Social policy in Latin America, Social policy and financialization

Special Focus
Social Protection
Social policies in the
“periphery” of capitalism:
the case of Latin America
Aerial image of São Paulo (Brazil), 2004
Credits: Tuca Vieira
Ana Carolina Cordilha
Université Sorbonne Nouvelle
Institut des Hautes Études de l’Amérique Latine
November 17th

Outline
1. What can we
learn about
social protection
Looking at LA?
2. Context: brief
overview of LA
region
3. Social policies in
LA: features and
challenges
Chile, 19th century Chile, 21st century

“Peripheral” countries?
“Emerging” countries?
“Developing” countries?
“Middle-Income” countries?
What characterizes these
economies ?

According to economic theory, usual
traits of “developing” /
underdeveloped” regions are
consequences of:
Common trait: relatively weak position in the
hierarchies and institutions of the world
economy (Lapavitsas and Soydan, 2020)
• Hierarchy of currencies
• Hierarchy of trade
• Inferior position in multilateral
institutions (IMF, WTO, WB, ECB…)
Weaker side in the global balance of powers

“Emerging”,
“developing”, etc
• Idea of “convergence”, “catching
up” with the patterns of
advanced countries

“Emerging”,
“developing”, etc
• Idea of “convergence”, “catching
up” with the patterns of
advanced countries
• Not true for Latin America

0%
10%
20%
30%
40%
50%
60%
1500 1820 1870 1913 1929 1940 1950 1973 1980 1990 2008
Per capita GDP of Latin American countries compared to wealth
countries (constant 1990 dollars)
Source: own elaboration. Data: Bértola and Ocampo (2012). "West“: 12 European countries, Australia, Canada, United States, and New Zealand.

0%
10%
20%
30%
40%
50%
60%
1500 1820 1870 1913 1929 1940 1950 1973 1980 1990 2008
Per capita GDP of Latin American countries compared to wealth
countries (constant 1990 dollars)
Source: own elaboration. Data: Bértola and Ocampo (2012). "West“: 12 European countries, Australia, Canada, United States, and New Zealand.
Interpretation : per capita GDP of LA is becoming smaller
and smaller compared to that of the richest countries

Table 1 Per capita GDP, population, and GDP, 1500-2008: Regional averages and ratio to the world
average
1500 1820 1870 1913 1929 1940 1950 1973 1980 1990 2008
Latin
America/W
est 0.54 0.56 0.36 0.37 0.4 0.35 0.36 0.32 0.34 0.26 0.27
West-Latin
America
gap 360 547 1,382 2,655 3,171 3,702 4,299 9,511 10,462 14,433 19,250
Gap/Latin
America per
capita GDP 0.86 0.8 1.79 1.72 1.53 1.86 1.76 2.14 1.92 2.85 2.7
Per capita
GDP (world
mean = 1)
West 1.37 1.83 2.45 2.73 2.93 2.91 3.2 3.42 3.52 3.79 3.46
Latin
America 0.73 1.02 0.88 1 1.16 1.02 1.16 1.09 1.21 0.98 0.93
0
0.5
1
1.5
2
2.5
3
3.5
4
Per capita GDP (world mean = 1)
"West" Latin America
Source: own elaboration. Data: Bértola and Ocampo (2012).

Table 1 Per capita GDP, population, and GDP, 1500-2008: Regional averages and ratio to the world
average
1500 1820 1870 1913 1929 1940 1950 1973 1980 1990 2008
Latin
America/W
est 0.54 0.56 0.36 0.37 0.4 0.35 0.36 0.32 0.34 0.26 0.27
West-Latin
America
gap 360 547 1,382 2,655 3,171 3,702 4,299 9,511 10,462 14,433 19,250
Gap/Latin
America per
capita GDP 0.86 0.8 1.79 1.72 1.53 1.86 1.76 2.14 1.92 2.85 2.7
Per capita
GDP (world
mean = 1)
West 1.37 1.83 2.45 2.73 2.93 2.91 3.2 3.42 3.52 3.79 3.46
Latin
America 0.73 1.02 0.88 1 1.16 1.02 1.16 1.09 1.21 0.98 0.93
0
0.5
1
1.5
2
2.5
3
3.5
4
Per capita GDP (world mean = 1)
"West" Latin America
Source: own elaboration. Data: Bértola and Ocampo (2012).
Wealthy countries have gone increasingly richer over time
while LA has continued around the world average
And has been lagging behind since the 1980s

Outline
LA: what can we
learn?
2. Context: brief
overview of LA
region
LA: features and
challenges

An opportunity
for critical thinking
“Decolonize” the study of
social protection
SPS: originate in European
countries.
- SPS studies : European
economic, social, economic
structures in mind
Opportunity to gain
understanding on how SP
work in practice

Social Protection: back to the basics
Definition?
Purposes?

Social Protection: back to the basics
Purposes:
• to protect against social risks;
• to improve redistribution;
• to avoid complete destitution (guarantee minimum levels of well-being to all
citizens)
“Natural” and “man-made” risks
See Nicholas Barr, The Economics of the Welfare State
Social risks vary greatly from one country and community to the other!

