Want to slash poverty? Look to Latin America.
One in 10 South Americans – about 38 million people – escaped poverty during the past decade. That's remarkable progress by any measure.
Contrast that with the United States, where poverty has been growing due to a decade-long stagnation of income for the middle class and the Great Recession. In 2009, the US had more poor people than in any of the 51 years since poverty levels have been estimated.
Of course, America's poor are far better off than South America's poor. And the US still has a much lower poverty rate (14.2 percent versus around 70 percent). South America remains infamous for huge income gaps between a tiny elite and masses of people making, often, just $1 or $2 a day.
Still, 10 years of growing prosperity has shrunk that gap. The credit goes to democratic leftist governments that have vastly boosted social spending to help the poor, maintains Mark Weisbrot, a left-of-center economist at the Center for Economic and Policy Research in Washington.
Half of that improvement comes from Brazil. Under outgoing President Luiz Inácio Lula da Silva, the nation pushed up the minimum wage a real 65 percent in eight years, helping to raise the wages of tens of millions of workers, including many receiving more than minimum wage. A program offered small cash grants to poor families if they sent their children to school.
The results? Real income per person is up some 24 percent since 2000. Illiteracy is down. Poverty has been halved since 2002; extreme poverty is down by 70 percent, says Mr. Weisbrot, pulling more than 19 million people into the middle class.
And the economy hasn't suffered. Unemployment under Mr. da Silva's presidency dropped from more than 11 percent to 6.7 percent. Income inequality has fallen considerably.
Other nations with "progressive" governments have made much social progress, notes Weisbrot. He lists Bolivia, Ecuador, Argentina, and Venezuela. Under President Hugo Chávez, attacked by the right in the US, oil-rich Venezuela has tripled social spending per person since 2003. Attendance at universities has doubled. Most of the poor now get health care under a government program.
The continent weathered the financial crisis relatively well. Social spending rose. So there was no big rise in poverty, says Norbert Schady, an economic adviser to the Inter-American Development Bank, speaking from Quito, Ecuador.
Moreover, prospects for continued economic progress are strong. The Institute of International Finance (IIF), set up by the world's biggest banks, forecasts 6 percent growth in gross domestic product in Latin America this year, which includes Mexico and Central America as well as South America. That growth should shrink poverty further.
By contrast, the IIF forecasts a 2.5 percent growth rate this year for the US. At that slow pace the US could see a further rise in poverty.
South America's new economic vigor is also causing a geopolitical shift. The US has long considered Latin America part of its political and economic sphere of influence. Officials running South America's left-of-center governments often charge the US with imperial ambitions.
But as US growth slows, South America's businesses have reached out to other markets. While 15 percent of South America's trade is still with the US, a greater share is tied to Europe. Also, trade within the continent is growing with a free-trade deal. So South American governments no longer feel so much under the thumb of the US.
• David R. Francis writes a weekly column.
