One of the backbones, if not the main one, of the current administration is the goal to achieve social inclusion for the majority in the least time possible. For me, the so-called social inclusion is nothing else than taking out millions of Peruvian from poverty and extreme poverty. A diagnosis will surely indicate that these segments of the population are excluded from the modern circuits of the high productive economy, such as the financial and technological, as well as infrastructure, education and health. Hence, they have to be included.
No one can disagree with this objective. However, what draws my attention is the excessive emphasis given to the expenditure in social programs as a way to reach this inclusion, such as Pensión 65, the extension of the Juntos program, Cuna Más, and raising the minimum wage. I consider that these measures are way far from becoming ideal and effective to reach the long-awaited inclusion. Maybe it could end up being a complement to more fundamental issues that I would like to discuss.
There will always be income inequality in society. This meaning, there will always be poor people, but not necessarily extreme poor people. Economic theory distinguishes between "good" inequality and "bad" inequality. The first is the result of people that are extremely productive, providing society with new goods and quality services. In exchange, they generate enormous amounts of income. One cannot be against that. By the contrary, it has to be encouraged. The second has to be eliminated because it ends up into bad practice, such as bribery, theft, privileges, and so on. If we want to attain substantial social inclusion in this government, the emphasis should be put in four deep structural reforms:
First, in education, in order to guarantee the access of a good quality education for all levels.
Second, in health, in order to guarantee as well the access of a good quality and low cost health system for everybody.
Third, a massive investment in infrastructure throughout the country, including road networks, telephone systems, environmental sanitation, energy, etc.
Fourth, a State reform in many aspects, including decentralization, security and efficiency in public administration.
The expenditure in social programs – read welfare – is necessary as long that there is extreme poverty but should not become fundamental. Its financing should be estimated after seeing what is required to make structural reforms, and not the other way around. The government should prevent the temptation of populism at all costs.
How should the Humala administration get rid of extreme poverty? Economist Jorge González Izquierdo thinks that welfare should be replaced by long-term reforms in education, health, infrastructure and state administration.