Lessons from European systems
1. More fair “financing”
• Direct taxation (wages and income)
2. Wider array of policies
• For social risks typical of monetized, urbanized,
industrialized societies: unemployment, poverty,
lack of housing, lack of health care, subsistence
means out of working age, ...
• Greater focus on services compared to cash
transfers
3. Wider social support (compared to other regions)

A note on typologies and frameworks
• Previous, european-centered
frameworks for Social Protection
Systems do not seem to fit in
• A long way from Esping-Andersen’s
“Three worlds of welfare”!

A note on typologies and frameworks for
Latin America & others
• Mesa-Lago (1978) – pioneers, intermediary, late-comers
...
• Franzoni (2007) – productivist state, protectionist state, familialist
state
....
• Bayliss and Fine (2020) – Systems of Social Provision
• Lavinas 2018 (Social Protection Paradigms)
One size does not fit all

In fact, the notion of “systems” of social
protection is highly questioned
• “System” implies something…
• Homogeneous : not the case across different sectors of the same
country
• Solid, stable, coordinated : not the case of social policies in LA

“Social
protection” in
LA
• Different results from European social
security policies
• Lo Vuolo, 2015 :
“(…) it is not only important to consider how much
income people receive, but also the form of access
to this income.
It is not only relevant to know if health services
are provided, but also to know the conditions to
access these services.”

“Social protection” in LA
Different results: far from the levels of
protection and redistribution of wealthy
countries
• Social context: profile of LA population
is different , “social risks” are also
different
• Economic & political context: fragile
SPS, ideologically and financially

Extremely high levels of informality
• What is informal work ?

• No formal contract
• No rights for employees
• Employers and employees
don’t need to contribute to SS
• Reduce the revenues for SS
• Reduce coverage of benefits
such as pensions,
unemployment insurance,
etc…

Source: Aguilera (2020). Data: ECLAC (2017).

The pattern of the so-called “developing world” is
much different from that of wealthy countries
Source: OECD, Tackling Vulnerability in the Informal Economy, 2019.

Source: Jimenez (2011). Data: ECLAC.
The most unequal region in terms of
income distribution*

income distribution*
Source: Statista. Data: World Bank (2016/2017).
20% richest holds more
wealth than the
remaining 80%

land distribution*
1% largest farms occupy
more land than the
remaining 99%
Percentage of land held by the largest 1% of farms
TOTAL REGION
Source: OXFAM (2016).

Left-wing
governments as of
2011
Timeline of Latin American politics
1970s 1980s-1990s 2000s 2010s
“Laboratory”
of neoliberalism
Structural
adjustments
“Progressive” wave
(“turn to the left”)
Conservative wave
(“turn to the right”)
Right-wing
governments as of
2018
Source:
Foro
de
São
Paulo
Pinochet & Milton
Friedman, 1975

Economic growth
in the 2000s
Commodity boom
Export of primary goods and
resource-based products
• Oil, mining, soy, cattle, wood, ....
Low technology, low value-added

From left to right: Hugo Chávez, Luiz Inácio “Lula” da Silva, Evo Morales, Michelle Bachelet
2000s
The issue of redistribution returns
to the agenda.
Greater engagement with
“social policies”/social spending*
2000s to mid-2010s: “growth
with redistribution”
↑EG, ↑ID, ↓Poverty,
↓Unemployment

Latin America drew considerable attention from the international
community because of its apparent capacity to combine "advances" in
the economic domain and in the social sphere

Short-lived: since mid-2010s,
greatest crisis in history
Even before the pandemic, LA
growth was at its weakest in
decades
Increase in hunger,
unemployment, poverty…
Continuation of
structural deficiencies
(labour market, housing,
sanitation...)

Latest ECLAC/ONU Reports: “The crisis in the region in 2020... will be the worst
in its entire history... Much due to the conditions prior to the crisis”
Total
1,7 million deaths

Argument
At least part of the
problems that LA
faces since the mid-
2010s is linked to
the pattern of social
policies in the region

Features & weaknesses of
social policies in LA
1. Revenue side
2. Expenditure side
3. “Smoke screen”
Obstacles to redistribution, equity,
guarantee of basic needs
Favourable measures and indicators

Features & weaknesses of
social policies in LA
(Neoliberal) profile of social policy

History of Social Protection in
Latin America
Pioneer in introducing social security programs in
the “developing” world during the 20th century
Argentina, Brazil, Costa Rica, Uruguay, Chile*,
and Cuba*
As in Europe, it started with work injury, disability,
sickness benefits…
Costa Rica, Caja Costarricense de Seguro Social,
1966

Latin America
Social insurance systems since 1930-40s, but did
not cover the majority of the population, which is
not in the formal labor market.
Pensions: contributory pension schemes
Health: mostly for contributors to the system
• The rest of the population dependent on the
private sector or restricted public programs
• Universal systems – Cuba, Brazil, Costa Rica,
Chile (50s-70s), still problematic
Costa Rica, Caja Costarricense de Seguro Social,
1966

Latin America
By the end of the 1970s, nearly all Latin American
countries enjoyed some sort of pension, health
care, and assistance benefits
Social security systems remained “incomplete” in
terms of services provided and the population
covered
Brazil, approval of the Universal Health System
in the Congress, 1988

Social Protection in Latin America :
fragmented systems
Social insurance
system for
formal workers
Private
sector for
the richest
Public
system for
the most
needy
Different subsystems for
different population groups
With different rules of
financing, affiliation, access
Determined by income
level and social status

1. Revenues for social
policy
Tax system
Regressive tax structure: low-income
individuals pay a higher percentage of their
income than high-income individuals
Undermines positive effects of social policy in
terms of poverty and inequality reduction

The tax system in LA
“Progressive taxation” ?
“Regressive taxation” ?
43%
60%
51%
31%
6% 9%
LAC OECD
Tax structures in Latin America
and OECD, 2010 (% tax revenues)
Other Taxes
Indirect Taxes (Consumption Taxes)
Direct Taxes (Income, Profits, Social Security contributions)
Data: OECD/ECLAC/CIAT (2012).

The tax system in LA
“Progressive taxation”: direct taxes (income,
wealth, property)
“Regressive taxation”: indirect taxes (production,
consumption, trade)
• Fall on price of goods and services
• Everyone pays equal: poor pay relatively more as a
proportion of their income
43%
60%
51%
31%
6% 9%
LAC OECD
Other Taxes

Regressive taxation
History of LA (export taxes, com-led period)
• Could boost revenues, easier to collect, less political
resistance
Implication :
• One of the main drivers of inequality
• Undermines the financing of social protection
• Volatility of the public budget
43%
60%
51%
31%
6% 9%
LAC OECD
Other Taxes

Source: Jiménez, 2011.
Gini index before and after taxes and transfers:
Latin America and EU countries (circa 2010)
Taxation:
almost no
effect in
reducing
inequalities
in LA

Revenues for
social policy:
highly volatile
Government revenues:
unstable & pro-cyclical
• E.g..: Venezuela’s oil
revenues ~ 99 per cent
of export earnings
(OPEC data)

2. The profile of social
spending
Different from EU
Focus on policies with
lower capacity to equalize
France, manifestation in
support of public hospitals, 2019

World Bank
International Labor
Organization
Academia
The core of social
policies in “emerging”
countries in the 21st
century:
Conditional Cash
Transfers (CCTs)

The two pillars of social policy & social protection
Different purposes, costs, and outcomes
Public
services
• Health
• Housing
• Education
• ...
Monetary
transfers
• Contributory
(e.g., pensions)
• Non-contributory
(e.g., welfare
benefits)
Source: Nicholas Barr, The Economics of the Welfare State

LA, 2000s: “boom” of cash transfer programs
“Pink tide” leaders

What are CCTs?
Monetary transfers
Targeted
• Poor households with children and
adolescents
Means-tested
Conditionalities:
• Punitive conditionalities linked to
school assistance and health
checks
Dependent on the availability of
government resources
Arbitrary selection of beneficiaries

CCTs
Low value
• BR: average benefit (2021): ~ 35 USD/mo
Low cost for the government
• BR: largest program in LA: ~ 0.5-1% GDP
Positive impacts on governments’
evaluation
Brazil, waiting lines to register as a
candidate for Bolsa Familia, 2020-2021

Monetary
transfers rather
than investing in
public services
Latin America: social public spending
by sector (% GDP)
Different from the pattern of
social spending in Europe (focus
on services & transfers as rights)

Source: Lavinas (2015). Data: Source: SIAFI - STN. (Expenditures by the Central Governement) and IBGE (SGS/BACEN). *Includes Culture, Citizens´Rights, Urban
Infrastructure, Housing, Sewage, Environment, Agrarian Infrastructure and Sports.
Brazil, Federal Social Spending, Cash Transfers and In Kind, 2003 to 2014 (as % of GDP)
2003 2005 2007 2009 2011 2013 2014
Cash Transfers 9,5% 10,0% 10,2% 10,6% 10,0% 11,1% 11,4%
Welfare Schemes 0,5% 0,7% 0,9% 1,0% 1,0% 1,2% 1,2%
Social Insurance 8,5% 8,7% 8,6% 8,7% 8,2% 8,6% 8,9%
Labor 0,6% 0,6% 0,7% 0,9% 0,8% 1,2% 1,3%
In Kind Services 2,6% 2,9% 2,4% 2,6% 2,6% 2,9% 3,1%
Healthcare 1,6% 1,7% 1,5% 1,5% 1,4% 1,5% 1,5%
Education 0,8% 0,7% 0,7% 0,9% 1,0% 1,2% 1,3%
Sewage 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Others* 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Total Federal Social Spending 12,1% 12,9% 12,6% 13,1% 12,6% 13,9% 14,5%

Cash Transfers from a
critical perspective
Why CCTs cannot promote social equity?
Do not allow for the same standards of
essential services
• 1st class services for the rich,
2nd class services for the poor
Not a right
• Political clientelism: “instruments of
social administration and control”
(Lo Vuolo, 2012)
Stigmatization of recipients

Cash transfers from a
Do alleviate poverty and promote
consumption
Do not promote equity and protect
from social risks
The issue is not CCTs, but making
them the focus of social policies...
at the expense of public and
universal services

Targeting recipients on
conditions reinforce the
trend away from universal
provision
and towards a limited,
“residual” model of social
protection (Lavinas, 2013)

Source: own elaboration based on Lavinas (2013). Sanitation: Running water, sewage, and adequate garbage collection.
2003
2003
2013
2013
2003
2003
2013
2013
2003
2003
2013
2013
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
10% poorest 10% richest
Brazil, access to adequate sanitation, cell phone and color TV by income
deciles, 2003 and 2013
Sanitation Cell phone TV Sanitation Cell phone TV
From Equal Citizens…
to Equal Consumers

Cash transfers from
a critical perspective
Line of less resistance
“Neoliberal” social policy
• Low cost: Appropriate
for containing public
spending
• Adopted by left & right-
wing governments
Facilitated by economic growth
• Cyclical financing
conditions
Lula "surfing" in a wave of oil.
Credits: Ivan Cabral

Analytical biases – “we see what we
want to see”
Measurement biases – “we pick the
data that proves what we want to prove”
Several forms of measuring income and
inequality
LA: drop in inequality using household surveys,
not always true when using income tax data
• More capable of capturing financial
income

Different data, different results
Source
:
ECLAC
Sccial
panorama
2013

Latin America - Top 1%
5%
10%
15%
20%
25%
30%
35%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Income Share - Top 1% and Bottom 50% Latin America and
World, 1990-2016
Source: Lavinas. Data: World Top Income Database.
World - Top 1%
Characteristics of
inequality in LA: High
inequality with a high
concentration in the
richest decile

What does it mean
“social protection”
in LA?
Social policies should consider social risks
particular of the region, e.g.:
1. Enormous labour informality
• “Vulnerability zones”: dual approach
distinguishing poor (targeted for social
assistance) and formal workers
(secured). A large group remains
unprotected (“working poor”).

2. Different social structure, with
different needs
E.g.: relatively high share of indigenous
population
• 45 million people (est.)
• > 60% of population in Bolivia and
40% in Guatemala (est.)
What does it mean
“social protection”
in LA?

• Higher levels of poverty
among rural and indigenous
population
• Indigenous: poverty rates are
approx. the double of that for
the whole population
• Directly related to issues of
land distribution

Different people,
different needs
Social protection : protection of
land and natural resources
“Social protection” also
involves agrarian policies,
environmental policies, guarantee of
“minority” rights…
Completely off the government
agenda

Displacements and deaths
linked to ongoing extraction
Booming international demand for
natural resources: growing number of
environmental, social and ethnic
conflicts
Millions of peasant, indigenous and
afro-descendant communities forcibly
displaced and dispossessed of land
LA gvts, left & right: involved or
supporting the projects
Source: CEPAL, 2014.
Extractive projects: conflicts in
territories inhabited by
indigenous peoples,
2010-2013

Deadliest place on Earth for environmental
activists
Source: Global Witness, 2018
≈ 4 environmental defenders
killed per week, more than
half in LA

Limits to
promote
social
equity in
Latin
America
Social policies are specific to each context
Policies favourable to the permanent decrease in
social inequality:
• Progressive tax system
• Public, universal services over income transfers
Opposite in AL:
• Social policies do not consider the social risks
and features of social structure in the region
• Limits to reduce inequalities and provide equal
opportunities

Thank you !
carolinacordilha@hotmail.com

Special Focus
Social Protection
“periphery” of capitalism:
the case of Latin America
(cont.)
ana.lot-canellas-cordilha@sorbonne-nouvelle.fr
December 1st
Aerial image of São Paulo (Brazil), 2004 ©T. Vieira

Recap
1. What can we learn about social
protection looking at LA?
2. Context: brief overview of LA
region
3. Social policies in LA: features and
challenges

3. Social policies in LA: features and challenges
3.1 Revenue side
3.2 Expenditure side
3.3 “Smoke screen”?

3.2. The profile of social
spending in LA
Argument: in comparison
to the EU, focus on policies
with lower capacity to
equalize

Literature on conditional cash transfers / microcredit
from a heterodox perspective
• Lo Vuolo, R. 2015.
• Lavinas, L. 2013, 2017.
• Leisering, L. 2009.
• Ocampo, J. R. 2018.
• Mader, P. 2015.
• Fine, B. 2014.
• Soederberg, 2014.
• Himmelweit, 2017.
• …

Locating CCTs within Social Protection

The two pillars of social protection
Different purposes, costs, and outcomes
Public
services
Health
Housing
Education
...
Monetary
transfers
Contributory
(e.g., pensions)
Non-contributory
(e.g., welfare
benefits)
Source: Nicholas Barr, The Economics of the Welfare State

From Equal Citizens to Equal Consumers
(Lavinas, 2013)
“The major positive achievement which has resulted from the creation
of direct, universalistic social services in kind [in Europe] has been the
erosion of formal discriminatory barriers.
One publicly approved standard of service, irrespective of income,
class, or race, replaced the double standard which invariably meant
second class services for second class citizens.”

In: Lavinas (2013).
The most
popular form
of social policy
in the region in
2000s-2020s

Part of an international trend

What makes CCTs a
special kind of transfer?

What makes CCTs a
1. Targeted
• Poor households with
children and adolescents
2. Means-tested
3. Conditionalities
• School assistance and health
checks ; punitive

4. Do not constitute a right
• Dependent on the availability
of government resources
• Arbitrary selection of
beneficiaries
What makes CCTs a
Brazil, waiting lines to register as a candidate
for Bolsa Familia during the COVID pandemic
(2020-2021)

CCTs in practice
Low value
• BR: average benefit (2021): ≈ 35 USD/mo
Low cost for the government
• BR: largest program in LA: ≈ 0.4 - 1% GDP
Positive impacts on governments’
evaluation (Lo Vuolo, 2012)
Brazil, 2020-2021

Monetary
transfers rather
than investing in
public services
Latin America: social public spending
by sector (% GDP)
Different from the pattern of
social spending in Europe: greater
focus on services & transfers as
rights
Source: CEPAL (Social Panorama)

