Espinosa, Juan
Guillermo (2001), Economia Neoliberal
vs. Economia Social en America Latina, Santiago, Chile: Dolmen
Ediciones, S.A.
- CHAPTER III
Translated by
David Felix Roberts (February 2002)
- WHAT
TO DO?
- A NEW
WAY OF LOOKING AT THINGS
- Global
Concepts and Approaches
- 3.1
The Need for Change
- As the
twentieth century comes to a close, we have reached a point at which the
centrally planned economy, one of the principal approaches of the last
seventy years, is about to disappear. In addition, only the capitalist
market economy continues to function, extending its reach to nearly every
corner of the planet, in diverse forms and with varied emphases.
- In the
struggle between the centrally planned economic system and the capitalist
market economy now predominant, capitalism did not achieve its current
position because it proved the more successful of the two, but because the
centrally planned economy collapsed. Consequently, not a day goes by in
our societies without critical commentaries or multiple complaints—in the
press, the radio and television media, the universities, or in books and
other publications—about what is wrong with this economy. Apparently there
are no alternatives.
- Despite
great accomplishments and important gains achieved by the predominant system,
with each passing day it becomes clearer this system is plagued with
deficiencies and, considered from the perspective of human needs and
aspirations, is neither the economy nor the society that Latin Americans
desire.
- For those
who continue to believe that ideas precede actions, one current problem is
that this intellectual void and lack of alternatives have reached such
proportions that it is necessary to reformulate some directions and steps
in order to move toward a more humane economy and a better society than
the one we have at present.
- In this
time of disorientation and loss of basic paradigms, we must investigate
and establish more thoroughly what would be acceptable and what, exactly,
would constitute a better economy and society than the ones we now have.
From the point of view of a true social economy, where should we be
headed? Once we identify both the state of the situation and the negative
tendencies to which we have come at the turn of the century, what should
we do? Are there no tasks that we could implement to make current economic
policies more socially efficient; to improve State-funded public services
and make them more accessible, more equitable and effective, from a social
point of view? How can equality be increased in our times? Can
unemployment only be reduced through a type of growth that employs fewer
and fewer people, destroying ever more rapidly the very milieu that
demands it? Can we not protect the environment even better in both the
present and in the future? Do we maintain the same level of military
spending as in the past, even though the Cold War has ended? In an
increasingly internationalized world, what is the appropriate
responsibility and course of action for a more humane economy and better
society in terms of commercial development and economic integration,
particularly for the poor here in Latin America, but for the world as a
whole as well?
- The
questions are many and there would seem to be no answers except the
neo-liberal, “one and only way of thinking,” which is supported by
powerful financial institutions like the International Monetary Fund
(IMF), the World Bank and the Inter-American Development Bank and seeks to
encourage development by promoting free enterprise, deregulation,
privatization and a reduction in public expenditures on social services.
This approach has met with neither resistance nor debate as it has
attempted to take hold throughout Latin America in the last decade. In
these post-Cold War years, it certainly would seem that the globalist
approaches and totalizing models have become obsolete. Ironically, it is
the supporters of the “one and only way of thinking” and the “end of
history” who
emphasize and affirm the elimination of those approaches. In reality,
however, they continue to employ policies based on the previous models
they so ardently denounce, thereby demonstrating their failure to practice
what they preach.
- In truth,
we have all learned from the events of recent years that drastic and
automatic change is not possible; nor are there instant solutions that
would painlessly resolve everything at once. In past decades, above all in
the 1960s, desire and good intentions were naively considered sufficient
to modify reality and achieve a better society in a short period of time.
In Latin America, at least, we paid dearly for this innocence with the
swift arrival of military dictatorships and authoritarian governments.
Between the mid-1980s and early 1990s, the dominant thinking shifted to
the other end of the ideological spectrum by embracing the fashionable
idea that countries operate independently and that little or nothing can
be done, by the State in particular, since any improvement must be
initiated by an unrestricted private sector permitted to be the driving
force of the economy and of progress.
- In other
words, naïve volunteerism became a type of State and social absenteeism,
in which those concerned about the public interest were to be nothing more
than outside observers, inert and complacent about the evolution of things
or, at best, resigned.
