Latin America, Caribbean Nations Have Economic Lessons for World Powers

By Gaudin, Andres | NotiSur - South American Political and Economic Affairs, December 21, 2012 | Go to article overview

Latin America, Caribbean Nations Have Economic Lessons for World Powers


Gaudin, Andres, NotiSur - South American Political and Economic Affairs


Beginning in October, documents from the World Bank, the European Union (EU) statistics office, various UN agencies, and private organizations made clear the unimaginable gap that has opened between the dominant countries of the Global North and the always-disdained nations of the South, in this case those of Latin America and the Caribbean.

Contrary to what has been a historic constant, however, this time the US and the floundering European economies have observed Latin America's healthy economic indicators. Those indicators show that the inclusive policies applied by progressive governments that came onto the scene with the new millennium produced employment growth and the capacity to generate new jobs and, consequently, a significant drop in poverty and food-insufficiency indices.

To be sure, the region remains one of the most unequal--and the UN agencies note that--but "with the capacity to show the world, and especially European countries, perhaps not only what they should do with their economies but also what they should not do," said Argentine economist Raul Dellatorre.

Commenting on a radio program about a report from the Economic Commission for Latin America and the Caribbean (ECLAC), Dellatorre referred to the adjustment policies that international lending institutions have demanded of countries like Greece and Spain. Dellatorre said such policies "are serving only to generate more unemployed and more poor. This has imposed a harsh reality on those societies that could be avoided if they learned from Latin America, which showed that it is not by adjusting or reducing salaries and pensions or by cutting spending on health and social programs that the crisis is solved but rather by applying inclusive policies. It is not by privatizing state businesses but by investing to develop them."

World Bank report leads off good news

The region's good news began on Oct. 3, when the World Bank released its report "The Labor Market Story Behind Latin America's Transformation." It indicates that, despite the economic slowdown in the large South American countries--Brazil and Argentina--regional GDP will continue trending upward, for an average growth rate of between 3.8% and 4% in 2013. Meanwhile, global growth is declining sharply from 4.5% in 2011 to about 2.25% in 2012, with prospects of a larger drop in 2013.

The World Bank report says that Latin America and the Caribbean will close the year with average unemployment at 6.4% and with expectations of even better figures next year.

The report adds an essential observation: "The region's long history of wage volatility linked to inflation surprises has come to an end. Even during the recent global crisis real wages remained stable without leading to higher unemployment. Behind this development is the rising credibility of the Central Banks in their conduct of monetary policy."

With this brief analysis, although it did not say so explicitly, the World Bank abandoned everything that was its creed during the dark years of the rise of neoliberalism in the 1990s. At that time, its position was that salary increases were a powerful inflationary factor and that healthy and stable salaries were negative for growth. It denied the stimulating role of the internal market and opposed countries' retaining their independence to set monetary policies.

In a complementary report on Oct. 31, the World Bank said that, as a result of the new policies that broke with neoliberalism, between 2000 and 2010 Latin America and the Caribbean generated 35 million jobs.

"The fist decade of the 21st century was very good for the job market in Latin America. We have seen educational improvements, a constant increase of women in the work force. We have seen how more and better jobs have been created. We have seen how employment in the informal sector has fallen and how adjustments to the labor market have increased efficiency compared with the 1990s," said Julian Messina, a senior economist at the World Bank, speaking in Lima about job creation in the region. …

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