Source: adapted from Lavinas (2015). Data: Source: SIAFI - STN. (Expenditures by the Central Government) and IBGE (SGS/BACEN). *Also culture,
Citizens´Rights, Urban Infrastructure, Housing, Environment, Agrarian Infrastructure, Sports.
Brazil, Federal Social Spending, Cash Transfers and In Kind, 2003 to 2014 (as % of GDP)
2003 2005 2007 2009 2011 2013 2014
Cash Transfers 9,5% 10,0% 10,2% 10,6% 10,0% 11,1% 11,4%
Welfare (Assistance) 0,5% 0,7% 0,9% 1,0% 1,0% 1,2% 1,2%
Social Insurance (Pensions) 8,5% 8,7% 8,6% 8,7% 8,2% 8,6% 8,9%
Labor 0,6% 0,6% 0,7% 0,9% 0,8% 1,2% 1,3%
In Kind Services 2,6% 2,9% 2,4% 2,6% 2,6% 2,9% 3,1%
Healthcare 1,6% 1,7% 1,5% 1,5% 1,4% 1,5% 1,5%
Education 0,8% 0,7% 0,7% 0,9% 1,0% 1,2% 1,3%
Sewage* 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Housing* 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%
Total Federal Social Spending 12,1% 12,9% 12,6% 13,1% 12,6% 13,9% 14,5%

CCTs failed at promoting
social equity in LA
Do not allow for the same standards
of essential services: “1st class
services for the rich, 2nd class
services for the poor”
Equalize only at the basic level of
consumer goods (consumer society
– purchasing power in times of
poverty)
Stigmatization of recipients

Source: own elaboration based on Lavinas (2013).
Sanitation: Running water, sewage, and adequate garbage collection.
2003
2003
2013
2013
2003
2003
2013
2013
2003
2003
2013
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
10% poorest 10% richest
Brazil, access to adequate sanitation, cell phone
and color TV by income deciles, 2003 and 2013
Sanitation Cell phone TV Sanitation Cell phone TV
Acess to consumer
goods expanded,
more than socially
acceptable living
standards

Cash transfers from a
✓ Do alleviate poverty and promote
consumption
 Do not promote equity and
protect from social risks
The issue is not CCTs, but making
them the focus of social policies
at the expense of public and
universal services

CCTs were deemed as the
main reason for the decline in
poverty and inequality
Several studies show that the
commodity-led growth came
the increase in wages and
employment, which was the
main reason for the decline of
poverty in LA during the 200s
Brazil, Formal Employment (Stock)
2002-2014
Source: CAGED in Alves (2017).

Connecting CCTs
to neoliberalism

Connecting CCTs
to neoliberalism
Low cost (austerity)
Lower taxation
Feeds consumer society
amidst poverty

Connecting CCTs
to neoliberalism
Do not challenge the
interests of private
companies – e.g.
education, health,
pensions cies (public
services do)

Connecting CCTs to
neoliberalism
• Adopted by left & right-
wing governments
Eg:
Bolsa Familia: ≈0,4% GDP
SUS ≈< 4% GDP
Universal Health care in
advanced countries (FR, UK,
….): ≈ 10% GDP

Cash transfers from
a critical perspective
Facilitated by economic
growth
• Cyclical financing
conditions
Lula "surfing" in a wave of oil.
Credits: Ivan Cabral

The reasons why social policies in
LA did not bring structural
changes include not only
institutional failures
Also methodological issues
• How we measure “social
development” today

Latin America - Top 1%
5%
10%
15%
20%
25%
30%
35%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Income Share of Top 1% (% Total Income),
1990-2016
Source: Lavinas. Data: World Top Income Database.
World - Top 1%
Characteristics of
inequality in LA: High
inequality with a high
concentration in the
richest decile

What does “social
protection” mean
in LA?
Social policies should consider social
risks particular of the region, e.g.:
1. Enormous labour informality
• Dual approach distinguishing poor
(targeted for social assistance) and
formal workers (secured).
• Social protection: protection of
“vulnerability zones”

2. Different social structure,
different needs
• Relatively high share of indigenous
population (> 60% in Bolivia,
40% in Guatemala)
• Social protection : protection of
land and natural resources
What does “social
protection” mean
in LA?

• Higher levels of poverty
among rural and indigenous
population
• Indigenous: poverty rates are
approx. the double of that for
the whole population

• Directly related to issues of
land distribution
• Worsened by the
“neoextractivist model” of
the 2000s

Displacements and
deaths linked to
ongoing extraction
Millions of peasant, indigenous and afro-
descendant communities forcibly displaced and
dispossessed of land
LA gvts, left & right: involved or supporting the
projects
• SOE, credit...
Extractive projects
Conflicts in indigenous
territories, 2010-2013
Source: CEPAL, 2014.

To
conclude
Social policies are specific to each context
Policies favourable to the permanent decrease
in social inequality:
• Progressive tax system
• Public, universal services
Not the case in AL:
• Social policies do not consider the social risks
and features of social structure in the region
• Limits to reduce inequalities and provide equal
opportunities

Special Focus
Social Protection
neoliberal period
Past and present
issues
ana.lot-canellas-cordilha@sorbonne-nouvelle.fr
December 1st
Protest in front of public hospital in UK

Common concepts to
discuss “neoliberal
reforms” in social policy:
austerity, privatization,
commodification, …
Popularized in the
1980s/1990s
Still guide the research on
social policy

However...
The world is not the same!