- However,
toward the end of the 90s, the idea of change once again permeated Latin
American societies. Slowly, the perception that there is much to do and
much to bring up to date became widespread. Above all, it became clear
that we in Latin America must change our approaches and emphases with
respect to what we are doing and what we are failing to do.
- 3.2
The Society We Want
- “The
perfect society is that in which all persons find justice, work and well
being.”
—Aristotle
- Today, in
the majority of Latin American institutions and societies, we know how to
identify what we do not want to be. However, the principal task at this
time, as many times in the past, is to better define what it is that we do
want to be.
- As in the
best Latin American tradition, the goal of our analyses continues to be a
deeper analysis of the situation and an increasingly thorough study of the
problems that we face. However, the search for a way out, for viable and
desirable solutions, is an exercise rarely performed but one that now
seems essential, despite proclamations by those who believe we are at “the
end of history.”
- Many
think that because it is difficult to identify social objectives, the
search for new solutions in Latin America must be a very complex task.
However, history indicates that this is not necessarily the case. The
greatest difficulty lies not in identifying social objectives but in
identifying means and instruments in keeping with our social objectives
and procuring the resources necessary to achieve our goals.
- If we
were to identify the objectives of Latin American societies at the
beginning of the 21st century from the point of view of a more
humane social economy and in very schematic and concise terms, we could
say very simply that our hope is to contribute to the formation of:
21.
–A society
in which all people, without exception, have access to the goods and services
(public goods) that they deserve simply by virtue of belonging to a society and
as human beings are integral parts of a nation.
22.
–A just
economy, from which no one is excluded, in which all have access to at least a
living wage; in other words, an economy that is particularly sensitive to the
needs of the weakest, to the least privileged, to those who have suffered the
exclusions or the impacts of previous economic processes that have failed to
consider the human being as a priority; and an economy that provides a
preferential place for youth and that does not abandon the elderly, but rather
makes use of their experience.
23.
–A society
that accepts all cultural traditions, both those that have contributed to Latin
America’s identity as well as those of other cultures and of foreigners.
24.
–A
democratic society created in a participative manner, in which the
decision-making processes are timely, equitable and inclusive at all levels; in
which families can thrive, look towards the future with hope, share nature, and
preserve its beauties for future generations.
- Because
of the disorientation currently prevalent, these simple yet fundamental
approaches seem to have been lost or diluted and replaced with
macroeconomic indicators and instruments that represent different purposes
or are directed toward other goals. These basic approaches simply
represent the aspirations of the vast majority of Latin Americans who
think, desire and imagine a more humane economy and a better society than
the current one, in which they can progress and develop.
- 3.3 A
More Modern Approach to Measuring Progress and Human Welfare
- “The development models presently offered to us by
both the East and the West is a compilation of horrors; will we be able to
invent more humane models that correspond to what it is that we are?… Can
we conceive a development model that is our own version of modern society?” –Octavio Paz
- Despite the progress of modern economic
analysis in recent decades, one determinant issue remains unresolved, or
has been resolved only insufficiently, is the “measurement of
development.” By measuring development, which provides the necessary
empirical information, it is possible to determine whether we are
advancing, what are we advancing toward, and how much we really are
advancing. Certainly the question of measuring the level of development is
quite complex, if not impossible to resolve in purely economic and
quantitative terms.
- It is
well known that currently, the simplest measure of development, or what
has come to be considered the measure of development, is Gross Domestic
Product (GDP). This figure is a measure of the total amount of goods and
services produced in an economy over a given period of time (one year, for
example). It is calculated as a per capita figure to allow for
international comparisons among different economies.
- The period from the end of World War II
until the 1980s produced a wide and profound debate on a universal scale
about what was understood by
“development.” Without regard for the concepts analyzed in that
lengthy debate, from the 1980s on, specialists began to understand
development, in strictly economic terms, as the ability of a national
economy to generate and sustain annual GNP growth rate levels of five to
seven percent, or greater.
- The emphasis placed on the search for
development reached such levels that the United Nations proclaimed the
1960s as the “Decade of Development.” Development was conceptualized as an
indicator of income represented by attaining a target GNP growth rate of
at least six percent annually. Consequently, it became common practice to
use the real GNP per capita growth rates (i.e. the increase in the
monetary value of GNP per capita less the price inflation rate) to measure
a population’s global economic welfare in general terms. In other words,
to measure the amount of real goods and services available to the average
citizen for consumption and investment.
