Outsiders?

Latin America and the Caribbean has undergone immense societal transformations in the past twenty-five years. The re-establishment of democracy during the mid-1980s changed both politics and policies in the region and gave rise to fresh expectations about a future of more modern, more prosperous, and fairer societies.

As sweeping as these changes have been, however, they have yielded only mixed results. The region is today more prosperous and modern than it was twenty-five years ago, after languishing for years under the watch of dictatorial, sometimes messianic, and often corrupt generals. Macroeconomic stability has been achieved and still prevails in spite of repeated adverse financial shocks. The combined impact of economic liberalization (a national decision) and globalization (a global phenomenon) has allowed the region to integrate itself into the world economy, an inexhaustible source of riches in the best circumstances, and at worst a shackle on distortionary domestic policies. The interventionist and centralized states whose fiscal crisis marked the decade of the 1980s have gone through a “silent revolution” that has transformed beyond recognition the way they relate to the population (Lora, 2007). On the other hand, poverty and highly skewed distributions of assets (including human capital) and income are an obstacle on the path to fairer societies in the region. Social exclusion, historically rooted in different forms of stigmatization of groups traditionally identified by race, ethnic origin, or gender, has changed as much as the region itself has changed and is now affecting much more diverse and growing groups among the population, especially those who eke out a living in precarious jobs without any prospect of improvement. Their exclusion does not result from being “outside,” isolated, left out, but rather from their interactions with more modern and prosperous societies.

These changes in the dynamics of inclusion and exclusion do not lend themselves to simplistic interpretations. There have been advances in the inclusion of some groups, at least in some dimensions, and there have also been regressions that have deepened exclusion. For instance, women have been included in some dimensions (formal political representation and education) but are still segregated in worse jobs than men. Contrastingly, entire sectors of the population have been excluded from formal jobs and their associated social insurance protection by slow growth and unemployment. Then again, the dynamism of civil society and the rise of social movements have made certain excluded groups (like landless peasants in Brazil, the unemployed in Argentina, and indigenous peoples in Bolivia) important actors in the political arena.

Exclusion and inclusion are complex and dynamic processes that operate in every dimension of social life. Exclusion in one dimension (for instance, lacking identity documents) leads to exclusion in multiple other dimensions (for instance, from opening a savings account or participating in formal politics). Social exclusion manifests itself in multiple social maladies (poverty, informal employment, political unrest, crime, and lack of access to health and education, to mention just a few), all of which limit the ability of large sectors of the population to participate fruitfully in a market economy and therefore diminish their well-being.

A look at society through the eyes of the excluded themselves offers a sobering lesson about the interrelated and complex nature of the deprivations they suffer and the ways they find to face them. The microdocumentaries “Faces of Exclusion” that complement this report attempt to provide the reader with such a vision. They offer a striking illustration of lives that are lived not somewhere else, but on the streets through which we walk and by people with whom we interact in the pursuit of our daily chores.

The “outsiders” of yesterday (marginalized, rural, ill-nourished, poor, and isolated) were safely out of sight. Exclusion among these groups has not disappeared. Modern forms of servitude, often bordering on slavery, still thrive in rural areas of the region. Gaspar, the subject of one of the microdocumentaries, is a 78-year-old rural worker in Brazil who lacks identity papers, has never been registered with Brazilian labor authorities, and is therefore excluded from a government-financed old-age pension for rural workers (Aposentadoria Rural). In another of the microdocumentaries, indigenous Matsiguenga communities’ lack of access to health facilities stands in striking contrast to the riches produced by the Camisea gas field, which is located on their ancestral lands in the Peruvian Amazon. These stories offer stark illustrations of the mechanisms and consequences of traditional forms of exclusion.

But social exclusion today has become more urban and visible, its victims people who are not “outside,” but whose exclusion results from their disadvantaged interactions with the institutions and resources that enable the mainstream to prosper in a market economy. The stories depicted in the “Faces of Exclusion” microdocumentaries are a testimony to these disadvantaged interactions. Peddling candy or cellular minutes or performing circus acts on street corners while the red light stops traffic becomes a source of income when one cannot find a decent, well-paying job. Collecting recyclables from garbage cans, squatting in abandoned buildings, sleeping on the same streets that their more affluent neighbors use to go to work and play are some of the survival strategies of these urban excluded. The inhabitants of poor, crime-ridden areas of the region’s cities, excluded from the protection of police and the judiciary, create their own forms of organization to contain violence and protect victims, providing, as they do so, a lesson in dignity and compassion.