However...
The world is not the same!
“Private actors” are not exactly
the same of 30 years ago
Evidence of new developments
that do not fit perfectly into these
concepts

Calling for new perspectives
on social policy
Financialization,
Datafication,
“Philantrocapitalism”....

Need of new conceptual
frameworks to understand:
• How do present reforms in
SP look like
• Who are the actors driving
and profiting from them
The concepts we use determine the changes
we see

New frameworks for systems
under construction
Reforms in existing systems
Argument I
Social policy in the neoliberal period: 2 directions

Social policy reforms serve
the interests of
private capital
Both “traditional” private
companies & financial
companies
Argument II
Who profits from reforms in social policy?
How ?

Outline
1. Mapping the current
debate on social
policy
2. New frameworks
3. Neoliberal reforms
Old & new concepts

Literature on privatization / financialization & social
policy from a heterodox perspective
• Dutta, S. 2018.
• Cordilha, A.C. 2021.
• Global Health Watch, 2014.
• Giovanella, L. et al. 2018.
• Lavinas, L. 2020.
• Bayliss, 2016.
• Bayliss, K. et al. 2016.
• Hunter, B., Murray, S.F., 2019.
• Mader, P. 2015.
• Himmelweit, S. 2017.
• Roberts, A. 2016.
• Mader et al., 2020.
• …
• …
• …

1. Mapping current
debates on social policy

Mapping discussions on Social
Protection
Post II World War
The “Classic” Welfare
State
70s
The crisis of the
“Welfare State”
80s/90s
Neoliberal reforms

Neoliberalism
Margaret Thatcher and Ronald Reagan

Neoliberalism
• Fine (2014), Fine & Saad Filho
(2017), Yilmaz (2017)
• Political project emerging in the
1970s/80s
• Policies supposed necessary for
individual entrepreneurship and
freedom to flourish
• & stimulate growth
• > trickle-down

Neoliberalism
• Economic theory, political
praxis, and ideology mixed
• Grounded on shaky
theoretical foundations
(Fine, 2014)

Neoliberalism as an “economic
and political paradigm”
• Specific policy recommendations
• Protect private property rights & profits
• Promote free financial markets & trade
• “Paradigm”:
Set of economic and political ideas, as well
as the policies, institutions, and practices
accompanying these ideas, which advocate
for unregulated markets and favor private
capital.
(Fine and Saad-Filho, 2017) Margaret Thatcher and Ronald Reagan

Neoliberalism is not about less State intervention
• Change in goals
• Tax cuts, liberalization, etc…
requires massive rounds of
regulatory changes

What’s social policy got to do with it?
The neoliberal ideology is heavily based on the narrative that “big governments”
disempower individuals, waste resources, and create disincentives for private
enterprise.
This narrative fuels a critique of all forms of institutionalized solidarity between
citizens, calling for budget discipline and the suppression of universal public
provision.
(Yilmaz, 2017)

What’s social policy got to
do with it?
• Since the 1980s, the idea of
comprehensive State provision
has been under intense pressure
in the context of neoliberalism
• Wasteful, inefficient, reduce
consumer choice, ….
• Social policies didn’t shrink: they
changed
• Two ways: reforms of existing
SPS & new frameworks for SPS
under construction
Protest in the UK, circa 2017

Why social policy?
Before discussing how
private actors are
participating in areas of
social provision, it is
important to interrogate the
reasons leading them to
do so

Why social policy?
Private companies & financial capital
Profitable frontier of expansion
1. Nature of social policy: secure and
increasing demand for services
• Secure and increasing opportunities to profit

Why social policy?
2. State’s commitment to provide and
subsidize such activities
• Tax & other incentives
• Cover the “hard to serve”
• Leave private & financial acitivies with
the less risky & more profitable areas

A profitable frontier of
expansion for private capital
E.g., private equity investments, a trillion-
dollar industry
Bain & Company (2019): investments
across different sectors from 2009 to 2015
“health care deals have returned US$2.2
for every US$1 of invested capital”
….. more than the returns obtained by investors
in sectors such as technology, infrastructure,
and other common targets of private
equity firms

Current debates on Social
Protection
1. Reforms
2000-2010
Reforms continue, but new
features become more evident
Financialization, Datafication…
1990s
Neoliberal reforms
Privatization, marketization,
commodification, ...

Current debates on Social
Protection
2. New frameworks
Guidelines (recommendations) for the implementation of social policies
International Organizations (ILO, WB, UN, WHO)
Especially (but not only) low- & middle-income countries
1. Reforms
2000-2010
1990s
Neoliberal reforms

Neoliberalism
• Economic theory, political
praxis, and ideology mixed
• “Budget discipline”
• Not absence of social
spending, but targeted and
residual

Social policies haven’t
shrunk during
neoliberalism:
they changed

New frameworks for systems
under construction
Reforms in existing systems
Social policy in the neoliberal period: 2 directions

Social policy reforms serve
the interests of
private capital
Both “traditional” private
companies & financial
companies
Who profits from reforms in social policy?
How ?

