Shrinking Inequalities in Latin America — A Response to the Economist’s “Securing Livelihoods” Edition

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By Sonia Dias, WIEGO Waste Sector Specialist

“Securing Livelihoods,” the special edition of the Economist produced in partnership with the Rockefeller Foundation, acknowledges that there is a general trend towards increase of inequality with the exception of LatinAmerica (For richer, for poorer), but it fails to pinpoint why inequality is shrinking in that part of the world—i.e., it fails to stress the role of the state in crafting policies geared to poverty and inequality reduction.

A brief analysis of a Latin American country—Brazil—however, makes it clear that, in fact, the strategic role of governments (national/sub-national and local levels) has been fundamental in addressing inequality as opposed to leave individuals and communities to fend for themselves.

The role Brazil’s transfer programs play in inequality and poverty reduction cannot be underestimated. A quote from a recent article on Brazil’s “Bolsa-Família” illustrates the role of cash transfer programs in this country:

“… from 2001 to 2007, income inequality in Brazil started to decline at an unprecedented rate: The Gini coefficient fell from above 0.60 to below 0.55, reaching its lowest level in more than 30 years. The incomes of the poorest tenth of Brazilians grew by 7 percent per year, nearly three times the national average of 2.5 percent. In less than a decade, Brazil had managed to cut the proportion of its population living in extreme poverty in half. This sharp decline coincided with the introduction of Brazil’s first cash transfer programs in 2001. Created to reduce poverty in the short-run, these programs also provided incentives to households to invest in their children’s education, health and nutrition.”

Further, a Barros et al. study (2009) concludes that key aspects of Brazilian public policy and labour market performance were important in reducing income inequality: government transfers; earnings differentials per educational level; spatial and sector labour market integration; and minimum wage. As the study indicates, government transfers accounted for about 40 per cent of the decline in inequality in Brazil. Thus, adoption of pro-poor social expenditures (such as the cash transfer “Bolsa-Família” to the disadvantaged), tax incentives for investments, opening credit lines from national banks for vulnerable sectors (including informal waste workers), and other social programs strengthened the ability of Brazil’s economy as a whole to counter the negative effects of the economic crisis in 2008.

Another example that illustrates how government public policies are important in the protection of livelihoods comes from the waste sector. The Informal Economy Monitoring Study, a major study of the urban informal economy in 10 cities around the world, found evidence that in the waste picking sector, sector-specific government grants could function as a cushion to fall back on in times of instability. Absence of such grants now adds layers of vulnerability to workers lives.

In Belo Horizonte, on the other hand, where waste pickers are formally integrated into solid waste systems, the federal government and the provincial governments heavily support the membership-based organizations that provide solid waste services. The workers see this state intervention as a positive driving force and acknowledge it as beneficial to them. Belo Horizonte’s informal recyclers also mentioned how important the “Bolsa-Família” is in times of greater instability of prices for recyclables in the value chain. WIEGO’s Policy Brief “Overview of the Legal Framework for Inclusion of Informal Recyclers in Solid Waste Management in Brazil” can be found here for more information on Brazil-specific integration.   

The city of Pune, India, provides another example where measures adopted by the local government to include waste pickers have improved their working conditions, acknowledged the relevance of their work, and formally included them as service providers in door-to-door collection of refuse. For more information, see WIEGO’s Policy Brief “Integrating Waste Pickers into Solid Waste Management in Pune, India.” 

Finally, it is important to state that failure to acknowledge government authorities’ role in assuming the main responsibility of protecting people’s livelihoods is detrimental to livelihoods protection. Absence of such protection increases the pressure on individuals and communities to rely on their own limited resources to confront hardships beyond their control (economic, climate, etc.).

Good public policies in livelihoods protection are essential in poverty and inequality reduction.