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Social exclusion and models of development in Latin America.

Abstract. This article provides an analysis of the conditions of social exclusion that result from an implementation of the neoliberal model of capitalist development. The social impact of this model is examined in the context of developments in Latin America. In addition to this analysis, the article explores various attempts to address the salient conditions of social exclusion such as social inequalities in the distribution of income, the destruction of labour markets, and poverty. At issue are four theoretical models for addressing these issues. The article focuses particularly on the model that underlies the sustainable livelihoods approach to the problem of social exclusion. This model, and the approach based on it, is criticized because of an inherent concern to avoid the central issue of political power involved in the struggle for change and development.

Resume. Dans cet article, on analyse les raisons de l'exclusion sociale engendree par l'emploi du modele de developpement capitaliste de type neoliberal et, plus particulierement, l'impact social qu'un tel modele exerce en Amerique latine. On explore egalement les diverses tentatives entreprises pour venir a bout des conditions caracteristiques de l'exclusion sociale, telles que les inegalites de la repartition des revenus, la destruction des marches du travail, et la pauvrete. Pour traiter de ces questions, on se base sur quatre modeles. L'analyse porte particulierement sur le modele qui sous-tend l'approche des revenus durables aux problemes de l'exclusion sociale. Ce modele et l'approche qui en decoule sont critiques en raison d'un probleme inherent qui consiste a eviter d'aborder le role capital que joue le pouvoir politique dans la lutte pour le changement et le developpement.


Over the past two decades society after society in Latin America and elsewhere has been subjected to a process of structural adjustment and globalization and, in the process, far-reaching changes in the socioeconomic conditions of their development. Behind this development can be found the workings of a new economic model based on a neoliberal form of capitalist development promoted by the World Bank and other agencies of a New World Order (Bulmer-Thomas 1996; Veltmeyer and Petras 1997, 2000). Although the profound social impacts of this model have been well-documented and analyzed, questions remain as to the social conditions of these impacts as well as the diverse strategic--and political--responses that have been made to them. This article explores some of these issues in the Latin American context.

The article begins with broad reference to an offensive launched by capital against labour. This offensive, in the form of a neoliberal program of structural adjustments to the economy and a campaign for legislated labour reforms, is part of a protracted class war that can be traced back to the early 1970s both in Europe (Crouch and Pizzorno 1978; Davis 1984) and in Chile (Leiva and Petras 1994). In the context of this war, the working class in Latin America and elsewhere has borne the brunt of the structural adjustment process and its conditions of social exclusion. We identify and briefly review these conditions before turning toward the search for "another development"--alternative ways of thinking about "development" and putting it into practice. Whereas the dominant economic model of neoliberal capitalist development is initiated "from above" (from within the state apparatus) and "the outside" (bilateral and multilateral "foreign aid" agencies), models of alternative development depend on the agency of civil society--"from within and below." Two of these models are discussed, one elaborated by economists at the United Nations Comision Economica para America Latina y el Caribe (CEPAL), the other currently advocated by reformers within the international development community.

The article ends with a brief assessment of this latter model for combating the condition of social exclusion and poverty. Based on a "sustainable livelihoods approach" (SLA), this model currently is highly favoured by the community of international development organizations such as the United Nations Development Programme (UNDP). The SLA, like the CEPAL model, is predicated on reforms to the structural adjustment process, giving it a social dimension and the whole process a "human face." However, neither cepalismo nor sustainable livelihoods provides a model for effectively combating the problems of social exclusion and widespread poverty. This, it is argued, requires an anti-sytemic orientation, an approach that moves beyond reform to a direct confrontation with the structure of economic and political power. In fact, this is the approach taken by new peasant-based sociopolitical movements in the region as well as the movement of unemployed workers in Argentina. Whether these and other such movements have the capacity to mobilize effectively the forces of resistance and opposition is a problem that warrants a closer look and further study.

The Neoliberal Model of Capitalist Development and the Offensive Against Labour

The neoliberal model is profoundly exclusionary. (2) Analysts of the capitalist development process and the neoliberal model have tended to focus not on this feature but on the exploitative nature of the system and on the social conditions of this exploitation--conditions such as inadequate wages, increased social inequalities in the distribution of income, and poverty. But it is possible to argue--and we do--that the dominant feature and the greatest social impacts of the capitalist development process in its neoliberal form relates not so much to its exploitative character as to its propensity towards "social exclusion" (Bessis 1995). For example, the neoliberal model is geared to benefit but a small segment of proprietors and business operators, those few private enterprises--estimated at around 15% of the total--that are able to compete in the world market. Another segment of private sector enterprises, estimated at around 35% of the total, are deemed to have productive capacity but are oriented towards the domestic market. Under the neoliberal model these enterprises are generally subjected to the discipline of market forces, with little support, protection, or benefits derived from government policies, leading to a process of economic restructuring that, in theory, shakes out the most inefficient. However, at least 50% of all units of economic activity (or enterprises)--primarily those based on the peasant economy in the rural sector and, in the urban environment, owned by operators of microenterprises in the informal sector--are left to twist in the winds of change propelled by the neoliberal model. The casualties of this model are found everywhere--in the growing mass of producers and workers disposed from their means of production, marginalized in the process of capitalist development, and excluded from both the formal political and economic process of this development. Under conditions of this social exclusion, a large and growing part of Latin America's population is experiencing a social crisis of growing and devastating proportions. (3)

The mechanisms of social exclusion also operate in the broader context of structural adjustment and globalization--privatization, liberalization, deregulation, and labour market reform (Veltmeyer and Petras 1997, 2000). It is possible to identify six pillars of this social exclusion, the conditions of which mostly derive from the way production is organized on the basis of the capital-labour relation. These conditions primarily affect the working class in its multitudinous but changing forms.