1. New frameworks
Guidelines (recommendations) for the implementation of social policies
International Organizations (ILO, WB, UN, WHO)
Especially (but not only) low- & middle-income countries
Mapping debates on Social Protection
2. Reforms
2000-2010
1990s
Neoliberal reforms

Current frameworks
on social policy

New frameworks for social policy

Underlying narratives compatible with the idea of a
« slim state »:
• « Efficient allocation »,
« targeting »
• Lower costs
• « Cooperation »
• Bring in private capital
• … in profitable parts of
public provision
• « Gradual expansion of
protection »

Universal Health Care Coverage (WHO)
• New paradigm of “universality” in public health care
• Blueprint of public health policies for middle- & low-
income countries today
• WHO > > > WB (loans/aid), UN (agreements), …
• 2010-2015: WHO & WB provided technical assistance
for +100 countries to implement UHC (WHO, 2015)
• Core policy recommendations of the Sustainable
Development Goals

Small difference in name,
large difference in meaning
• Universal Health Coverage is different
from Universal Health Care
• Universal care :
• Equal access to services at all levels
of care*
• Publicly guaranteed
• Paradigm for the creation of PHS
Public hospitals in Europe

Universal Health Care Coverage (WHO)
• UHC: not a new form of achieving
universal health, but a
reinterpretation of the concept
• More limited scope in terms of the
services guaranteed by the
government

The role of the government within the UHC
framework
Public funding to “minimize health risks
& financial-related risks”:
• Guaranteeing primary care*
• Subsidize access to complex care in the
private sector
• Help paying for private services / private
insurance
• Depending on one’s income

“Partnership” with the private sector means….
• “Affordable user fees” (charging for
services, but possibly subsidized)
• Health insurance (possibly
subsidized)
• Private services, privately owned
health care infrastructure

The example of PPPs (Fine, 2020; Bayliss & Van
Waeyenberge, 2017; Loxley and Hajer, 2019; …)
• Main/important form of infrastructure
investment in several countries
• Costs - often “hidden” in the public budget
• Estimates suggest that, over these three decades,
NHS hospitals received £13 billion in investments,
but will have to pay back around £80 billion by
the end of the contracts (Thomas, 2019).
• Publicly subsidized private profits

Implications for social equity (Dentico, 2019)
“Abandoning the goal of building a national health
system (integrated network of standard quality
services for all, at all levels of care)
Replaced by an approach in which public provision
equalizes only at the level of basic care services,
the rest tailored according to purchasing powers”

Financial inclusion (WB)
• Improve access to the
financial system
(bankarization,
microcredit) can play
the role of social policy

Financial inclusion (WB)
• Improve access to the
financial system
(bankarization,
microcredit) can play
the role of social policy
• Reduce poverty, create
life opportunities,
empower people

Making sense of neoliberal reforms:
past & present
Privatization and Financialization

1. Stéphane Bancel, Moderna’s CEO
2. Ugur Sahin, CEO and co-founder of BioNTech
3. Timothy Springer, immunologist and founding investor of Moderna
4. Noubar Afeyan, Moderna’s Chairman
5. Juan Lopez-Belmonte, Chairman of ROVI
6. Robert Langer, scientist and founding investor in Moderna
7. Zhu Tao, co-founder and chief scientific officer at CanSino Biologics
8. Qiu Dongxu, co-founder and senior vice president at CanSino Biologics
9. Mao Huihua, also co-founder and senior vice president at CanSino Biologics
Plus 8 billionaires that became even richer:
1. Jiang Rensheng & family, Chair, Zhifei Biological products
2. Cyrus Poonawalla Founder, Serum Institute of India
3. Tse Ping, Sinopharm
4. Wu Guanjiang, Co-founder, Zhifei Biological products
5. Thomas Struengmann & family, Germany's BioNTech and
Uruguay's Mega Pharma
6. Andreas Struengmann & family, Germany's BioNTech and
Uruguay's Mega Pharma
7. Pankaj Patel, Controls listed company Cadila Healthcare
8. Patrick Soon-Shiong, ImmunityBio

Financial
institutions (2020)
More than $379 trillion held in
financial assets
(OECD)

Neither developed not
developing countries are
“running out of money”
High-income countries:
financial assets ≈ 6 times size of the
national GDP (average)
Middle-income countries:
financial assets ≈ 3 times size of the
national GDP (average)
2019: Top 3 asset management firms:
$16.7 trillion in assets under
management (more than the
European Union’s GDP)
(Thinking Ahead Institute, 2020; OECD, 2021)

“Financialization”
Importance of finance to
understand present reforms
in social policy
How financial institutions are
driving and benefitting from
reforms in social policy
How financial instruments
are serving to carry new
types of reforms

Privatization
Along with other concepts (commodification,
marketization, ….), guided the research on SP
Incorporating traits from private companies &
private companies themselves into the network
of public provision

Actors involved
The companies more directly involved in
and benefiting from earlier rounds
of privatization are non-financial
companies
Produce & commercialize goods and
services related to social provision
E.g.: private hospitals, clinics, schools,
universities, construction companies,
retirement homes, …

Today, part of policy shifts
in public systems aims at
reaching not the private
providers of services and
insurance
but the providers of
money
who?

Financial actors: a specific kind of
“private”
The notion of “private actors” used in the privatization literature put
little emphasis on financial players such as banks, investment funds,
investors
However, there is reason to think that these agents are having an
increasingly important role in social policy

Who are financial institutions?
What they do?
What instruments they use?
Why are they so powerful?

