Policy Note #1: Poverty under the Concertación: Mythical or Real Success?

July, 2012
Silvia Borzutzky, Claudia Sanhueza and Kirsten Sehnbruch

“Concertación's rhetorical commitment to focusing on social policies was not matched by a political and fiscal commitment.”

The analysis of absolute, relative, dynamic and multi-dimensional poverty rates shows that the story of poverty under the Concertación is not the unqualified success story that political rhetoric would like to have us believe: While the reduction of absolute poverty levels was impressive, relative poverty levels show no significant improvement. The negligible impact of fiscal subsidies and the relatively stable level of social expenditure belie the frequently cited commitment of the Concertación to overcoming poverty and improving inequality. In addition, the analysis of dynamic poverty suggests that strictly targeted social policies are not the best method for the long-term eradication of poverty, a point that is confirmed by the outcomes of the Concertación's flagship poverty programme, Chile Solidario. Concertación governments were successful in reducing absolute poverty levels, but ideological and political constraints prevented the dedication of an appropriate level of resources to social policies. Although, Concertación governments dedicated a significant amount of effort and resources towards creating the institutional capacity for dealing with poverty: the creation of basic social services and the administrative capacity for managing specifically targeted social programs. We should therefore give the Concertación more credit to for its sound economic policies than for its social policies. The failure of Chile Solidario to live up to the expectations illustrates three of the principal problems within the Concertación's social programs: first, following recommendations of strict targeting criteria, they were extremely highly focused on only the poorest households, and therefore considered poverty, and in particular extreme poverty, as a relatively static phenomenon, and therefore never managed to eradicate extreme poverty as they, unwittingly, were shooting at a moving target. 

Second, they were all designed from a fiscal position, which reasoned that a poor country has insufficient funds for direct social transfers. In part, this was due to the fact that it has always been the Ministry of Finance, which has had both the technical expertise and the political clout to determine the final shape of social policy. At the same time, technical experts from all sides of the political spectrum worried that benefits would create perverse incentives, and would negatively affect patterns of labour market participation, even if these benefits only consisted of absolutely minimal amounts. Therefore, when enough resources became available during the administration of President Bachelet, her Finance Minister, Andrés Velasco, managed these with extreme caution, affecting the potential impact of the social programs, as policymakers had not yet assimilated the research findings, which show that you need to spend money in order to help people make money.1 Third, the problems experienced with Chile Solidario illustrate the lack of linkages between social programs and social insurance, employment and vocational training programs. The expectation that people from households with extremely low levels of education would be able to learn a skill in a matter of weeks or months, or set up their own business with a small grant or microcredit was unrealistic, and those social programs which have incorporated some form of vocational training were poorly funded, and poorly thought through.