A New Labour Regulatory Regime

The 1990s brought to Latin America considerable advances with respect to the introduction of new technologies, the downsizing of the workforce in the industrial sector, and experimentation with a new post-Fordist production paradigm based on a more flexible mode of regulation (Boom and Mercado 1990; Camargo et al. 1995; Gomez Solorzano 1992; Katz 1996; Olave 1994; Ominami 1986). The key to this new form of production is increased flexibility in the use of capital and labour in the production process. However, the introduction of this post-Fordist form of flexible organization was resisted by the unions and seriously inhibited by a complex of labour laws enacted under the Fordist regime of the old economic model. As a result, governments in the region, as part of a campaign orchestrated by the World Bank, introduced new legislation designed to increase the power of employers and plant managers to hire and fire workers--and to relocate them in the production process as and where needed. Parallel to these moves, compliant governments vis-a-vis the neoliberal model, most notably Menem in Argentina, the concertacion regime in Chile (1990-2002), Zedillo in Mexico (1994-2000), and later in the decade, Fernando Cardoso in Brazil (1994-2002) also sought to remove the constitutional protection of job tenure in the public sector. This move against public sector workers and employees was mandated by the IMF which, at the outset of the Cardoso regime in Brazil, demanded the reduction by 10,000 of public sector employees as the conditionality of an agreed-to loan.

In April 2002, a similar demand was made of Argentina's government, caught as it was (and still is) in a scissor-squeeze between the demands of the "international financial community" (and Washington) and a restive population pushed against the wall by the government's neoliberal policies and conditions of a severe economic crisis that they have generated. However, the response by governments in both this and other cases generally has been frustrated by the constitutional protection of the right of public sector employees to secure job tenure introduced under the "old economic model" used in prior "populist" regimes. As discovered by Presidents Cardoso in Brazil and Menem in Argentina, this constitutional protection makes it difficult to obtain the required level of congressional approval.

Given the difficulty experienced by these and other regimes in the region in removing these political obstacles to "free enterprise," the dualist industrial structure has been generally reinforced. On the one hand, large-scale capitalist enterprises in the formal sector, in addition to the processes of structural adjustment and globalization (privatization, deregulation, liberalization ...), have undergone a process of technological conversion and productive transformation, resulting in a reduction in the workforce, increased management flexibility--and, it seems, only a marginal increase in total factor productivity (Camargo and Neri 1999). On the other hand, most of the dynamic growth in the level of production has occurred in the unstructured "informal" sector of small (largely family managed) businesses and micro-enterprises which, as shown by the ILO (1996, 2000) and Portes et al. (1989), has outgrown the formal sector of medium- to large-scale enterprises by a considerable margin. In fact, PREALC (1993) and the ILO (2000) estimate that the "unstructured" informal sector accounts for up to 80% of the net employment created in the regional economy over the last decade and a half. As Table 1 shows, there is a regional pattern to this.

The trend toward a destructuring of labour markets can be traced back to the early 1980s. However, with the facilitating legislation introduced by many governments in the 1990s, the trend has accelerated, consolidating the process of reduction in the number of wage workers receiving full benefits; the expansion in the rate of unemployment, and the rapid growth of workers in the informal and unorganized sector of micro- and small enterprises (CEPAL 1998). According to the ILO, Latin America's unstructured informal sector at the end of the 1990s exceeded the formal sector in size--56% of workers (versus 48-52% in the late 1980s). As a result, the micro-enterprises that are reliant almost entirely on unwaged family labour--or those who work "on their own account" and generally do not receive any social protection or other social benefits (encargos sociais)--have proliferated. Excluded from the labour market as well as from government programs, they tend to work and live under conditions of economic insecurity, low income, and poverty.

As for the formal sector, the dominant trend in the region has been toward a degree of "productive transformation" along three dimensions (and without the "equity" called for by CEPAL in its model): (1) the introduction of new labour-displacing information technologies; (2) more flexible forms of labour regulation; and (3) a downsizing of the workforce independent of the technology factor. The effects of this restructuring can be traced out at different levels: (1) a marginal increase in overall productivity in the industrial sector; (2) an increase in rates of both over- and under-employment, as well as unemployment in the sector--up to 21% among workers in the ABC region of Sao Paulo and Gran Buenos Aires; (3) an increase in the number and share of jobs with non-standard contracts, without any social security protection and benefit coverage, and little to no union affiliation; (4) a disproportionate increase in de-skilled low-wage jobs; (5) an increase in putting out and sub-contracting, generating a complex system of interdependence between the informal and formal enterprises; and (6) a steady decrease in the value or purchasing power of wages and in the government-set minimum wage.

With regard to the mean average wage, in the 1950s and 1960s it rose 30%; in the 1970s it rose another 15%; in the 1980s, in the context of a region-wide recession and debt crisis, it fell 11%; in the 1990s, in the context of neoliberal reforms, wages maintained most of their purchasing power but by the end of the decade they had not yet recovered to levels reached in the 1980s in many cases--1970 in the case of Argentina (Mattoso 1995; Lesbaupin et al. 1996, 17). With regard to the minimum wage, the statistics are startling and revealing of government policy. Taking 1945 as 100, the index of the real value of the minimum wage by 1990 had fallen to 29, and by 1994 the index stood at only 22.7. By 1998, notwithstanding a dramatic decline in the rate of inflation, a major region-wide campaign by the World Bank against "excessively high wages," and minimum wage legislation that, according to the Bank, led to "the withdrawal of capital from production" and hence "[labour market] problems of informality, unemployment and poverty," the real value index of the minimum wage had retained only 26.6% of its 1945 value (Lesbaupin et al. 1996, 14-15).

In the light of these developments, Leiva and Agacino (1995) and others write of "the progressive destruction" of labour markets, a trend that is clearly connected to and facilitated by the neoliberal policies and labour legislation of diverse regimes in the region. Collectively these policies and legislation constitute a major offensive in the undeclared war that has been unleashed against the working class.

The Social Impact of Adjustment: Six Pillars of Social Exclusion (4)

From 1995 to 1998, the Cardoso regime in Brazil achieved an accumulated growth rate of 16% in the capital goods sector of industrial production and 11% in the consumer goods sector. But this represented an annually averaged overall growth rate of only 1.4% versus 1.7% over the course of the 1980s, the decade "lost to development," and 2.6% for the region in the 1990s overall. (5) These macroeconomic indicators suggest a stagnant development path, one taken by virtually every other country in the region and a far cry from the years of unprecedented rapid growth in the 1950s, 1960s, and 1970s. Other indicators, however, tell a different part of the story. They point to a process of productive transformation and technological conversion and a deep restructuring of the economy that has had a major impact on the lives of most people in the country, particularly workers (Boom and Mercado 1990; Camargo and Neri 1999; Leiva and Agacino 1995). Of particular significance, however, are the high social costs involved and the social debt contracted in the process. By all accounts, this debt exceeds even the dimensions of the external debt accumulated over the same period.

The social dimensions of this debt are very evident and reflected in a range of indicators of social exclusion, possibly the most critical condition of the economic restructuring process underway across Latin America. (6) In terms of the conditions generated in this process it is possible to identify six major forms of social exclusion:

(1) lack of access to labour markets, reflected in the rate of labour force participation;

(2) lack of access to the opportunity to work, reflected in the rate of unemployment;

(3) lack of access to "good quality or decent jobs," reflected most clearly in evidence of increased rates of super- and under-employment, and in the growth and prevalence of jobs that are contingent in form (involuntary part-time, short-term, et cetera) with a high degree of informality and low pay, as well as employment on "one's own account";

(4) reduced access to social services and forms of social development such as education, health, and social security (see discussion below);

(5) lack of access to means of social production and income; and

(6) incapacity of household members to meet their basic needs, reflected in indicators of relative and absolute poverty. (7)

Some of these indicators relate to the contraction of the industrial sector as a base for formal employment--the reduction in the number of well-paid full-time industrial workers. The statistics on this development are clear. In the case of Brazil, for example, over the course of Cardoso's first term in office (1994-98) at least 897,000 formal sector jobs were lost. These labour-related indicators also refer to the gradual but persistent rise in the rate of unemployment--from six to eight percent over the course of Cardoso's two terms in office--up to 20.3% in the ABC region of Sao Paulo (SEADE/DIEESE 2000). In the case of Argentina this pattern, found across Latin America, was particularly dramatic--from six to eight percent at the beginning of the 1990s to 18.4% at the end of the decade and 20% as of mid-2001. In addition, the decade saw the persistent increase in informal work relations and conditions--in the case of Brazil, the region's largest economy, from 36% of the labour force in 1990 to 53% in 2000, an increase of 34% in just 10 years (Folha do Sao Paulo 23 May 2000, 9A; SEADE/DIEESE 2000). (8) As Cibils, Weisrot, and Kar (2000) have shown, the statistics on these "developments" have been even more striking in Argentina, with estimated rates of unemployment that in some parts of Greater Buenos Aires have reached 60% and a dramatic increase in the spread and depth of income poverty.

As for the conditions of social exclusion connected to programs of health, education, and social security, the statistics are staggering. Studies by CEPAL, the ILO, and a host of university-based researchers have documented a regional pattern of deteriorating conditions and reduced coverage by government programs (CEPAL 1998; ILO 2000). Other income-based or related indicators of widespread social exclusion include a persistent decrease in the share of labour in national income (as well as value added to production), a reduction in the real value of wages, and a corresponding increase of social inequality in the distribution of household incomes as well as the increasing incidence of poverty, both relative and absolute. The social conditions of this inequality and poverty are also reflected in statistics that show a rise in crime and other forms of social disorganization.

Labour Forms/Conditions of Social Exclusion

Overall in Cardoso's first term in office, employment in the industrial sector fell by 22% and by 30% in the capital goods and consumer or wage-goods sectors (SEADE/DIESE 1999). As noted above, this contraction in industrial employment corresponded to a process of growth in the value of output--16% and 11% respectively. This simultaneous growth in output and decline in employment is a clear indicator of both technological conversion and a sloughing off of labour--that is, a downsizing of the workforce without technological conversion. Notwithstanding reduced inputs of both labour and capital under the conditions of this double restructuring process, the GNP did increase.

However, as in other countries such as Argentina that exhibited the same trend, labour did not receive any part of this productivity gain: 100% of it was appropriated by capital. In fact, while wages over the period in question (1994-98) showed an accumulated increase of 11% on a per-unit or individual worker basis, this increase constituted a decrease of 15% in the mass of accumulated wages (SEADE/DIESE 1999). Over the decade, from 1990 to 1999, this decline was in the order of 40% (SEADE/DIESE 1999), paralleling "developments" in Argentina, Mexico and elsewhere. In Brazil in 1997, despite a recovery and upsurge in GDP growth, total national income in the form of wages fell by 7.7% (Mantenga 1998, 49). In Argentina, at the same time, economic production slumped and then entered a four-year period of sluggish growth and decline, reaching crisis proportions at the turn of the millennium, with a consequent growth of unemployment and a decline in the share of wages in national income. The effect of these developments has been to reduce the share of labour in national income overall. This is clearly a long-term regionwide trend, but it is particularly accentuated in Brazil where labour at the end of the 1990s, after a decade of state-led "market-friendly" reforms, received only 34% of national income--versus almost 70% in the late 1950s (Jornal Sem Terra 20.117, 15). The bulk of this income accrued to capital in one form or another.

These data suggest that labour bore the brunt of the adjustment and reform process in the 1980s--and, in the case of both Menem's Argentina and Cardoso's Brazil, in the 1990s as well. Income data show the same thing. For example, in the 1960s, in the context of rapid growth in overall and industrial output, social inequalities in the distribution of national income, already among the very worst in the world, significantly increased and the lion's share of income growth was appropriated by the owners of capital and the top bracket of income earners. In the 1970s, in a different context of sluggish growth, these inequalities further increased, as they did in the 1980s in the context of a region-wide debt crisis and recession. In the 1990s, under the regimes of Collor and Cardoso in Brazil, Zedillo in Mexico, and Menem in Argentina, neoliberal destabilization measures and policies of structural adjustment exacerbated the social inequality--and inequity--in national income distribution to the point that the UNDP pointed towards Brazil as one of only three countries (Brazil, Sierra Leone, and Guatemala) in which disparities in the distribution of wealth and income constituted a serious barrier to economic development. The situation in terms of income distribution is not much better in other countries in the region: as a region Latin America exhibits a rate of income disparity that is at least twice the rate of income disparity found in any other region in the world (Bulmer-Thomas, 1996). In the region as a whole, the richest 10% of the population receives (or appropriates) 40% of overall income while the poorest 30% receive only 7.5% (CEPAL 1998). The ratio of the income share of the richest 20% of households to the poorest quintile of income earners in Latin America is 22 to 1, twice that of the next regional ratio of 11 to 1 in sub-Saharan Africa and three times the rate of seven to one in the industrial countries.