- In
addition, it has become customary to complement this quantitative measure
of development with casual references to generally accepted, non-economic
social indicators such as an increase in literacy, education, sanitary
conditions and access to housing.
- Thus, we
have reached a point at which we now study is not development but growth.
When economists study economic development now, they begin by slightly
modifying the subject under study. At least with respect to measurement,
what they study is not development as a complex, multidimensional process
but simply the growth of some index of the volume of production. They then
endeavor to explain this growth in GNP to the greatest extent possible in
terms of the growth of one or more input indices.
- This
present generalized use of a one-dimensional measure such as GDP to
represent economic development has not always been accepted practice. Even
now, it is not something inherent to economic analysis. This practice is
clearly a deliberate simplification and, like all simplifications, cannot
be accepted if it appears not to take into account essential aspects of
the subject under study.
- The use
of one-dimensional indicators is not, however, the only problem or detour that
occurs when economists attempt to measure development. One of the
principal problems with economics as a discipline is that economists
concentrate only on measurable things. It goes without saying that among
those things that should be measured, the ones that can be measured most
easily and precisely are the ones that capture economists’ attention.
Therefore, to cite one example, the majority of analysts agree that
statistics concerning services (which in the case of the U.S. comprise an
estimated two thirds of the economy) are inexact because they are
intangible.
- In
addition to services, there are many other factors of great social and
economic importance that economists do not even attempt to measure, and
consequently, in practice, are totally disregarded in economic analysis.
University of Chicago Professor Robert Fogel, the 1993 winner of the Nobel
Prize in Economics, has studied this issue. Fogel presented the American
Economic Association with a precise analysis of some of those neglected
areas of the economy and what they mean for growth and well-being.
37.
One of the
first subjects Fogel examined was technology. Although economists speak about
technology, it is a difficult area to quantify and one of the areas with which
they are unfamiliar, despite the broad consensus that long-term growth depends
in crucial way on technological advances. In his analysis, Fogel refers to
technology in historical terms, pointing out that technological change began to
accelerate dramatically around 1700 A.D., and that it has increased even more
rapidly in our time. However, this acceleration of technological innovation has
not been taken into account in the analyses of most economists. In general,
this is because economists consider only relatively short time periods in their
analyses and also, because they do not know how to measure this rate of
technological change.
- Fogel
insists that economists working now have entirely disregarded the
significant impact of information systems and computers on labor
productivity. There is a wide consensus that computers have had an
enormous effect on productivity, but since economists do now know how to
measure their impact, they tend to neglect this important change.
- Fogel
also believes that if technology has been disregarded, to an even greater
degree economists have failed to estimate economic activity produced in
the nonmarket sector. For example, in Latin America the growing magnitude
of informal work is rarely taken into account in economic measurements.
Likewise, in all countries, both developed and developing, there has been
a significant increase in volunteer work, in other words, in those jobs
that people perform voluntarily, without remuneration. However, this work
is not taken into account because economists only measure activities based
on the tangible income they generate.
- Another very important area that Fogel
highlights is that of spiritual resources, not in the sense of religion
per se but referring to the immaterial factors of well-being.
This area is also excluded by economists, since they limit their study
exclusively to the consumption of material goods. However, it has been
increasingly recognized, even among economists themselves, that daily,
spiritual factors are becoming more and more important to human happiness,
since the economic growth of recent decades has brought the disappearance
of many material needs of the past. A large number of economists have
estimated that until a century ago, only 10% of the North American
population had incomes above what is currently recognized as the poverty
level. Today, however, in the United States it is possible to satisfy
those basic material human needs with a minimal amount of work. According
to Fogel and many other social scientists now that those basic needs have already
been satisfied and people have much more leisure time, the improvement of
our general well-being now depends increasingly on our spiritual
well-being, causing spirituality to become a determinant of happiness for
most people. Fogel further estimates that at least half of real
consumption today consists of spiritual assets. It seems hard to believe
that these goods are poorly estimated or are totally disregarded by
economists.