In the midst of all these multiple deprivations the excluded struggle to make a living with their limited resources. Their daily life is hampered by institutions that are unresponsive to their needs and rights as citizens and by their lack of access to resources as mundane as telephones to receive a call for a job interview, or as dramatic as medical services denied to them by overwhelmed public health facilities. They are left out of the paths towards inclusion that more privileged members of society enjoy, yet they are not outsiders, as their exclusion arises from their participation in social life with limited resources and within rules that are often biased against them by embedded discrimination and prejudice.

Exclusion is at the source of the growing sense of disengagement and dissatisfaction that affects the population of countries in the region and creates a fertile ground for populist experiments that erode the economic, social, and political institutions of democracy. This disengagement has grown in spite of reasonable progress over the medium term on life expectancy, health, literacy, and other indicators of well-being, as shown by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) in its recent (2007) report on social cohesion. Politicians all along the political spectrum now mention the fight against social exclusion as the main task of development and substantive democratization. As Goodin (1996: 343) points out, “‘Social exclusion’ is a catchy phrase, and it catches much of what is substantively of concern to us. Indeed, the great value of the concept lies in its promise to link together so many of our other social concerns, tracing them to common (or anyway cognate) causes and prescribing identical (or anyway integrated) cures.”

For all the political nuances and overtones with which the term has been used, the notion of social exclusion provides a powerful political rallying cry for anybody who worries about the plight of the worst off in society. However, as normally happens with effective mobilizing notions that need to mean different things to different groups, there is no clarity regarding what is meant by social exclusion. Even if the ambiguity of the concept of social exclusion is useful as a mobilizing tool, the design and adoption of inclusive policies is hindered by the lack of conceptual clarity about the nature of exclusion and the forces that produce and reproduce it.

THE CONCEPT OF SOCIAL EXCLUSION

Social exclusion is an inefficient and dysfunctional dynamic social, political, and economic process whereby individuals and groups are denied access to opportunities and quality services to live productive lives outside poverty. Following Sen (1999), this report argues that those social, political, and economic processes of societies limit the functionings of certain individuals or groups, resulting in their diminished well-being. [1] Those processes might affect the behavior, command of resources, or access to institutions of the excluded individuals or groups in ways that limit their ability to function and, therefore, to acquire or use capabilities that are valuable in a market economy.

Functionings take place in a social space in which individuals and groups engage in “transactions” through behaviors that express their choices based on their command of resources under the set of formal and informal rules that regulate those transactions. Social capital, norms, and collective action deserve special mention within this set of formal and informal rules. They improve collective welfare, especially in circumstances in which the state is weak and cannot respond appropriately to people’s needs. Exclusion, in contrast, erodes trust and hinders collective action. When trust among economic agents is not at its fullest, transactions costs inflate, and the scope for economic trades is reduced. As a result, society suffers a welfare loss. Public policies can shape formal and informal institutions that promote (or hinder) the intrinsic motivations of individuals and the self-management possibilities within civil society, thereby affecting trust, reciprocity, and willingness to cooperate.

The term “social exclusion” was coined in the 1970s in France to describe the situation of those groups excluded from the benefits of employment-related safety nets and other groups locked in social ostracism by drug use and other forms of dysfunctional behavior (Lenoir, 1974). However, social exclusion applied to the Latin American and Caribbean context is both a larger (in terms of scale and type of people affected) and more multidimensional concept.

Exclusion is by nature a multidimensional, dynamic social process and therefore is not the “consequence” of some particular “cause” (in the sense of an event that precedes an outcome, without which the outcome would not have happened) (Burchardt, Le Grand, and Piachaud, 2002). We all participate in multiple interactions in our daily social life in which we exchange our labor for a salary with an employer, use that salary in transactions with producers and sellers to buy goods and services, vote in elections, recur to the police and the justice system to solve economic and noneconomic disputes, pay (or evade) taxes, participate in community organizations and churches, go to a government office to obtain licenses and permits, and do innumerable other things. All of these exchanges occur within a certain set of social, economic, and political institutions (formal and informal) that provide opportunities and services required to obtain outcomes valuable in a democratic market society. Social exclusion arises when a set of those formal and informal rules constrain the functionings of certain individuals or groups.[2]