Finance
Financial sector: banks,
investment funds, insurance
companies, pension
funds, high net worth
investors, …
Manage the circulation of
money and the undertaking of
investments
45

Financial instruments
Loans, shares, bonds,
investments...
Giving money against rights to
future payments or claims on
ownership
Financial "profits" : interests,
capital gains, dividends, fees, ...
46

Financial income
“Profits" in the form of interests,
capital gains, dividends, fees, ...
47

Finance-dominated
capitalism
Public entities resorting to finance
and provides goods and services
This is seen on the increasing use
of financial instruments (loans,
securities, PPPs)
• All forms of attracting money from
the private sector
• At high costs

Privatization in social policy
1. Adoption of languages, instruments, goals
of nonfinancial private companies
by public bodies
2. Incorporation of practices and actors from
the private sector into public structures of
management, financing, and provision
Financialization in social policy
1. Adoption of languages, instruments, goals
of financial institutions by public bodies
2. Incorporation of practices and actors from
the financial sector into public structures
of financing, management, and provision

The financialization of the French Social Security System

The French Social Security
System
• 4 sectors: public health, pensions,
assistance benefits, work injuries
• “Debt problem” since the 1990s
• “Solving” deficits and debts by
borrowing in financial markets

1. Issued financial securities to
manage the SS debt
2. Issued financial securities to raise
short-term revenues
• Also,
3. PPPs: public hospital infrastructure financed
by private investors
4. Major program for public hospitals to borrow
in private banks
Alain Juppé, 1995

“Selling” the Social Security debt to financial
markets
1. SS (finances the French PHS)
has a debt
Before 1996: refinancing
through public banks
1996: Creation of the Social
Debt Amortization Fund
(CADES)

Long-term securities for refinancing Social
Security debts (CADES)
1. SS (finances the French PHS) has a debt
2. The SS debt is transferred to another agency (CADES). Accounting
move. The debt is no longer in SS balance sheets.
Public System Financial Markets
Public Agency

3. CADES issues bonds in the financial markets. In this way, it brings
revenues in. The revenues are used to pay its current debt.
Public System Financial markets
Public Agency

1. Agent sells securities to investors
How debt securities work

2. Agent receives money in return

3. Agent reimburses investors later
with additional interest

3. What is the problem here (from an accounting perspective) ?
Public Agency

4. CADES needs to pay back investors later.
Public Agency

5. To pay, social contributions (mainly on wages and social benefits).
Public Agency

CADES transforms the SS
debt into a financial debt
(other part of the budget)
Principal and interests
for investors are paid
with taxpayer money
Money that was not
available for Social Security
before

0
50
100
150
200
250
300
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Billions
of
euros
of
2018
Accumulated debt (amortized) Accumulated debt (outstanding)
Social Debt Amortization Fund (CADES), accumulated debt,
1996-2018, billions of euros of 2018
Source: Cordilha (2021). Data from CADES, 2018.
By the end of 2018, the
volume of debts
transferred to CADES
accumulated to €260
billion
60% amortized
40% still left for
amortization

Social Debt Amortization Fund (CADES), revenues,
1996-2018, billions of euros of 2018
Source: Cordilha (2021). Data from CADES, 2018.
To pay for such a
strategy, the agency
received €228 billion of
public funds since 1996
0
50
100
150
200
250
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Billions
of
euros
of
2018
Accumulated revenues

Interest
payments to
investors
• In total, the agency
channeled around €72 billion
to financial actors in the form
of interest payments and
commissions
• In 2017, the agency paid €2.2
billion in interests and
commissions (net of interest
income), the equivalent of
the Social Security “deficit”
in that year

Many other examples
Evidence that systems in
many other countries
have been resorting to
financial instruments and
institutions to address
their financial issues
National Health
Service (UK)
Sistema Único de
Saúde (Brazil)
Assurance Maladie
(France)
Medicare
(Canada)
Sistema Único de
Saúde (Brazil)
Assurance Maladie
(France)
Servizio Sanitario
Nazionale (Italy)

England – National Health Service (Bayliss, 2016, 2021)
• Privatization reforms in the 1990s (e.g., the outsourcing of
public services, provision of private services within public
structures)
• Private providers for the NHS incorporated to giant
financial holdings
• Also,
• Private Financial Initiatives: public hospital building
financed by private investors
• NHS employment agency sold to investment firms

ENGLAND – NATIONAL HEALTH SERVICE
≈2016: NHS provided around 30% of BUPA revenues and patients
Public
System
Private
hospital
Priv Equity
Comp New Company
London Stock
Exchange
Subcontracts Sold Restructured Listed
Private providers for the NHS: incorporated to
large financial holdings
Tax Heavens
(Luxembourg)

Announcement of NHS cuts
caused a drop in the value of
private hospital chain shares
Impacts: allow the financial
sector to profit from the NHS

Privatization and
financialization
• Go together (ideological bias)
• Financialization exacerbates impacts of
privatization
• Prioritization : budget balance
• Undermine quantity and quality of public
provision
• …. and bring in additional ones

Impacts of financialization
on social policy
Regressive redistribution
Volatility (inherent to
financial markets)
Loss of transparency
(intermediation)
Conflicts of interests
“When CADES was created, I was
working as an insurer. At the time, I
prohibited the purchase of CADES’
securities, considering that social
security should not be financed in such
a way.”
CADES’ President, hearing at the
National Assembly, 2016

Thank you
carolinacordilha@hotmail.com

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