Building the middle class

Social mobility
Education - Health

(First published on November 21, 2012 on First Steps, an Inter-American Development Bank Blog)

The philosopher John Rawls invites us to imagine our lives if tomorrow we were reborn under a veil of ignorance, in other words, knowing nothing about the home or country we come from, nor our parents’ level of education or income. Would you be up for it? Probably not.The concept of equity behind Rawls’ thought experiment is equality of opportunity—when the circumstances beyond personal decisions and behaviors (such as gender, race, or parental education levels) do not determine, in advance, the path of an individual.

The launch of a major report on the region prepared by the World Bank, Economic Mobility and the Rise of the Latin American Middle Class, prompted me to think about the topic of equity. This publication has attracted media attention and commentary from influential outlets such as The Economist and the BBC [article in Spanish]

This study empirically investigates the changes that have occurred in Latin American societies income distribution in recent decades. Among its main findings is the reduction in income inequality in the region, together with the presence of a large percentage of the population that has experienced economic mobility or, as defined by this study, a change in social class.

The good news from this report—the result of two years of research—is that trends in the region really are encouraging because ultimately, this greater economic mobility results in a reduction of income inequality. Unfortunately, there’s also bad news. Inequality of opportunity in the region continues to be high; specifically, intergenerational mobility remains quite low. What this means is that the characteristics of parents, such as employment or education level, largely determine their children’s achievements.

The results of the World Bank report make me think that we’ve made significant progress in the region in recent decades with respect to rather sophisticated programs to reduce poverty; however, we’ve invested less effort in policies that seek greater equity. The state of early childhood development policies and programs in the region is clear proof of this neglect.

There’s a growing body of solid evidence documenting that gaps occurring during early childhood in different dimensions of child development are costly or impossible to bridge later in life, which explains why the return on investment in the development of children from vulnerable sectors is so high compared to investments in those same groups at other stages of life. But we also know that investment in early childhood is a long-term undertaking whose political benefits will never be realized by the leaders who spearhead these decisions.

The study published by the World Bank concludes by cautioning that continued progress in Latin America will depend on the new middle class’ commitment to a social contract that favors social inclusion. The recent preferences of Latin American voters in several countries appear to be consistent with that trend. However, this social contract demands not only that the prosperous be willing to pay taxes but also that governments provide quality public services. I would add that this more inclusive social contract must not, under any circumstances, exclude early childhood development. And here, I refer not only to the need to expand the coverage of child development services but, above all, their quality (in previous posts on the blog First Steps, Florencia Lopez-Bo and I have discussed the issue of quality more in depth).

In practice, this change demands a great deal of effort in terms of the management capacity of governments. Providing quality public services or implementing inclusive social policies is not easy. Neither is increasing tax collection, particularly in sectors where evasion has been the norm for years. It takes much more than willingness and good intentions in order for actions to translate into tangible results. And maybe that’s the biggest challenge that lies ahead!



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