- In
accordance with the resurgence of neo-liberal ideas and contrary to the
“great voids” mentioned above, the last two decades have brought a renewed
tendency in the large centers of economic and financial power to measure
only “economic growth” but to label it “economic development.” At most,
competitiveness indicators have been formulated, but these are indices of
financial and business profitability that do not accurately measure
development or human progress. Given the growing influence of finance and
the movement of capital in the international system today, the pages of international
economic newspapers and television newscasts are full of figures and
values, primarily calculated by large banks, risk assessment agencies or
by the World Economic Forum, all of which represent the prices of assets,
stocks, commodities, interest rates, currencies or exchange rates and many
other factors that have little to do with development, progress, and the
well-being of the people, poverty reduction, or improved quality of life.
- Development,
however, is a much broader and more important process. Human and social
development—of free people who are able to support themselves, and who
live and work in a community, and who do not find themselves alienated—is
much more important than the production of increasingly large quantities
of material goods or an increase in stocks and bonds.
- It is true that many other and more
complex methods for measuring economic development have been created.
Among them, for example, is the Harbison-Myers Human Skills Index. This is
probably the most advanced index, since it focuses not only on the income
and production levels of a specific economy but also on the development of
human resources. However,
international organizations and national economic authorities have not yet
begun to apply it. Instead, they maintain the current limited and
insufficient methods that our Latin American governments continue to apply
mechanically almost without improvement, despite recommendations that they
must be improved.
- In the
final analysis, it is clear that the indicators currently valid or
predominant in our system are being used to measure distinct or partial
processes that neither encompass nor correspond to development as a whole.
The principal problem with these indicators is that they promote
contradictory economic and social policies or measures and, in some cases,
ones that even promote the undesirable effects of the economic process.
- The
currently valid or predominant indicators, as mentioned above, focus on
measurable material progress, which is an important component of
development, but is far from the only one. This is because development is
not solely the economic phenomenon it has come to be considered in the
most advanced economies. Rather it is a phenomenon that should encompass
something more than the material and financial aspects of people’s lives.
- Aside
from increases in income and production, development typically involves
substantive change in institutional, social and administrative structures,
and also, in particular, in “people’s values and attitudes, and sometimes
even their customs and beliefs.”
For the same reason, as early as the 1970s, an increasing number of
economists and economic policy makers in the United Nations began to call
for product substitution as the “indicator” of development and for the
search for a new indicator that would be weighted more heavily toward
clearer and more nuanced advocacy for individuals, direct initiatives
against generalized and absolute poverty, the rectification of the
increasingly unequal distribution of income, and the specter of growing
unemployment.
- In
response to the issues presented above, since the end of the 1980s, the
United Nations has created a new concept, the Human Development Index.
This index is related to two other basic ideas that have emerged during
recent decades in the literature and in the analysis of development. The
first, which appeared in the mid-1970s, establishes satisfying the “basic
needs” of the inhabitants of each and every country as a fundamental goal
of economic development. The second, which also arises from the focus on
basic needs, and expands on it, emerged in the 1980s and states that
sustainable development should become the basis of modern development
strategies. In other words, development should tend to the needs of the
current generation without limiting the capacity of future generations to
progress socioeconomically, politically and ecologically.
- The
Human Development Index
- In 1990,
the United Nations Development Program (UNDP) began to publish the Human
Development Index, which has been systematically perfected. It currently
combines three basic elements of human development: lifespan, as a
reflection of life expectancy and the health of a societies’ inhabitants;
level of education or knowledge, measured by adult literacy and average
years of schooling; quality of life, measured by real GDP per capita,
adjusted to the local cost of living and purchasing power parity.
- The most
interesting thing about this initiative is the UNDP’s serious effort, by
creating the Human Development Index, to formulate a new paradigm that
places the human being at the center of the analysis. Seen from this
perspective, the objective of development must be for all human beings, of
both current and future generations in developing as well as developed
countries, to increase their economic, social, cultural and political
capacities.
- Furthermore,
the UNDP maintains that this indicator should be considered a “minimum
measure” that shows the degree to which “people are able to live long,
healthy lives; their ability to communicate with one another and to be
adequately informed about community activities; and that they can count on
having the resources necessary for attaining a reasonable quality of
life…” (UNDP: 1993).
- The UN
believes that, in its current form, the Human Development Index provides a
better measure of socioeconomic progress of those countries than simple
GDP per capita. Furthermore, this index can be used to evaluate progress
over time, in order to orient policy making and have a broader base that
will permit comparison among the experiences of several countries.
