In Brazil as elsewhere in Latin America, social infrastructure and access to state-provided, decommodified goods and services are growing at uneven tempos, exacerbating inequalities that are more difficult to measure than raw labour-income disparities. Patchy state provision of basic public goods, coupled with rising wage earnings, have encouraged private spending in education and health. Indeed, healthcare is a prime example of how a universal right has been damaged by the rationale of finance-led capitalism.
Lena Levinas, New Left Review 84, November-December 2013
Latin America has long served as a proving ground for economic and political experiments that later acquire a global reach: the shock therapy of neoliberalism was followed by structural adjustment programmes that were visited on debt-stricken states across the continent in the 1980s, before being rolled out in Africa and elsewhere. [1] Since the late 1990s, the region has also served as the laboratory for what the Economist has called ‘the world’s favourite new anti-poverty device’: conditional cash transfer programmes (CCTs) which, as their name suggests, supply monetary benefits as long as recipients can demonstrate that they have met certain conditions. In 1997, only three Latin American countries had launched such programmes; a decade later, the World Bank reported that ‘virtually every country’ in the region had one, and others outside it were adopting them ‘at a prodigious rate’. By 2008, 30 countries had them, from India, Turkey and Nigeria to Cambodia, the Philippines and Burkina Faso; even New York City had put one in place. [2]
The reasons for this proliferation appear simple. CCTs hold out the prospect of killing several developmental birds with one stone: by tying receipt of benefits to children’s attendance at school or to family visits to health centres, they aim to reduce extreme income poverty while also addressing other disadvantages suffered by the poor—rectifying what development-speak calls ‘underinvestment in human capital’. In many cases they also claim to advance an agenda of ‘female empowerment’, either by requiring women to be the recipients of the cash or by making girls’ education a condition of disbursement. Further, by ‘targeting’ recipients and imposing conditions, CCTs offer a way to attenuate extreme poverty without imposing the kind of fiscal burdens that universal welfare provision would involve; they are an ad hoc benefit, subject to significant budget constraints. The Economist concluded approvingly in 2010 that ‘the programmes have spread because they work. They cut poverty. They improve income distribution. And they do so cheaply.’ [3] Little wonder, then, that governments across the developing world, policy experts and multilateral financial institutions—the World Bank foremost among them—have increasingly turned to such programmes as their weapon of choice in the ‘war on poverty’.
The rise of CCTs has unfolded in the midst of a broader shift in the nature of social protection, affecting global South and wealthy North alike. In many rich industrialized states, governments of both centre-right and centre-left have proclaimed that they can no longer afford universal welfare systems of the kind created during the twentieth century. Over the last three decades, many have moved to downsize or dismantle them, shifting from comprehensive coverage towards more individualized models—‘targeted’ or ‘means-tested’—and from decommodified provision of goods and services to a greater emphasis on cash benefits. The differences are by no means trivial, underpinned by an ideological sea change with far-reaching effects. Whereas one function of the post-war welfare state had been to remove core provision of health, education, housing and social insurance from the buffetings of the market, the role of the new-model ‘enabling state’ is to facilitate the play of market forces—providing ‘public support for private responsibility’. [4]Rather than recognizing needs, it concedes ‘entitlements’, and instead of ensuring equal access to public goods, it offers rewards in exchange for the fulfilment of obligations—the quintessential coinage in this sense being ‘workfare’.
In the West, one of the key mechanisms for promoting individual responsibility has been financialization: the expansion of credit markets enables citizens better to ‘manage risk’, with personal and household debt serving in theory both to liberate citizens from dependency on a retreating state and to discipline the feckless. These same doctrines of individual responsibility and risk management have also been advanced across much of the global South, most prominently by international financial institutions, development agencies and NGOs. Here the agenda has been driven not so much by a desire to dismantle universalist mechanisms—countries in the developing world generally lacked the comprehensive social insurance schemes that were a feature of the Cold War in the West—as by a twofold emphasis on economic growth and ‘human capital accumulation’. The generally low educational levels and vulnerable health of the poor are seen as an obstacle to prosperity, not least because they prevent them from participating fully in the market. As one IMF functionary emphatically asserted at a seminar co-organized by the Friedrich-Ebert-Stiftung and ILO, ‘there is no vibrant economy if there are no consumers.’ [5] In this agenda, the battle against poverty and the advance of finance-led capitalism have fused.
