Overcoming Poverty: Economic Growth vs. Social Policies?
Mauricio Olavarria Gambi
This article analyzes whether economic growth has been effective in reducing poverty in context of either relatively high or low social indicators. The case of Chile is compared to two similar cases (Uruguay and Costa Rica) and to two different cases (Bolivia and Paraguay). The work argues that long government involvement in social services has been a key factor in enabling many sectors of the population to increase their human capital, making it possible for them to take advantage of opportunities given by growth to escape poverty. The paper concludes that the long tradition of social policies would have created the conditions for Chile, Uruguay, and Costa Rica to exhibit relatively high social development and low poverty. On the contrary, the lack of such social policy long tradition would have prevented Bolivia and Paraguay to reduce poverty and speed up their social development, even in their fast growth era. Thus, the article opens the question on whether economic growth needs preconditions to contribute effectively to poverty reduction.
This document is a byproduct of the research project "Fighting Poverty in Chile," sponsored by the University of Chile's Vicepresidency of Research. The work has undertaken a quasi-experimental expost design. The countries analyzed -Chile, Uruguay, Costa Rica, Bolivia, and Paraguay- have been compared on their long term economic performance, social development and the politics leading to the rise of main government intervention in social affairs.
The paper begins presenting the facts on Chile's poverty trend, the debate on what would explain such poverty reduction and the mainstream opinion on that economic growth would be that explanation. To provide the context of the analysis, the recent evolution of the economic and social trends is also presented. The article shows a discussion based on the findings of the research and then concludes that economic growth itself is not the cause of poverty reduction observed in Chile, and that economic growth and social policy not only act together but also need each other to make poverty to fall.
Boletín Reforme N° 397
