Managing Globalization: To Reduce Poverty, Money isn’t Everything
Tuesday, August 21, 2007
How much can governments do to fight poverty? In South America, a couple of answers are emerging in the growing economies of Venezuela and Brazil. Both governments have publicly pledged billions of dollars to raise living standards – but have they succeeded?
Overall income is moving upward in both countries, if for different reasons. Venezuela is riding the black tide of high-priced oil, while Brazil’s relatively firm economic policies have built confidence in its business prospects among both locals and foreigners.
The president of Venezuela, Hugo Ch?vez, has portrayed himself as an ardent socialist and a disciple of Fidel Castro. Reducing inequality is fundamental to his agenda, whether by dividing up Venezuela’s oil wealth or, as he has obliquely suggested this month, through land reform. His consolidation of executive power has brought Venezuela closer to a centrally planned economy and, as such, has given him the opportunity to invest heavily in social programs.
But identifying the results isn’t easy. The poverty rate in Venezuela was about 50 percent when Ch?vez’s presidency began in 1999, according to the government’s own figures. Since then, roughly equal numbers of people have fallen into and out of poverty at various times, with a spike to more than 60 percent in 2003 and a drop below 40 percent in 2005.
Notably, the figures have followed the path of Venezuela’s economic growth more closely than they have followed the level of investment by the Ch?vez government. This isn’t too surprising, given that the economic ups and downs have been spectacular: a deep recession and the more recent record-breaking boom.
“The reduction in poverty is the expectable result of growth, which is the expectable result of an oil boom,” said Francisco Rodr?guez, an assistant professor of economics and Latin American studies at Wesleyan University in Connecticut, via an e-mail exchange.
Rodr?guez also questioned whether Ch?vez’s programs could be completely effective because of the way they were managed. Some of the world’s most successful initiatives for improving the well-being of the poor, he said, linked families’ benefit payments to useful actions like their children’s attendance in school or visits to the doctor. In Venezuela, he said, the link is to political loyalty instead.
“The level of political polarization has become so high that not only is loyalty to the regime the key determinant of your access to benefits, it is also the key determinant of your capacity to be involved in the administration of those benefits to others,” Rodr?guez said.
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