ECONOMIC POLICIES AND GOVERNMENTAL PERFORMANCE

READING

Smith, Democracy, ch. 8

Modern Latin America, chs. 11, 12

OUTLINE

1. Seeking Keys to Development

2. Declining State Capacity

3. Politics of Economic Growth• The Arguments• The Findings

4. Democracy and Social Welfare: Infant Mortality and School Attendance

5. Poverty and Inequality

IN SEARCH OF SOLUTIONS

The Liberal Era (1880s-1920s)Import-Substitution Industrialization (1930s-1970s)The Socialist Alternative (1950s-1980s)Neoliberalism and the Washington Consensus (1980s-

present)

HYPOTHESES: THE POLITICAL ECONOMY OF DEVELOPMENT

H1: The greater the prevalence of democratic rule, the greater the provision of material benefits.

H2: The greater the prevalence of undemocratic (authoritarian) rule, the greater the provision of material benefits.

H3: The prevalence of democratic or undemocratic rule bears no systematic relationship to the relative provision of material benefits.

Figure 1. Cycles of Political Change in Latin America, 1900-2000

0

1

2

3

4

5

6

7

8

9

10

11

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13

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1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000

Year

Nu

mb

er Semi-Democracy

Oligarchy

Democracy

GDP Growth

1960 1965 1970 1975 1980 1985 1990 1995 2000

-3

-2

-1

0

1

2

3

4

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7

Patterns of GDP Growth, 1960-2000

Table 8-2. Electoral Regimes and GDP Growth, 1960s-2000

| _____________Electoral Regime__________ GDP | Autocracy Semi-Democracy Democracy Growth (%) (%) (%)-----------+-------------------------------------------+---------- Low | 27 26 24 | Med-Low 20 31 29 | Med-High 24 26 26 | High | 30 18 22 | -----------+-------------------------------------------+----------

101 101 101 N | 306 109 319 | 734

Figure 8-3.  Electoral Regimes and GDP Growth (Rank Order)

1.57%

3.30%

4.91%

5.10%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

Autocracy 1978-2000

Democracy 1978-2000

Autocracy 1940-1977

Democracy 1940-1977

Re

gim

e-Y

ear

s

% GDP Growth

Table 8-4. Electoral Regimes and Infant Mortality, 1960s-1990s

Infant | _____________Electoral Regime______________ Mortality | Autocracy Semi-Democracy Democracy

(%) (%) (%)-----------+-------------------------------------------+-

High | 48 17 12 | Medium-High 22 32 24 | Medium-Low 22 32 25 | Low | 8 19 39 |

-----------+--------------------------------------------+ Total | 100 100 100 |

N 128 53 186

Table 8-7. Electoral Regimes and Primary School Enrollment, 1980s-1990s

Primary | _____________Electoral Regime______________ School | Autocracy Semi-Democracy Democracy Enrollment (%) (%) (%)

-----------+-------------------------------------------+- Low | 40 27 14 | Medium-Low 15 14 38 | Medium-High 31 14 27 | High | 13 45 22 |

-----------+--------------------------------------------+ Total | 99 100 101 |

N 67 44 101

Note: Columns may not add up to 100 because of rounding.

FOLLOW-UP STUDY

• Universe=Middle income countries• 55 in lower-middle, 41 in upper-middle, N=96

• Time frame=1990-2004• Units of analysis=country-years

• Dependent variables= Annual GDP growth rate (%) Infant Mortality (per 1,000) Primary School Enrollment (%)

REGIONAL DETERMINANTS

__Growth__ __Mortality__ __Schooling__ (1,091) (280) (370)

East Asia (0, 1) .8961 -6.7748 5.9032 Eastern Europe (0, 1) -1.9764* -11.3097* -.6376 Central Asia (0, 1) -1.8337* 13.0827* 1.4343 Middle East (0, 1) .7693 -1.3313 -.1781 Sub-Saharan Africa (0, 1) -.2954 18.9078* -11.8868* South Asia (0, 0) ---- ---- ---- LatinAmerica & Caribbean (0, 1) -.1103 -2.4558 2.2513 Constant: 3.6313* 71.2188* 82.5390*

R2 .0096 .6234 .3227

*Significant at .05 level or better.

REGION AND DEMOCRACY

__ __ Growth__ __ Mortality__ __ Schooling__(1,032) (266) (346)

Latin American & Caribbean Democracy (0, 1) .2373 -11.8388* 8.5104* Other Democracy (0, 1) .3569 -10.4353* 4.5804* Nondemocracy (0, 0) ---- ---- ----

Constant: 3.9008* 83.8488* 76.6599* R2 .0690 .5336 .2027

*Significant at .01 level or better.

DEMOCRACY WITHIN LATIN AMERICA

__Growth__ __Mortality__ __Schooling_ (240) (48) (80)

Liberal (0, 1) 1.1157 -12.5294 .3389 Illiberal (0, 1) 1.1872 -.0239 -2.2475 Semi (0, 1) 1.1818 4.2093 2.3719 Nondemocracy (0, 0) ---- ---- ----

Constant: 3.1253 46.8197* 95.7521* R2 .0609 .4680 .1792

*Significant at .05 level or better.

UPDATE: GROWTH RATES2000 + 4.02001 + 0.42002 - 0.42003 + 2.22004 + 6.12005 + 5.02006 + 5.82007 + 5.82008 + 4.22009 - 1.82010 + 5.92011 + 4.82012 +2.6

UPDATE: POVERTY LEVELS

N__%__ __(millions)__

1980 40.5 136 1990 48.3 200 2002 44.0 2212010 32.1 180

UPDATE: INEQUALITY

1980-2000 = rising increasing lower-higher skilled gap uneven effects of international trade absence of public policies

2000-2006 = declining (slightly) reduced lower-higher skilled gap (due to education) government programs (including remittances) 2007-09 unclear impact of global crash still high by world standards

ANTI-POVERTY PROGRAMS (CCTs)

Goals: Empowerment of poor, improvement of life chances Increase of human capital Reduction of poverty and inequality

Features: “conditional cash transfers” social contract between state and beneficiaries typical conditions: children’s attendance at school, of health

care, nutrition payments usually made to women (mothers), not men

(traditional heads of family) requirements for oversight (entry, exit, funding)

CASES: MEXICO AND BRAZIL

Mexico: “Oportunidades” (1997- ) 5 million households 20 % of household consumption payment to mothers major impact on school attendance excellent data collection 0.5% of GDP

Brazil: “Bolsa Família” (2003- ) 11 million households $14 USD per child up to 3 children (+ “basic benefit” ≈ $37) payment through debit card distribution > human capital formation 20% decline in inequality 0.5% GDP

Elsewhere: Argentina, Colombia, Chile, Ecuador, Honduras, Nicaragua, Paraguay, Peru…

Perceptions of Poverty in Latin America, Europe and the United States

Percentages (%) who believe that: The poor are poor because:

“Society is Unjust” “They are Lazy” “The poor have very littlechance to escape from poverty”

LAC - Average 65.8 28.3 62.0Mexico 65.8 24.6 56.9Argentina 74.0 26.0 74.5Brazil 75.7 20.5 70.5Chile 55.6 36.9 58.5Peru 56.5 34.2 47.1Venezuela 52.9 47.1 59.6Uruguay 77.2 12.4 73.5Dom. Republic 68.6 24.5 61.2Colombia n.a. n.a. 55.8

ContinentalEurope 63.3 17.1 60.2

United States 38.8 61.2 29.5