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Multilateral policy-making

Poverty and exclusion are not the same

by Luiz Ramalho
The Inter-American Development Bank backed off from pure free-market doctrine in “Outsiders?”, a policy document published late last year. Luiz Ramalho, head of InWEnt’s Sustainable Business Department, appreciates the Bank’s growing interest in how societies operate. [ Interview with Luiz Ramalho ]

You have read “Outsiders?”, the report by the Inter-American Development Bank (IADB). What did you find remarkable about this multilateral institution’s policy paper?
The report takes a new look at social exclusion in Latin America. In recent years the continent’s economies have been growing, but so has inequality. Only very recently have there been rays of hope that public policy might reduce inequality somewhat. The IADB authors make interesting distinctions. Social exclusion is often referred to specific groups of the population such as women, indigenous communities and Latin American people of African origin. More importantly, however, they consider exclusion the result of economic and social interaction among Latin American people. Exclusion is thus no longer seen as the problem of particular segregated groups, but as a mechanism which affects the entire poor population.

How does exclusion come about?
Exclusion is about large sections of the people being put at a disadvantage by formal and informal processes. Water, for instance, is a simple and essential commodity, and it is more expensive for poor people who are not connected to public supply systems than for better-off people with a mains connection. Poor people can hardly afford access to education or health services – and on top of that, they face cultural and other barriers. The media do not report their views, and their organisations do not have voice in the polity. Social interaction is organised in a way that prevents marginalised people’s participation.

What is the merit of that point of view?
It leads to new approaches to policy making, which is no longer about “affirmative action” or programmes targeting specific groups and fighting poverty with income transfers, for instance. Rather, policy has to reduce – and even put an end – to the dynamics of exclusion. Essentially, we need to provide access to opportunities, we need political involvement, we must expand human capital and create scope for politically effective self-organisation.

Please be more specific.
Poverty and exclusion are not the same thing. Poverty refers to income. But if transfer programmes boost incomes, the other forces of exclusion stay in place. Therefore, policy-makers should tackle the problem of exclusion in a different way. For instance, if they provide access to the education and health sectors, that will do more to reduce poverty than simple money transfers would. Policy-makers have to give disadvantaged groups influence; they have to empower them.

Does the report refer to the economic laissez-faire dogma, according to which growth is the prime goal and free markets are best fit to generate growth?

A departure from that world view is obvious. The IADB recognises that social exclusion has not been paid sufficient attention by multilateral and, to some extent, bilateral agencies to date. The proposed combination of prudent economic policy-making and targeted measures against social exclusion may not be new in any breathtaking sense, but the IADB is certainly taking a step in the right direction. It is coming to terms with policies that have already proven successful in Mexico and Brazil – making income transfers to poor families depend on their children attending school, for example. Such programmes are not about charitable aid, but about enabling people to take fate into their own hands. The goal is not redistribution as a principle, but rather the old adage of helping people to help themselves. I find the new approach remarkable, because normally development banks are concerned with financial flows, but not necessarily with how society operates.

So how do the ideas fit in with the policies of other donor agencies, for example the World Bank or InWEnt?

The World Bank too is currently assessing the innovative transfer programmes just mentioned, but the IADB has made a lot of headway with this report. At InWEnt, we consider that most welcome. The IADB is dealing with the issues we prioritise: building capacities, training skills, expanding human and social capital. These are complexly interwoven issues, of course. It is obviously useful to make progress in the education sector. But that is not everything; we also have to look at issues like people’s ability to organise, at self-determination and collective action. InWEnt stresses that you have to act at three distinct levels. They include policy-making, which is what the IADB is dealing with. But the level of social organisations and associations, for example, also matters. And ultimately, we are always looking at building individuals’ capacities too.

So do the proposals of the IADB translate easily into new policies for Latin American countries?

As a concept, social exclusion is so vague that almost all parties and groups use it in Latin America. Such rhetoric serves mobilisation; it strikes a nerve. As a result, societies seems to be becoming less and less tolerant of exclusion. On the other hand, the lack of clarity also results in many large-scale programmes not working properly. Further work still needs to be done on how to break the mechanisms of exclusion.

Questions by Hans Dembowski.