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The Freeman Spogli Institute for International Studies Stanford University Frank E. and Arthur W. Payne Distinguished Lecture Series 2008 “Economic Growth, Poverty, Populism, and Democracy” “Can the Poor Afford Democracy? A Presidential Perspective” Alejandro Toledo

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The Freeman Spogli Institute for International Studies Stanford UniversityFrank E. and Arthur W. Payne Distinguished Lecture Series2008

“Economic Growth, Poverty, Populism, and Democracy”

“Can the Poor Afford Democracy?

A Presidential Perspective”

Alejandro Toledo

Payne Distinguished Visiting Lecturer

CDDRL Visiting Scholar


poverty and democracy
Poverty and Democracy



Economic Growth

Democratic Institutions

Poverty and Exclusion Reduction


  • We cannot redistribute poverty and the final objective is not that everyone is equally poor.
  • Economic growth is an indispensable (but insufficient) component for poverty and exclusion reduction.
  • Economic, social, political and legal stability are indispensable to attract national and foreign capital investment.
  • Within a market economy, there is a need for deliberate social policies targeted and specific projects directed to the extremely poor.
  • There is high need for accountability.
conceptual framework
Conceptual Framework
  • Conventional wisdom

Economic Growth

Income Levels

Poverty & Inequality


The conventional wisdom among most development economists and policy makers is that economic growth and increases in

income levels are the key, and at times the only crucial, components for any poverty reduction strategy. The literature on this is

abundant in Latin America as well as in USA, And Europe.

Less examined is the reverse proposition: That high levels of poverty and social exclusion may in fact constitute real impediments to achieve the needed social, economic, political, and legal stability for sustained economic growth and democratic governability in the region.

This development process perspective recognizes the existence of “vicious circles” in which low economic growth accentuates

poverty and high poverty, in turn, results in a low economic growth and fragile governability.

This study/book seeks to examine the ways and means to convert this “vicious circle” into “virtuous circle” in which poverty,

exclusion/inequality reduction, and sustained economic growth could support each other and strengthen democracy, thus

preventing the surge of irresponsible populism and destabilizing forces which undermine sustainable development.


Region-Unique Opportunities

Few times in its history has Latin America had the opportunity to make a qualitative

jump into a predominant role in the World Economy in the next 10 to 15 years.

  • Some reasons for cautious optimism:
  • The region’s economy is registering a sustained rate of growth of an average of 6% in the last 6 years. Of course, there are some variations from country to country.
  • The region’s internal composition of growth is in the direction of increasing diversification. Latin America is now exporting more grapes, olives, asparagus, mangos, lemons, artichokes and textiles than ever before, and these are products which are more labor intensive and less vulnerable to the changes of commodities in the international market.
  • We have opened up new markets in the United States, in the European Union, and in Asia. We are widening and diversifying our trade and investment relationship in the world.
  • China and India’s economic growth, at least in the medium run, will continue to demand raw materials (minerals, grains, and energy). For China and India to maintain their present levels of economic growth they will need continuing supply of such raw materials.…which they have found in Latin America. This factor will help the region in decreasing the risk of the prices of our raw export materials from dropping significantly in the short and medium term, and this is paradoxically a great opportunity of which we should take advantage.
  • In the last sixty years, with significant participation from institutions such as the Ford Foundation, and AID, and other international corporations, the region has constructed a respectable stock of human capital who today are in a Diaspora around the world. If the region is intelligent enough to produce deliberate public policies to recuperate this human capital, it could constitute a crucial component for the region’s objective to build a knowledge-based economy, which in turn will liberate Latin America, to a large extent, from external forces.



Region-Unique Opportunities (continued)

However, This cautious optimism is not free of some significant challenges:

  • The persistently high levels of poverty and exclusion in the region may, by themselves, constitute a serious impediment for the needed political, economic, social and legal stability to attract capital investment for the achievement of sustained rates of economic growth indispensable for any poverty reduction strategy.
  • The emergence of indigenous people in the political life is the new challenge for the 21st century democracy in
  • Latin America. Issues of indigenous people, have profoundly changed the social and political challenges of Latin America in the last two decades. Constitution of indigenous movements as political actors have become the
  • most significant phenomena to have occurred in the region and will have lasting impact in its democracies
  • through the organization and actions of indigenous people who on their own rights are demanding to be included
  • in the economic, social and political life. These demands include claims for new conveniences and broader
  • concepts of citizenship.
  • The fragility of democratic institutions including the political parties in the countries of the region contributes to
  • weaken the stability and the accountability of the respective governments at different levels.
  • These conditions may constitute a fertile land for the expansion of opportunistic and irresponsible populism that, in
  • the short term, may have high political returns but constitute impediments for sustainable development of the region. This populism attempts to resolve the crucial poverty challenge by giving fish away to the poor instead of providing them their right to learn
  • how to fish.
data on poverty
Data on Poverty



  • World
  • Latin America
  • Peru

6.6 Billion World

2.6 Billion < $2/day

1.1 Billion < $1/day

0.5 Billion Latin America

18 Million in the world die of poverty

per year

Peru 28Mil (.5% of LA )

other manifestations of poverty
Other manifestations of Poverty
  • Unemployment
  • Infant mortality
  • Malnutrition
  • Lack of access to quality health and education
  • Vulnerable to economic crisis
  • Ethnically social-exclusion (Ethnicity)
indigenous people new challenges for the 21 st century democracies
Indigenous People: New Challenges for the 21st Century Democracies
  • Increase in access to quality health and education
  • Assure effective social inclusion (particularly the indigenous population)
  • Indigenous people of Latin America emerge with old inequalities diverse realities and new obligations for 21st century democracies.

4) Regions impatient with the democracy

5) High inequalities

6) Lack of availability of jobs,

  • rural, urban contrasts.
  • Inclusion with mutual respect for cultural diversities.
poverty and democracy26
Poverty and Democracy



Strong Democratic




Poverty, Inequality/Exclusion




Can Democracy Afford To

Neglect The Poor?