995 but since the debt crisis struck in 1982 the ratio has risen from 15:1 to 22:1. The poor, as a percentage of the population, may have declined a few points since 1990, but since 1982 they have risen from under a quarter of the population to over a third, and furthermore absolute numbers have almost doubled in the same period to over 150 million, and are still rising.

The IDB economists put their faith in education where they see slight improvement. Latin American workers now have an average of just over five years schooling, two less than the world average, but up from only three years in 1970. They are not catching up on their Asian counterparts, however, who have risen from four years education on average in 1970 to nine now. The IDB goes on argue that more effort must be put into education (they can’t quite bring themselves to say more spending) but that this will only work in the context of "deeper economic reform, and stability"(one presumes they are referring to political stability as they can hardly hope for deeper economic reform and social stability).

The Economist balks at the IDB’s description of education as "the accumulation of human capital", and finishes its own critique as follows:

"Take a fine-tooth comb to this supposed report on social, as well as economic, progress, and you will be hard put to it to find such words as ‘power’, ‘judge’, ‘army’, ‘teacher’, ‘nutrition’, ‘health’, or ‘housing’. Let alone ‘women’. The IDB is not famously stony-hearted among World Bank type institutions, rather the reverse. But does it really feel what development is for? Not on this evidence."

We could hardly have put it better ourselves.