Recent studies (IDB 1998) show that the top decile of income earners in Brazil appropriate close to 50% of the national income, leaving but 7% for the bottom 40% of income earners, most of whom are as a result income-poor. In Mexico, according to the National Statistics Agency (INEGI) and the Bank of Mexico, the poorest decile of housolds in 1984 received only 1.7% of national income, a share that was reduced to 1.6% by 1989 and to 1.5 in 1992 (Saxe-Fernandez 1999, 333). At the same time, the share in national income of the richest decile of families rose from 32.8% in 1984 to 37.9% in 1989 and to 38.2 in 1992.

The distribution of income in the 1990s was even worse than in the 1980s after two decades of rapid growth under the old economic model. As observed by researchers at the Instituto del Tercer Mundo, an NGO watchdog system aimed at monitoring commitments made by governments at the World Summit for Social Development, Brazil is the country with the "highest index of income concentration" in the world and, they add, this disparity "has increased systematically. Today," they further add, "it is much higher than in the first half of the 1980s" (Roque and Correa 2001, 2). (9) In fact, it is the worst case of such disparity in Latin America. There is some indication, derived from official government statistics, that under Cardoso there has been a marginal improvement in the overall incidence of poverty but, at the same time, an increase in the depressingly high degree of income disparity. And, of course, this disparity is much less than the disparity in the distribution of productive resources and wealth; these are highly concentrated in the hands--and banks and corporations--of the big bourgeoisie.

According to the World Bank (1998/99, 198-199) only Sierra Leone has a higher Gini Coefficient than Brazil, a statistic that points towards a staggering degree of social inequality in the distribution of productive resources and income. The structural context or source of this disparity includes growth of unemployment; fewer opportunities for formal sector employment and a burgeoning informal sector; a trend toward wage dispersal (deviation from the mean) which, according to CEPAL, is a major source of Brazil's increased income inequality in the 1990s; a dramatic fall in the value of the minimum wage and an increase in the number of workers remunerated at or below this level; and a decline in the level of the social wages--benefits channelled through government social programs.

Under these and other structural and policy conditions of social exclusion, some of which predate the neoliberal regimes in the 1990s but others that do not, a large and increasing part of Latin America's population has become impoverished--up to 44%, according to the World Bank in its latest (2001) Informe Mundial. Although widespread in the urban centres and cities that have had to absorb the impact of a massive rural exodus, the conditions of this poverty are concentrated in the rural sector. It is estimated that up to 70% of the rural population across Latin America is either landless or suffering from conditions of social exclusion, separated as many are from any means of production and the labour market--and excluded from any of the income and other benefits associated with the national development process (Jazeiry 1992; IFAD 2000). (10)

In this connection, up to 70 million people in Brazil alone can be defined as poor on the basis of the World Bank's new "international poverty line" set arbitrarily at the ridiculously low income threshold of $2 a day or $60 a month (World Bank, Informe Mundial, 1998/99). (11) In fact, one out of every four (23.6%) Latin Americans fall below even the World Bank's equally arbitrary and conservative measure of extreme poverty set as $1 a day or $30 a month. (12) In the case of Brazil, the government's own economists calculate that over one half of the country's labour force barely earn the minimum wage of $77 a month or, in the case of millions working off the books, even less (Rohter 2000). Despite the efforts of the Cardoso regime to put a favourable gloss on its social policies, and the highly-publicized and much-vaunted anti-poverty campaign initiated by Herbet de Souza (Betinho) and supported by the government, this situation represents a clear deterioration relative to earlier administrations. The January 2000 devaluation, combined with reduced social expenditures--a huge budget cut of $1 billion in May alone--made this situation even worse, overnight pushing millions of workers and their households below the poverty line, able to make ends meet only under the greatest difficulty and duress. In Argentina, once the richest and most highly developed country in Latin America, the situation is even more desperate: a large and growing part of the working class now finds itself in dire straits, while a substantial part of the once large and powerful middle class has joined the ranks of the poor.

Capitalist Development and the Search for Alternatives

Neoliberal capitalist development is profoundly exclusionary, but it has also tended to generate powerful forces of opposition and resistance. In fact, it is difficult today to find strong advocates of the neoliberal model. Even Michel Camdessus, former Executive Director of the IMF, a key institution in the design and implementation of this model, has backed away from neoliberalism. According to Camdessus, despite the barrage of criticism levelled against the IMF--even by George Soros, Carlos Salinas de Gortari, Jeffrey Sachs, Joseph Stiglitz, and other architects of capitalist development and self-appointed guardians of the New World order--the IMF is not (or no longer) neoliberal in its orientation and policy advice. Its policies, he argues, have three main pillars: (1) the invisible hand of the market (according to neoclassical theory, the most efficient mechanism for allocating resources to factors of production); (2) the visible hand of the state (the basic agency for economic development according to the proponents of structuralism and neostructuralism); and (3), more enigmatically (and highly problematic), "solidarity between the rich and the poor." In fact, it would appear--or it could be argued--that the neoliberal model is staked out in the front lines of the class war between capital and labour (and the contentious arena of politics and ideology) as a false target, one that no one is prepared to defend but that allows the guardians of the capitalist world order to reposition themselves--to find a more defensible and sustainable model of capitalist development.