Social exclusion has been used to conceptualize the restrictions that hindered the functionings (Tsakloglu and Papadopoulos, 2001) and access to opportunities (Behr­man, Gaviria, and Székely, 2003) of certain specific groups (women, indigenous peoples, Afro-descendants, the handicapped). Buvinic´ and Mazza (2004: 6) state that “exclusion is produced if belonging to a certain group has a considerable impact on the individual’s access to opportunities, and if the interactions between social groups happen in the frame of an authority/subordination relationship.” Exclusion in this view is considered to be a group phenomenon and therefore leads to the development of inclusion policies geared towards increasing the opportunities and access of specific groups of the population. An example within this family of policies is the 2002 Brazilian National Program of Affirmative Action (Programa Nacional de Ações Afirmativas), which introduced, beginning in that year, affirmative action quotas for Afro-descendants and indigenous peoples in a range of different areas, including public sector hiring and contracting, higher education, and parliamentary seats.

More recently, social exclusion in Latin America and the Caribbean has come to be seen as either an (undesirable) outcome of the economic reforms of the 1990s or a mechanism that prevents important segments of the population from benefiting from the macroeconomic prosperity that the region has recently been experiencing. Therefore, it has become a recurring theme in alternative economic policies that place a high value on income and asset redistribution. Under this view the focus of inclusion policies moves to fundamental changes in economic and social policies that seek to redress inequality and poverty for all people, whether part of an excluded group or not.

Material deprivation is one of the crucial outcomes of exclusion but is just one aspect of the deprivations suffered by the excluded. Furthermore, material deprivation is highly correlated with other dimensions of deprivation that affect the capacity of the excluded to obtain outcomes desirable in a market economy. Lack of (or low-productivity) employment results in low incomes and poverty, but also restricts the participation of those unemployed and in low-productivity jobs in social institutions, such as unions and other forms of worker organizations geared at improving their working conditions. Political and electoral systems that exclude disadvantaged groups of the population diminish these groups’ ability to influence government actions and thus reduce investment in the provision of high-quality services (such as schools) needed by the excluded to improve their lot. Geographical segregation increases the exposure of disadvantaged groups to crime and violence, both because the rich retreat into gated communities with private security and because the disadvantaged lack the social, economic, and political resources needed to access the preventive and corrective forces of the judicial system and the police.

Focusing on social exclusion aims at expanding the analytical and policy focus from poverty specifically into a broader range of concerns. Poverty focuses on outcomes such as measurable income; is based on the analysis of cross-sectional, static data; and looks at individuals and households. Exclusion, instead, focuses on processes, sheds light on the multidimensional nature of deprivation and the interactions between those dimensions, understands deprivation as a dynamic phenomenon, and looks at individuals and households in the framework of a community (Burchardt, Le Grand, and Piachaud, 2002).

Multidimensional deprivation is one outcome of exclusion, but as such needs to be distinguished from the process that produces and reproduces the exclusionary outcome. Poverty, unemployment, informality of employment, lack of political engagement, and dysfunctional forms of social interaction are outcomes of exclusion but should not be confused with the process that generates them. Compensatory policies such as income transfers or subsidized public employment can reduce poverty, and the ensuing reduction of material deprivation will, it is hoped, affect all the other outcomes of exclusion. However, to the extent that such transfers do not have an impact on the forces that constrain the functionings of the excluded, the process of exclusion will continue unabated.

The excluded do not inhabit a social universe devoid of interactions and exchanges from which they are to be rescued by inclusion. Rather, the outcomes of exclusion are the product of particular interactions and exchanges through which the excluded are denied access to resources that would enable them to participate actively in the market economy and the formal and informal institutions that provide social services and opportunities to others. Neither are the excluded passive objects of exclusion; instead, they organize and develop individual and collective actions to change the social features that generate exclusion. Often this results in an “alternative” set of behaviors and institutions that serve to replace the outcome (access to the financial system) denied by exclusion. Exclusion is also at the root of contentious politics and street protests that draw attention to issues important to groups excluded from political representation.

AN OVERVIEW OF THIS REPORT

The outcomes of exclusion (unemployment and underemployment, poverty, disengagement from the state, and “bad” integration with the community) have traditionally been understood as the result of decades, if not centuries, of discrimination and stigma. Discrimination is crucial as a force of exclusion because it lies at the heart of individuals’ “transactions.”