- It is
impossible to describe here the multiple results and interesting
antecedents associated with the HDI. (These figures are summarized and
published annually by the UNDP.) However, the Human Development Index
clearly allows us to classify countries in a different way than GDP’s per
capita-based ranking. For example, in the case of Latin America, a country
like Costa Rica that ranks 75 out of 170 countries in GDP, ranks 39 on the
HDI scale, perhaps because it offers its inhabitants better basic
education and health conditions than its position on the GDP per capita
scale indicates. In contrast, a country such as Brazil, which ranks 52 on
the GDP per capital scale, ranks lower on the HDI, probably for opposite
reasons. (See UNDP, Human Development Index, 1994).
- It is
obvious that the HDI’s rigid methodology fails both to take note of the
conceptual and theoretical wealth of human development and to cover the
topic exhaustively. In other words, the Index does not live up to its
concept. The loss of information produced is inherent to the process of
establishing socioeconomic indicators and it can be explained by the
Index’s focus on multidimensionality. The current methodological structure
of the HDI is the result of the UNDP’s effort to construct an index that
allows for comparison between countries. This has required choosing a
select and limited number of indicators that must be based on complete and
reliable statistical information capable of allowing for such of
comparison.
- When the
UNDP indicates that “human development is the process by which the
opportunities of the human being are expanded” (UNDP: 1993), it stresses
in particular that economic growth can be important but that alone it has
proven insufficient. Also, the organization does not become bogged down in
visions of social development in which people are considered either
“input” for development (as in theories of human capital); or only as the
“beneficiaries” of development (as in the social welfare approach and
other approaches). In this view of human development, individuals are an
end in and of themselves and not solely a means of production.
- The
concept of human development, then, in a broad sense, attempts to rescue
the centrality of the human being as the manager and beneficiary of
development. In doing so, it also rescues economists’ basic and
fundamental goal as they seek to define development: a way to measure
human progress on the basis of physiological, intellectual,
communication-related and material conditions, that increase quality of
life. Consequently, one of the first and most crucial tasks in
constructing a more humane economy and a society better than the one we
have at present is to establish appropriate socioeconomic indicators.
Relevant indicators must effectively measure the elements that economists
want to evaluate and be aimed precisely in the direction of the goals they
want to meet.
- The Human
Development Index is an indicator that clearly fulfills those objectives
and requirements. It does so better than GDP and its derivative
indicators. Therefore, it will be essential to implement the HDI in a
country from the time a process of change is initiated. The Index should
be expanded annually, preferably by national or official statistical
offices, that ideally would be the same entities or persons that keep the
National Income and Product Accounts. In addition, from the beginning, the
Index should be constructed regionally in view of what can be drastic
regional differences within a country.
- Constructing
and employing the Human Development Index in a country is not a question
of putting an end to the economic, social or financial indicators in the
present capitalist economy, but, rather, of revealing and highlighting two
fundamental aspects of development. First, there is an important need to
use relevant statistics and indicators that effectively measure and
provide information about what economists want to measure, especially in
less developed countries or interior regions. Second, the construction and
availability of appropriate statistics and indicators of the search for a
more humane economy and a society that is better than the one we have at
present is a basic requirement for strategic human development. Such
indicators, in turn, would allow for the selection and programming of
public and private policy and development efforts in general. Those
efforts should now be oriented toward increasing the opportunities a
nation’s people and offering full participation to all.
- As a
whole, the considerations discussed above indicate how important it is to
select indictors, indices, variables or measures of the evolution of
social and economic issues that are effectively aimed at, represent, or
correspond to achieving the goals established in the model or strategy of
a given development initiative. Although often considered trivial, this
issue is crucial and highly significant, especially when dealing with the
search for a more humane economy and a society that is better than the one
we now have.
- In
conclusion, the identification and selection of pertinent indicators could
be likened to mapping the landmarks and routes on an atlas in order to
ensure that efforts are being deployed as planned in pursuit of an
agreed-upon objective. Economists, politicians and other analysts
concerned about public issues often tend to disregard such indicators or
fail to identify them properly. However, experience has shown that
indicators should be specified from the onset of a process of change or at
the very beginning of any social or economic improvement program.
Otherwise, there is no way to know for certain whether the process moves a
society forward or backward. Knowing the route from the beginning helps policy
makers and individuals to stay on course and not lose their way on the
road to development.