In the current context of policy advice and redesign of the operating model of capitalist development, it is possible to identify three major variations on the theme of change to--if not an alternative form of--this model. First, there is the neostructuralist model advanced by the economists at CEPAL. Secondly, there are the models advanced by proponents of an alternative form of development--initiated "from below and inside" rather than "from above and the outside," equitable and socially inclusive, human in form and scale, people-led or centred, empowering, and sustainable in terms of both the environment and livelihoods (ways of making a living). There are a number of models based on a broad commitment to these principles and the agency of non-governmental and grassroots organizations--the strengthening of "civil society." (13) Thirdly, there are a number of proposals or projects for change and development in the direction of social inclusion or cohesion based on the agency of anti-systemic social movements and direct action.

The CEPAL Model

The CEPAL model, formulated systematically in a study (Productive Transformation with Equity) published in 1990, was specifically designed as an alternative to neoliberalism. Accordingly, it was designed to broaden the social base of the production process--to incorporate rather than exclude diverse sectors and units of economic activity, including informal sector enterprises and activities within what Razeto (1993), a Chilean economist connected to the ILO, defined as the "economy of solidarity." The primary mechanism for doing broadening the base of productive economic activity was to create a more participatory and socially inclusive form of development via the decentralization of government decision-making (Boisier 1986; Borja 1989; Borja et al. 1987; Laurelli and Rofman 1989; Veltmeyer 1997). In the view of CEPAL (Boisier et al. 1992), popular participation is the "missing link" in the productive transformation-equity chain within the development process--the necessary means of ensuring "productive transformation with equity."

The issue, as CEPAL saw (and sees) it, was not just to secure a more equitable distribution of income as well as improved conditions of health, education, and welfare--matters of both social justice and government action--but greater access to society's productive resources such as land, capital, and technology. In the neoliberal model, the allocation of these productive resources and the distribution of income are left to the free market--the workings of the "market mechanism." The CEPAL economists, however, armed with a (neo)structuralist perspective and analytical framework, argued that, first of all, for an optimum (and equitable) resource allocation the market needs to be regulated; secondly, that improved access to society's productive resources requires a measure of structural change and policy reform on the part of the government (land reform, rural credit schemes, et cetera); thirdly, poverty reduction, if not eradication, requires a "new social policy"--one that both targets the poor and involves them in decision-making; and lastly, a policy of social inclusion dictates a strengthening and extension, not a weakening and dismantling, of established government programs of health, education, and welfare.

As for the "new social policy," it was designed in collaboration with the economists at the World Bank and broadly implemented in the 1990s. Whereas the old social policy was universal in its orientation and coverage and was based on government expenditures on health, education, and welfare programs, the "new social policy" was based on an investment rather than an expenditure approach. It was targeted (focalizado) at the poor rather than universal in scope, and it focused on health and education, the pillars of social inclusion. Lastly, it was based on a partnership approach towards poverty reduction and alleviation as well as the decentralization of decision-making authority and capacity.

The evaluative and assessment literature on both the conditions of social exclusion and the new social policy is voluminous, reflecting widespread implementation of this policy by governments across the region, most particularly Bolivia, Chile, and Mexico (see studies in Veltmeyer and O'Malley, 2001). However, with the possible exception of Chile, where there is some evidence of an actual reduction in the number of the poor and in the alleviation of their condition, if not a decrease in their exclusion, it is clear that the CEPAL model in practice has not yielded any substantial change or benefit to the poor. There are a number of apparent reasons for this, all of them studiously evaded by the assessments and evaluations commissioned by international development or UN organizations such as the UNDP and CEPAL itself.

One reason for the general failure of the CEPAL model is that it is predicated on an effort to create a more humane form of structural adjustment and stabilization policies mandated by the IMF--to provide the World Bank's policies a social dimension and to give the whole process a "human face." That is, the model is predicated on policy measures that have been shown to generate and exacerbate the problem (poverty and social exclusion). (14) A second reason for the failure of the CEPAL model to bring about any substantive improvements in the lives of the poor is that its implementation has been based on a nefarious deal with the World Bank and other International Financial Institutions (IFIs) such as the Inter-American Development Bank (IDB) to limit or avoid any significant structural change. It is clear enough to most people that development is predicated on such change. For example, any significant improvement in the lives of the poor and a more socially inclusive form of development requires more than expenditures on social programs or investment in resources made available by the poor themselves--their social capital. What is required, first of all, is a significant change in the ownership (and distribution) of natural productive resources such as land and, secondly, improved access to capital, technology, and other such productive resources that are social but have been privately appropriated.

Both these and other changes, however, involve a confrontation with the power structure--the political and economic power of the local or national elite. The effective deal made with the World Bank and other agents of global capital and "international development," and the national governments involved, is a commitment to increased participation of the poor in decision-making, while limiting this participation to decisions that are local in scope--for example, to share in decisions as to how to spend the poverty-alleviation funds or to design local development projects. At the same time, the national governments effectively agree to take a non-confrontational approach to change, based not on direct action but on dialogue, negotiation, and use of the market and electoral mechanisms (UNRISD 2000). Of course, the non-governmental organizations that litter the landscape of Latin America's increasingly active and mobilized "civil society" have been the unwitting (or, in some cases, witting) partners in this form of "participatory development," often acting as its executing agents (Petras and Veltmeyer 2001).

The Search for Another Development and Sustainable Livelihoods

The search for "Another Development" (AD) has reached the proportions of a major social movement of non-government organizations that can be numbered in the tens of thousands on a global scale. In every region of the world and in many countries today it is possible to identify nodal points in the search for AD in the form of a research group, a program of activities, and a journal that provides an outlet for collaborative research, programmatic statements, and news. An example of such an organization is INAUCO (Instituto Intercultural para la Autogestion y la Accion Cultural) and its journal, Revista Iberoamericana de Autogestion y Accion Comunal (RIDAA) at the Universidad Autonoma de Madrid. Other examples include the Stockholm-based Dag Hammerskold Foundation, the Society for Alternative Development, and the journal Development Dialogue--all of which can be traced back to 1974, constituting, in effect, a foundation stone and a pillar in the movement to establish an alternative and more socially inclusive form of development; COLACOT (Confederacion Latinamericana de Co-operacion y Mutuales de Trabajadores) in Sante Fe de Bogota, Colombia; Equipo Pueblo in Mexico City; the International Foundation for Development Alternatives (IFDA) and its IFDA Dossier; and several operational agencies of the United Nations, in particular UNRISD whose conferences and publications over the years have been instrumental in the propagation of the idea of a community-based, socially inclusive and participatory form of sustainable development.

AD takes diverse forms. One of the earliest is associated with the ideas of Manfred Max-Neef, a Chilean economist whose reflections on human-scale development (La economia descalza, 1986) constitutes a important reference point in the search for a more socially inclusive form of development. Another form of AD is associated with another Chilean economist, Luis Razeto (1988, 1993), connected to the ILO's Regional Program on Employment (PREALC). A Latin American scholar and practitioner who has made a significant contribution towards AD is Roberto Guimaraes, a Brazilian economist. A critical departure point for the reflections of Guimaraes and others on the Latin American experience with "co-operativism" is a series of studies commissioned by UNRISD, co-ordinated by the Colombian theorist of social action, Fals Borda, and published in 1974. On the basis of extensive field research and case studies, these reports concluded that co-operatives generally were ineffective forms of organization for meeting the basic needs of the poor or acting as an agency for social transformation. The general conclusion reached by the UNRISD team and supported by Guimaraes, who now works with CEPAL, can be summed up in three statements: (1) co-operatives are not agents for change, producing few benefits for the poorest sectors of the population; indeed, the strengthening of co-operatives in most places led to an unexplained increase in income gaps; (2) co-operatives tend to reproduce the structure of community relations and conditions rather than transform it; and (3) they tend to reinforce as well as extend and deepen pre-existing social inequalities, an outcome that can be traced in part to the tendency for groups and individuals who are accommodated to the power structure to control the key committees and the administration of co-ops; and in the few cases when coops actually represented the interests of and were composed of poor peasants they were manifestly incapable of promoting the interests of their members (Guimaraes 1989, 285-286).

A central notion in AD is "participation" as a source and means of "empowerment" and "social inclusion" (Goulet 1989; Oakley 1991; UNICEF 1989). The term "participation" first appeared in development discourse in the late 1950s. At the time, development practitioners began to notice that common people were almost completely excluded from the formulation and implementation of development projects. It was thought that the inclusion of local people would increase efficiency leading to the improvement of development. This view of participation is now widely accepted by most NGOs, development workers, and even governments. In fact, these days it is taken as a matter of principle both with regard to the design and execution of development projects as well as the process as a whole. Thus it is that the concept of "participation" serves as a primary tool for project evaluation by the World Bank and other donors and aid agencies (Blaikie 1985). Stiefel and Wolfe (1994) add the following gloss on this point: "When joined with the processes of political democratization, it is not surprising that the international community is looking to 'participation' as a means of making their development projects function better, helping people cope ... [and] as an indispensable dimension of ... policies ... that can no longer be evaded or postponed."

However, the notion of "participation" has turned out to be contentious. There are, in effect, two conceptions of it. One, associated with the World Bank, sees participation not so much as an alternative form of development that is socially inclusive, empowering, and transformative but as a means of ensuring greater efficiency and cost-effectiveness in project design and implementation. In this conception, the development agenda is predetermined, objectives are defined, and solutions are envisaged before local people come into the picture. In the second view, participation requires that people be brought into the development process from the outset and be actively engaged in every phase. This perspective was initially and then widely aired at a number of conferences organized by UNRISD in the 1970s and 1980s, but it did not come into its own until the late 1980s when, for many practitioners and scholars, it displaced the perspective (and "old paradigm") of the World Bank, CEPAL, and other such organizations in the mainstream of development thinking and practice.

In the mainstream view, increased participation in the development process is seen as a primary responsibility of governments which, in partnership with NGOs, are viewed as the major executing agency for development. From the perspective of AD, however, participatory development is seen as a strategy to be implemented not "from above and the outside" but "from below and within"; that is, with the agency of community-based or grassroots social organizations. In this view, people need to be incorporated into the development process front and centre, and from the outset--in defining the problem, identifying possible solutions and, finally, in taking action. Participatory development (PD) here is viewed not as a project but as a process--designed to bring about a decentralized, non-authoritarian or democratic form of development that is not only socially inclusive but based on a sense of real community, as well as sustainable.

The Sustainable Livelihoods Approach

A few years into the new millennium, the world is far from achieving the target set for 2015 by the international development community to reduce by one half the number of people living in extreme poverty, many of them in rural societies. In fact, if anything, this number has increased over the recent decades as has the global divide in incomes and living standards. The alleviation, if not the reduction or eradication, of extreme poverty, recognized by the World Bank as early as 1973 as the major challenge confronting the world community of development agencies and practitioners, was placed front and centre on the new development agenda set by these agencies in 1990 (see World Bank 1994). However, despite a decade of continued efforts and diverse strategies to deal with it, the problem of extreme poverty persists, as does that of relative poverty--the growing number of those unable to meet their basic needs. Whether "absolute" or "relative," poverty is the most critical factor of social exclusion.

In response to this situation, and with reference to ideas advanced by Chambers (1997) among others and adapted by Carney (1999), the UK Department for Development (DFID), the UNDP, and SID (the Society for International Development) have begun to advocate a new "sustainable livelihoods approach" towards the problem--for achieving a more socially inclusive form of development. (8) Social exclusion is viewed by all proponents of AD as "the basic problem." However, none of its proponents has been able to come up with or design any specific strategies for addressing the problem of poverty at its roots, reducing its incidence, or eradicating it rather than merely alleviating its worst conditions. In the Latin American context no form of AD has been successfully translated from theory into practice, despite diverse experiments with community-based forms of "development from below" (Veltmeyer and O'Malley 2001). Each one of these experiments has failed to address the problem of social exclusion and poverty in a programmatic way--to formulate an effective strategy for overcoming the problem. This is where the sustainable livelihoods approach (SLA) comes in.