Traditionally, particular attention has been paid to the role of ethnic origin as the main culprit in discrimination. It has been documented that indigenous peoples and Afro-descendants have less capacity to generate income because of their lower levels of human capital (i.e., formal education or training), lower remuneration in the labor market, and less access to high-quality jobs. This leads to a notoriously higher incidence of poverty among these groups, which persists despite the overall improvement of other groups in society, and lower returns to assets (physical and human capital, public assets, and social capital) that affect income generation strategies.

Latin Americans do believe that discrimination is alive and well, but do not believe that it operates only, or mostly, against traditionally discriminated-against groups (indigenous peoples, Afro-descendants, women). Recent opinion surveys such as Latinobarometer report that most people in the region believe that the poor, the uneducated, and those who lack social connections are the groups that suffer the most discrimination.

Beliefs, however, are informative only to the extent that they influence the economic decisions and outcomes of individuals engaged in market transactions. The fact that different individuals obtain different outcomes in their economic transactions could be explained by differences in the observable productive characteristics of the individuals, and by various factors that are unobservable for the researchers (such as entrepreneurial attitudes, motivation, and work ethic) but that can easily be “seen” by an employer or another relevant actor in the markets in which these individuals participate. Recent advances in the economic literature using highly controlled experiments geared towards obtaining information on unobservable traits show that stereotyping (which vanishes when information flows reveal the “true” productive capabilities of individuals) and self-discrimination (which does not vanish) largely explain discriminatory outcomes. This is not to deny the evident differences in human capital and financial and social assets associated with gender, race, ethnic origin, and class distinctions. What this literature reveals is that these differences do not necessarily reflect overt discrimination; rather, they may result from differences in endowments of various groups within the population. Markets may simply act as resonance boxes that reflect these differences in endowments. This suggests that the automatic attribution of differential outcomes to discrimination may be misleading and a pernicious departure point for the design of remedial policies.

But there is much more to exclusion than discrimination. Focusing on interactions and exchanges makes it possible to move beyond group affiliation (e.g., according to gender, race, ethnicity, religion) towards a more general understanding of exclusionary outcomes as a product of constraints on the functionings of the excluded that do not arise from discrimination alone. From this point of view, exclusion is a moving target. Looking at exclusion through the lenses of groups that have persistently been excluded from the benefits of social services or the opportunities of political participation would obscure multiple other forms of exclusion that affect the disadvantaged, even if they do not belong to stigmatized groups.

The long period of sustained growth and modernization in Latin America and the Caribbean from 1930 through the debt crisis of the 1980s resulted in substantial growth in productivity (Thorp, 2007). The contemporary expansion of public employment and the industrialization process served to create paths for integration of a lucky few, mostly through employment in public or manufacturing jobs that gave them access to social security and other benefits of a truncated version of the welfare state. In this context, basic citizens’ rights became attached to formal sector jobs, rather than developing independently of place of employment (Gordon, 2004). The debt crisis in the region in the 1980s and the economic policy reforms of the 1990s disrupted those paths of integration and made those left behind (in unemployment, job informality, or simply poverty) more vulnerable to the traditional forces of exclusion.

Globalization, democratization, and macroeconomic stabilization changed the capabilities of the state to propel and sustain social integration and the mechanisms for doing so, thus altering the patterns of inclusion and exclusion. Democratization has exposed corruption and waste in the public sector, but a new equilibrium between political legitimacy and administrative efficiency has yet to be reached. Stabilization has restricted the capability of the state to fund excessive public expenditure through inflationary financing, whereas globalization (through both trade libereralization and technological change) has threatened employment and tested the limits of income protection and social security policies. These forces have not only changed the nature of the state, but also made a larger part of the population vulnerable to the traditional forces of exclusion.

Although the effect of these societal changes encompasses multiple dimensions of social life, the labor market is a crucial place where these new forces of exclusion manifest themselves. The labor market has been one of the social loci where “modern” exclusionary forces (largely economic and social in origin) associated with globalization, democratization, and economic stabilization have expanded, both in magnitude and scope, the impact of the traditional forms of exclusion that persist unchecked in the region. Under these conditions, having a job is not necessarily a means of escaping material deprivation and poverty, and in most cases it does not offer access to mechanisms of social protection, insurance, and participation that could create a path towards social inclusion for workers who have jobs and their families.

