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From Social Policy to an Open-Economy Social Contract in Latin America

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  • Nancy Birdsall

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Abstract

After a decade of economic and political reforms that dramatically altered the structure of economies in Latin America, poverty and high inequality remain deeply entrenched. Integration into the global economy in the 1990s brought increased prosperity only to a small minority of households in most countries, primarily those in which adults had some university education. The reforms in themselves did not hurt the poor, but they left behind both the poor (using the international definition of those living on less than $2 a day), but the great majority of middle-income households who are, as I show, surprisingly poor by Western middle-class standards. What does this imply for future social policy in the region? I suggest in this paper the logic of going beyond the standard, poverty-targeted, elements of good social policy to a modern social contract adapted to the demands and the constraints of an open economy. A modern open-economy social contract would extend current social policy in two ways. First, it would be explicitly based on broad job-based growth. Second, it would be politically and economically directed not only at the currently poor but at the near-poor and economically insecure middle-income strata. I discuss critical elements of an open-economy social contract. These include unusually good fiscal policy; increasing effective taxation of the rich, making job mobility an explicit public policy goal, and a regional strategy for better access to rich country markets.

Suggested Citation

  • Nancy Birdsall, 2002. "From Social Policy to an Open-Economy Social Contract in Latin America," Working Papers 21, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:21
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    File URL: http://www.cgdev.org/content/publications/detail/2769
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Miguel Braun & Luciano di Gresia, 2003. "Hacia un sistema de seguro social eficaz en América Latina: la importancia de una política fiscal anticíclica," Research Department Publications 4334, Inter-American Development Bank, Research Department.
    2. Bird, Richard M. & Zolt, Eric M., 2015. "Fiscal Contracting in Latin America," World Development, Elsevier, vol. 67(C), pages 323-335.
    3. Hector J. Villarreal & Ricardo Cantú, "undated". "Do Walmartians Ruled? The political power of an emerging middle class in Mexico," Working Papers 20081, Escuela de Graduados en Administración Pública y Políticas Públicas, Campus Monterrey, revised Jun 2007.
    4. Jan Vandemoortele, 2004. "The MDGs and pro-poor polices: related but not synonymous," Working Papers 3, International Policy Centre for Inclusive Growth.
    5. Miguel Braun & Luciano di Gresia, 2003. "Towards Effective Social Insurance in Latin America: The Importance of Countercyclical Fiscal Policy," Research Department Publications 4333, Inter-American Development Bank, Research Department.

    More about this item

    Keywords

    Latin America; social policy; open economy; poverty;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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