The essence of the SLA is to place local and community-based development within the context of conditions created by "external" structures, agencies, and processes. Within this context, the focus for analysis and action is on the impact of these structures and processes on the "livelihood assets" of the community--their capacity to generate financial, social, human, natural, and physical capital (Carney 1999; Warner 1999).

Another concern of the SLA is to identify the forms of action capable of minimizing the negative effects of the external processes and transforming them. In this connection, attention has focused on "associations"--producer groups, co-operatives, and community-based organizations of various sorts. The reason for this is that analysis of experiments with local development all over the world has led to the identification of such organizations as having the greatest potential for achieving social empowerment, a process in which individuals and groups within a community learn to interact with one another in a constructive manner, co-operate towards a common objective (identifying and addressing their problems), and undertake the collective action needed for social transformation and economic development. (15) More recently, this empowering process has been viewed as a strategic means of building on the assets that the poor have in abundance, their capacity to organize and network and for collective action. In the parlance or discourse of recent development theorists and practitioners, at issue is "social capital" which in theory can be constructed without the accumulation (and major outlay) of financial capital, hitherto always regarded as the driving force of the development process. Even better from various points of view is that, in theory, social capital (16) can be built without any major structural change or the confrontation of those who occupy positions of power in the society.

With regard to the "model" advanced by the proponents of the SLA, it is structured around the five "productive resources" or livelihood assets: natural, physical, financial, social, and political (Amalric 1998). The first three of these assets, however, are not at issue. They are central to all development theories and models to date and the proponents of the SLA do not advance any new ideas as to how to secure a better (more efficient or equitable) distribution or improvements in access to them. These factors of production and how to incorporate them into the development process have defeated all theorists and practitioners to date, largely because of the elusive political conditions of radical structural change that are required for their implementation. Within the mainstream of development thought and practice, both within the old and the new paradigms, the approach has always been one of reform: change that does not confront or challenge the power structure in place or allow for any substantive change in the situation of the poor, excluded from the structures of economic and political power. Thus it is that the SLA focuses on assets that, it is argued, the poor have in abundance and that are not predicated on major structural change or government policy.

An increasing number of development projects, especially in rural areas, are designed on the basis of the SLA, concerned above all with the building of social capital and without any specific strategies for securing the redistribution of, or improved access to, the other categories of productive resources recognized as part of, and essential to, the development process--the securing of sustainable livelihoods. In effect, development agents operate within the community, with support (poverty alleviation or social investment funds) from outside donor or development agencies, and in a participatory manner with grassroots organizations in the community or the broader civil society.


The SLA represents the cutting edge of change in alternative development thinking and practice. Although the CEPAL model still has considerable weight in many government and policy-making circles, at least in Latin America, a growing international and increasingly powerful movement based in a "global civil society" is oriented towards more radical reforms to the institutionality of capitalism (private property, wage labour, markets, the state) and the neoliberal model. In this context, the SLA has a number of attractions and advantages over the CEPAL model. For one thing, it is based on initiatives taken from below as well as within. For another, the SLA provides a better counterweight/ point to growing pressures for more radical or revolutionary change. In addition, the SLA does not entail any break with the institutionality of the system, nor a direct or violent confrontation with the power structure.

At the same time, there are a number of standpoints from which the SLA can be seriously criticized, both in regard to development practice and the associated or underlying theory. One is that in isolation from structural change and government action, the social capital built in the process of the development project cycle has no solid foundation. Another is that the building of social capital does not empower the groups and individuals involved. As the UNDP has acknowledged (at long last!) in its latest 2001 Human Development Report, the building of social capital does not in and of itself lead to "social transformation," a prerequisite for a more socially inclusive form of alternative development. Social transformation not only requires (1) a fundamental redistribution of natural, physical, and financial forms of capital and (2) an accumulation of social capital, but it requires "political capital," the accumulation of decision-making capacity in regard to conditions that affect or determine their livelihoods. As political economists in the radical tradition have argued for decades--and as even the UNDP, an advocate of reform, notes--it requires "political power."

Since the conditions of political power originate in forces and structures outside the local community, and since decision-making power in this regard tends to be vested in elites and highly concentrated as well as centralized, the social empowerment of the poor dictates a relative disempowerment of the rich and the powerful few. Powersharing in this context--to achieve Camdessus's "solidarity between the rich and the poor"--cannot be settled without the rich and powerful surrendering their disproportionate share of economic and political power. The solution currently offered to the poor by all modalities of the "development project" (World Bank, CEPAL, AD, SLA)--participation in decision-making in regard to issues of local development (how and where to spend the meagre poverty alleviation funds made available to them)--clearly will not work. It is both inadequate and unacceptable. It is clear that the rich and powerful are not likely to surrender or negotiate any effective sharing of their real power.

Thus, the state, or at least the government, will have to step in and instigate the structural changes required for a more equitable redistribution of society's natural, physical, and financial assets. Indeed, this is the implication of the UNDP's conclusion that what the poor need, above all else, is political power--the capacity to make, participate in, and influence those decisions that determine their lives and affect their livelihoods. Given that this power is highly concentrated, and given also the dominant position of the country's economic elite in the institutions of the state--and the corresponding exclusion of the direct producers and working class--this is not likely to happen without a protracted political struggle of opposing forces. This conclusion is inescapable, even though neither CEPAL nor the UNDP is willing to draw or state it. However, the only alternative to government action for substantive change in the structure of economic activity and political power is direct collective action by people themselves. This is the road currently taken by the social movements of oppositional and antisystemic forces that dominate the political landscape in Latin America today. But this is another topic.


(1.) The author is Professor of Sociology and International Development Studies at Saint Mary's University (Halifax, Nova Scotia, Canada), as well as Adjunct Professor of Political Science and Development at the Universidad Autonoma de Zacatecas (Mexico).

(2.) On this model see, inter alia, Bulmer-Thomas (1996), Veltmeyer and Petras (1997, 2000), and Petras and Veltmeyer (2001).

