Current Economic Development Doesn’t Produce Sustainability

In global terms, economic development is currently driven by the industrialization of Asian countries and the surge of the BRIC economies―Brazil, Russia, India and China―plus an increase in the number of people entering a new global middle class (a projected 150 million people per year during the next 20 years). The latter is a positive social change that will also directly impact the environment, food production and access to water.


While economic growth in recent years has advanced hand-in-hand with a reduction in poverty levels, Latin America remains the most inequitable region in the world and, up to now, has not been effective in overcoming these inequities.  Where inequality has fallen, economicinclusion is due in large part to cash transfers and access to credit, and less to improved earned income of low-income groups.  At the same time, the access of this population to quality public goods and services such as health and sanitation, education, security and justice remains an urgent challenge.


In many countries, economic growth occurs without reducing unemployment, the informal sector, or gaps in social safety nets, all of which present serious obstacles to upward mobility. This new middle class still has a precarious hold on economic opportunity. A change in government transfer policies or loss of formal employment can easily reverse their gains, as savings are generally non-existent. Finally, this group has not tended to demand quality public services such as education, health, and security.

 
Competitiveness is uneven in Latin America—while some nations have experienced improvements, others are hampered by weak institutions, inadequate infrastructure or inefficient allocation of resources. In addition, against the backdrop of a profound worldwide digital divide, low levels of investment in scientific and technological innovation persist in the region.

 
Meanwhile, organized crime continues to penetrate Latin American economies, leading to a proliferation of illicit businesses, not only to launder money but also to acquire social legitimacy.


Unfortunately, many of the fastest-growing economic sectors also cause the most harm and destruction and generate the least amount of benefits for society as a whole. Unregulated extractive industries and those tied to narrow economic interests or to illegal activities represent Latin America’s old economy, one that dates back to colonial times and has generated much of the poverty and inequality that have characterized the region through history.


It will be necessary in the coming years to influence markets so that economic gains also reduce inequality and increase efficient and sustainable use of resources. Promoting inclusive markets and involving companies in the creation and improvement of public goods will be key.

 

A deep analysis of these and other trends has led Avina to focus on:

 

 

 

References
Primary sources: Research, interviews, and essays produced by Fundación Avina.

Secondary sources consulted: