Diverse Histories, Different Outcomes: Social Policy and Development in Latin America and East Asia

During the 20 century, over two hundred million Latin Americans and South East Asians abandoned their secular, agrarian, traditions and migrated to a modern, urban, way of making a living; at the same time, countless millions housewives joined the workforce. A turbulent, painful, and frequently violent, process that is still ongoing in full transition in the regions as a whole. It has been the birth of a century. It was led by theState, through two succesive developmental strategies: Initially, the State had to build economic infrastructure by itself, meanwhile, social policy was used mainly as a means to transform backward peasantry into a fairly healthy, and educated, urban workforce. The second strategy took advantage of these achievements, to promote State-led market economies, meanwhile social policy shifted it focus mainly to address the problems of already large urban populations. 

Both regions are emerging out of this process as significant economic actors of the 21 century, and at the same time their overall indicators measured by UNDP social development index have improved quite dramatically. Yet, in spite of these regularities, wide differences are evidenced in their respective outcomes: Latin America started its transformation decades earlier, but East Asia has changed much faster; the former is the most socially unequal part of the world and relies heavily in the rent of natural resources exploited by a tiny part of the workforce, which relegated in large part to commerce and non-productive services, remains in large part poorly educated and precariously unemployed or unemployed; meanwhile the latter is amongst the most egalitarian, and bases its economic might in the value added by its highly qualified, fairly decently and fully employed, mainly industrial, workforce. The paper tries to explain these different outcomes in the history of transition in both regions, analysed in the intersecting spaces of tectonic shifts in their social relations, historical starting points and paths, and institutional arrangements

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Diverse Histories, Different Outcomes: Social Policy and Development in Latin America and East Asia

On a tectonic level, economic development is all about urbanization. When peasants massively migrate to the cities, and women join the urban workforce, their exhausting work miraculously acquires the Midas Touch: everything they touch turns into gold, although very little of it ends in their own pockets. Before, in the fields, and homes, it had been just as hard, and they had delivered products and services that were just as useful, however, they consumed them mostly themselves or their families: scarcely any of them was sold in the marketplace. 

     Meanwhile, when they join the urban workforce, most of their work is input into goods and services that are sold in the marketplace. Peasants and city dwellers have bread and milk for breakfast, but only the latter buy those in the marketplace. Gross Domestic Product (GDP), the core measure of modern economics, only accounts for the value added by human work input into goods and services that are sold in the marketplace. The rest of human work -that is to say, most of it in peasant, and male provider, societies-, does not count for this purpose. This is not the result of a mistaken calculation: human work assumes the form of value only when the goods and services produced are sold in the marketplace. 

     This is the great finding of the classic liberal economists, which according to Marx, changed the course of human thought. Based on this knowledge, the latter author described this great peasant migration as the indispensable basis for the emergence of modern economies: He called it “primitive accumulation of capital”, because it provides the armies of men and women, liberated from their oppresive bonds to lords, land and home, free to be hired by capitalist employers; and also forced to do so once and again, to earn a living, which most of them cannot do otherwise because in the cities they lack land or other means of production and livelihood. 

    It was only after the fall of the Berlin Wall in 1989, that the world has become aware that this is an ongoing process, as formidable capitalist competitors emerged from the other side, while communism remained a phantom. Goldman-Sachs’ Jim O’Neill estimated in 2003 thatthe BRIC countries, until then considered condemmed to eternal backwardness, would swarm into the G6 by mid-century; since then, bankers have been greatly exaggerating the speed of this process to entice naive investors into the mother of all speculative bubbles. And there are much more to come, as the UN estimated that in 2008 exactly half of humankind were still peasants. Markus Kopplers, CEO of mining giant BHP Billiton, in a 2008 interview to The Wall Street Journal, described the same process saying: GDP is growing very fast as new people are arriving to industrial age, as a consequence of massive urbanization.