(3.) Given the large array of international organizations and research institutions, both within the UN system and the international development community, that are involved in the war against poverty and the broader conditions of social exclusion, it is clear that the problem has not only reached critical proportions but that it is global in scope. One of many organizations set up in the search for solutions to the problem of social exclusion, the Research Centre for Analysis of Social Exclusion, was established in October 1997 at the London School of Economics and Political Science with funding from the UK Economic and Social Research Council.

(4.) The term "social exclusion" (Steifel and Wolfe 1994) carries with it some of the connotations of the term "marginality" in former years. In the 1960s and 1970s the concept of "marginality" denoted the existence of a mass of labour-power that was surplus to the requirements of capitalist development and that in Marxist terms constituted an "industrial reserve army." In the 1990s a number of analysts have turned toward the term "social exclusion" essentially to describe the same and other associated social conditions (Escoral 1996; Freund in the preface to Xiberras 1996, 12). In their use of the concept they reached back to the earlier studies such as Castell (1995), Paugam (1996), and Nascimento (1994), possibly the first to use the term in the sense of marginality. More recently, the CEPAL and ILO scholars, Stiefel and Wolfe (1994) and Xiberras (1996), among others, have expanded on the notion of social exclusion in terms of more general sociological processes and conditions of exclusion from participation in the economic, social and political institutions of the broader society, i.e., lack of participation in the benefits of the development and modernization process. In this context, Stiefel and Wolfe (1994) and Escoral (1997) treat social exclusion as "a process that involves the trajectory of vulnerability, fragility and precariousness, a breaking of ties along [diverse] dimensions of human existence--work, socio-familiar, cultural, and human."

(5.) While Brazil led Latin America in annualized rates of growth throughout the 1950s, 1960s and 1970s (from 6.8 to 8.7 versus 4.8 to 4.9), and even in the 1980s, in the 1990s Brazil's annual growth rate was barely two-thirds of the Latin American growth rate.

(6.) The concept of "social exclusion" captures the form and content of the interaction between economic restructuring and a society's social institutions; thus, they can be identified in both the worlds of work and family life.

(7.) A poverty-oriented "Basic Needs" approach dominated the study of international development in the 1970s, originating in the 1973 discovery of the World Bank that upwards of two fifths of the world's population was in a state of relative deprivation, unable to meet its basic needs. According to Amartya Sen, a household without sufficient income to meet the basic needs of its members is poor, a condition that can be measured in terms of a head count, that is, the number and percentage of the population that falls below a defined income poverty line or, according to Sen (1992), by an index of disparity in income distribution, viz. income gap ratio multiplied by the number of the poor, which provides a co-efficient of specific poverty.

(8.) Official statistics compiled by the Instituto Geographico do Brasil Estadisticao (IGBE) show considerably lower rates of unemployment, but most observers take as more reliable the statistics compiled by the Departamento Intersindical de Estadistico e Estudos Socio-economicos of SEADE (Fundacao Sistema Estadual de Analise de Dados).

(9.) As for the incidence of poverty, at the bottom end of this income distribution, the relevant index peaked in 1994-95 during the initial implementation of the Plano Real, but even though the poverty index in subsequent years (1996-97) for which data are available is somewhat lower than the indices for 1994, it is still higher than the indices for 1993 (Roque and Correa 2001, 1). And, the authors note, a similar pattern exists for wealth distribution indicators.

(10.) According to IFAD (Jazeiry, 1992), there are least 20 distinct processes responsible for the production of rural poverty, all of them clearly in evidence in rural Brazil.

(11.) In the first month of 2000, still in the throes or wake of a severe financial crisis, the Brazilian government under Cardoso engaged in a "public" squabble with the IMF over the government's announced plan to spend US$22 billion on poverty-oriented social programs over the next decade (IGBE 1999). The Fund insisted that the government should use these funds, in part dependent on the $41.5 billion rescue package provided by the Fund in November 1998, to reduce the country's external debt rather than fight poverty.

(12.) The government of Argentina, until recently (before the latest drawn-out economic crisis) the wealthiest country in the region with the highest per capita incomes, has formally recognized that 51.4% of the population, or 18.2 million people, now fall below the poverty line (Clarin, 10 June 2002). This includes from one third to one half of what was once Latin America's largest and most powerful middle class. This class now constitutes a significant part of what the National Statistics Institute terms "the new poor."

(13.) On these models see Veltmeyer and O'Malley (2001).

(14.) Osvaldo Sunkel, a CEPAL economist at the time and a major architect of Latin American neostructuralism (1991), back in 1989 commented to the author on the intended theoretical (and policy) convergence between the two schools of development thinking, one represented best by the World Bank, the other by CEPAL which, for over 30 years, had led the opposition to liberalism and neoliberalism within the development community.

(15.) On the various dimensions of the SLA, the most recent formulation of AD, see Amalric and Banuri (1995), Chambers (1997), and Liamzon et al. (1996).

(16.) On this notion of "social capital" and its application to the development process, see Coleman (1988), Knack (1999), Rubio (1997), Woolcock and Narayan (2000), and Woolcock (1988).


CEPAL Comision Economico para America Latina y el Caribe

FLACSO Facultad Latinoamericano de Ciencias Sociales

IDB Inter-American Development Bank

IFAD International Fund for Agricultural Development

ILO International Labour Organization

OECD Organization for Economic Co-operation and Development

PREALC Programa Regional de Empleo de America Latina y el Caribe

UNRISD United Nations Research Institute for Social Development

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Saint Mary's University, Halifax

Structure of Urban Economic Activity, Latin America--1980, 1995

 Informal Sector

 Total Own Account Domestic Micro

1980 52.5 24.6 6.9 21.0
1995 56.1 26.5 7.1 22.5
Dif. 3.6 1.9 0.2 1.5

 Formal Sector

 Total Ses (a) LEs (b)

1980 47.5 15.4 32.1
1995 43.9 13.2 30.8
Dif. -3.6 -2.2 -1.3

(a.) State Enterprises

(b.) Large Enterprises

Source: ILO 1996
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