The outgoing President, Ricardo Lagos, once made a commitment to crecimiento con igualdad: growth with equity, meaning that everyone would get their fair share the benefits of economic growth. While Chile has seen plenty of economic growth in the past 4 years, critics have pointed to the lack of improvement in the distribution of wealth. The following table, based on statistics from MIDEPLAN, the Ministry of Planning, shows the proportions of total autonomous household income (not including benefits) enjoyed by each 10th of the population, ordered from I (the poorest 10%) to X (the richest 10%).
The data show that the distribution has stayed very much the same right across the period from 1990 to 2003, and the difference between the shares of the richest 10% and the poorest 10% is frankly shocking.
In a recent interview (El Mercurio, 18 December 2005), the presidential candidate Sebastián Piñera (representing the right-wing Alianza por Chile) was asked what would be his biggest objective as president. He responded "I want to be the president that managed to defeat poverty in Chile". He went on to give a fairly confusing account of how it would be possible to eliminate extreme poverty in Chile in the next four years, deftly mixing up statistics on GDP growth targets, the poverty gap, and the poor. To be fair, I'm not sure if it was he who was confused, or the journalist, or both, but I as reader definitely ended up confused. The only thing that was clear was that he planned few radical changes: the main idea seemed to be that given the expected growth of 25% in the economy over the next four years, a fairly modest proportion of this (1.7 percentage points), if directed at the poorest families by drip-irrigation, would get them up and over the poverty line. Was this a subconscious agriculture reference or a hint of a land-owner mentality? Is he thinking of ways to improve the crop of poor families in future years? A sort of fertilizer to make them stronger and happier?
I did some research into a figure of 1.7% of GDP that Piñera mentioned would need to be trickled down towards the poorest in society in order to get them over the poverty line. What I came up with was that the most recent figure on the poverty gap in Chile was indeed 1.7%, but this was not 1.7% of GDP, but the average difference between the household income of the poorest families and the poverty line, expressed as a percentage of the poverty line (technical note: the so-called "poverty gap" indicator is one of the Foster-Greer-Thorbecke family of poverty measures, FGT(1), where FGT(0) is the "head count" or incidence of poor families in the population; both are percentages but of different things).
What is the poverty line? The definition changes from country to country; in Chile there are two official poverty lines (according to MIDEPLAN): the line for extreme poverty or indigencia (which translates roughly as being the limit of starvation) is the income needed to buy the food that supplies the minimum quantity of calories needed for continued survival. The other poverty line is rather arbitrarily defined as being twice the value (in income) of the extreme poverty line. So, in conclusion, what came across as being rather impressive in newsprint (1.7% of 25% economic growth) appears to be something else in reality: a small fraction of the minimum income needed for survival by the poorest families in Chile. I hope Piñera is not planning to grow them up until they are fit for harvesting. Data on the changes over time in the proportion of Chilean households living in poverty and extreme poverty apparently show a significant improvement, as the following graph shows.
The data appear to show a significant improvement in the situation. How can this be consistent with the data we saw earlier that show no improvement in the distribution of wealth over the same period of time? The main explanation that occurs to me is that while over this period of sustained economic growth wealth has trickled down to the poorest families, rather more has fallen on the upper layers of the Chilean jungle. In this sense, crecimiento con igualdad could be interpreted not as "growth with equity" but as "growth without change"; everyone gets richer, but in proportion to their previous level of wealth. Of course that was not the spirit of the words, and despite being fairly skeptical about the promises of presidential candidates, I honestly hope that the phenomenon of prosperity with equity will be much more evident in the years ahead. The chances for radical improvements to the lot of the poorest groups in Chilean society do not look very good, however; the most probable scenario would seem to be "business as usual", and we have seen what that scenario implies for the distribution of wealth. The binomial system used in Chilean elections means that whichever of the main two coalitions gets the presidency, in practice they cannot do much without the agreement of a significant proportion of the other coalition. So, for all the rhetoric of the presidential candidates, the possibility for real change is dependent on the government being able to agree on the best course of action. Let us hope that when they do agree on what to do, it will be in the best interests of all of the Chileans. Perhaps this is why so much emphasis is placed on the personality and the leadership abilities of the political candidates: whoever is elected will have to knock heads together and forge a consensus if they are to have any chance of achieving their objectives, however laudable those might be.
The figures in this article have been borrowed from various documents produced by the Fundación para la Superación de la Pobreza.
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