In the 1980s and 1990s, the tools of choice for integrating the deserving poor into the market were microcredit schemes, such as Grameen Bank in Bangladesh or BancoSol in Bolivia. Despite many enthusiastic claims made for them, the impact of such schemes on poverty rates was modest, to say the least. [6] Since the turn of the century, thanks to their record of apparent success in Latin America, it is CCTs that have moved to the fore. Such programmes are not merely a technical device for combating poverty. By targeting recipients on condition that they demonstrate ‘co-responsibility’ for their own welfare, the schemes reinforce the trend away from universal provision and towards a limited, ‘residual’ model of social protection. At the same time, by providing select groups of the poor with cash or new modalities of bank credit rather than decommodified public goods or services, they are also a powerful instrument for drawing broad strata of the population into the embrace of financial markets. In that sense, the global spread ofCCTs is part of a wider reshaping of welfare regimes in the developing world and beyond.
But just how effective have CCTs been in reducing poverty, and what have been their wider consequences for social provision in countries that have adopted them? The experience of Latin America, where the policy was developed and road-tested on populations from Mexico City to Santiago, from the Brazilian sertão to the Peruvian altiplano, offers the broadest range of case studies to date. In what follows, I trace the emergence and take-up of CCTs across the region, and examine the evidence on their outcomes.
The decisive impetus for the design and implementation of new safety nets came from the severe fiscal and economic crises of the 1980s. The debt spirals that resulted from the hiking of USinterest rates in 1979 brought high inflation, unemployment and sharp declines in real wages across Latin America, as growth stalled for what became known as the ‘lost decade’. The remedies applied—IMF-decreed structural adjustment plans, which involved sweeping cuts in social spending and elimination of subsidies—aggravated the situation, deepening levels of destitution and forcing millions into the informal economy. Over the course of the 1980s, Latin America witnessed a significant increase in poverty and ‘indigence’ (extreme poverty) rates: according to figures from the Economic Commission for Latin America and the Caribbean (ECLAC), the overall poverty rate for the region went from 41 per cent in 1980 to 48 per cent in 1990, with indigence rates rising from 19 to 23 per cent. The number officially classed as poor reached 204 million people in 1990, as against 136 million ten years earlier.
There was clearly an urgent need for some sort of cushion against the consequences of liberalization. The existing pay-as-you-go social protection systems, largely the privilege of formal-sector employees, were unable to cope with the effects of structural adjustment, and those outside them fared still worse. But the solutions sought for this situation during the 1990s involved not a reversal, but an extension of the neoliberal paradigm, to which many governments had converted radically and abruptly, pushing through extensive and rapid privatization programmes. Two strategies were pursued initially. On the one hand, the public pension systems were to be fully or partly privatized, to reduce the fiscal burden imposed by demographic shifts (population ageing) coupled with low growth and high rates of informality among the working population. Several Latin American countries adopted pension reforms which, following the example set by Chile in the early 80s, entailed an expansion of the private sector’s role: Mexico and Peru in 1992, Argentina and Colombia in 1993, Uruguay in 1995, Bolivia in 1996. A central aim was to foster the development of capital markets in Latin America, considered relatively feeble at this point. On the other hand, at the same time as it withdrew from the social responsibilities of pension provision, the ‘enabling’ state would play a greater role in ensuring the smooth operation of markets. Reducing poverty and indigence was a key goal of this strategy, since high levels of destitution represented a threat to liberalization. Otherwise, who would pay for the new services to be delivered by the private sector—pensions, health, electricity, water, communications?
These twin strategies—privatization, marketization—were pursued in parallel during the 1990s, without being integrated into a single, coherent model. Moreover, the results of this wave of social-insurance privatization fell far below expectations: as the World Bank itself acknowledged a decade later, the reforms failed to improve coverage rates. [7] Partly due to the dismantling of earlier, fragmented public pension regimes, poverty grew in the 1990s in several countries: Bolivia, Ecuador, Peru and Venezuela all experienced rises in the poverty rate. The continuing vulnerability of large sectors of the population, and the deepening income deficits wrought by the crises of the 1980s and ensuing structural reforms, prompted the development of a different kind of safety net.