As labor is the main, if not the only, source of income for most of the population, low wages mean material deprivation for workers and their families. A worker in a low-productivity job is likely to be excluded in at least two dimensions (from consumption because of a low wage and from access to social security because of job informality) but is not in this state of exclusion necessarily as a result of discrimination in the labor markets. An economy growing slowly and generating more bad jobs than good is likely to have a substantial number of people from the mainstream (i.e., those not traditional victims of discrimination) in bad jobs. Not having a job or having a precarious job severs the connection between workers and the provision of social services linked to formal wage relations. Having a formal job makes workers subject to payroll taxes, and their tax contributions entitle the workers and their families to insurance against medical problems, old age, disability, and death risks. Because bad jobs “do not exist” as far as the region’s labor authorities are concerned, there is no possibility for workers in these jobs to present grievances or to form or belong to a union, thus making them vulnerable to exploitation and unsafe working conditions.

Exclusion resulting from nonemployment or employment in the informal sector has grown in importance in urban areas during the last decade and a half and has resulted in an increase in the percentage of the population excluded from the benefits associated with formal employment. Such exclusion is more acute for groups traditionally considered vulnerable (women, youth, the unskilled), but is increasingly affecting prime-age, educated males normally considered part of the mainstream. The dynamics behind this growth in bad jobs have been shaped by at least two sets of factors. On the one hand, the region’s lackluster economic performance since the late 1990s, which has shown itself in rising unemployment in some countries, mediocre employment growth in most, and rising demand for education (associated with larger imports of capital goods and technology), has increased the share of low-wage employment in total employment. On the other hand, the change in the sectoral structure of employment and the increase in women’s participation have had small effects and have sometimes (as in the case of a declining share of agriculture in total employment) gone in the direction of reducing the share of low-wage work.

Individuals excluded from good jobs for reasons unrelated to their qualifications and effort are likely to see their interests as diverging from those of society at large. This feeling is bound to be stronger if hopes and expectations for the future, both for the present and for subsequent generations, are low. Two societies with identical income distributions may have different levels of welfare depending on their degree of social mobility. In societies with very low mobility, the family in which one is born and the education level of one’s parents are more important than one’s own effort in determining one’s present income and welfare and those of one’s descendants.

The picture that emerges from measurements of social mobility in Latin America and the Caribbean is not that of a region advancing towards equality of opportunities for all, independent of social origin. Most individuals in the region feel that they are unlikely to see significant improvement in their income or social position or that of their children, regardless of effort or ability. It therefore should not be surprising that under these conditions, incentives to work, to acquire skills, and to participate fully in social and political activities are weak. In contrast, the small group of the population belonging to the middle and upper classes of income and welfare, who have income and opportunities comparable to those in the developed world, are very unlikely to see their situation deteriorating. This excess of security stunts innovation and risk taking and leads to the perception that public officials and entrepreneurs are more interested in the status quo than in the public welfare.

Social capital and trust levels across society are one of the most notorious victims of this grim panorama of exclusion, immobility, and inequality of opportunities. Cooperating with other individuals or groups in society and trusting them involves significant personal risks given the uncertainty regarding the actions of the other parties involved and the characteristics of the institutional context in which these interactions occur. Social exclusion may increase these risks both because the stakes are higher (making uncertainty more important) for those who are excluded, and because exclusion decreases the ability of the institutional context to channel to each individual involved in a particular transaction valuable information about the behavior and incentives of other individuals engaged in the transaction.

In order to fully gauge the burden that social exclusion imposes on social capital and trust, the researchers involved in this report turned to the tools of experimental economics. A representative sample of individuals in six capital cities in the region were engaged in a series of games in a tightly controlled setting that allowed for an understanding of what incentives and mechanisms affect the possibility of group formation for different social groups. The researchers found that Latin Americans are as willing to cooperate as individuals in other parts of the world, but that their willingness to cooperate decreases as the gap in social traits (class, income, education) increases among individuals. This has an important economic cost in terms of foregone opportunities to engage in mutually beneficial transactions. The actual gains that accrued to players in the games fell short of their full potential in magnitudes that vary between 22 and 72 percent, indicating the enormous welfare losses that exclusion produces for everyone, not just the excluded, as a consequence of the associated erosion of trust and incentives to cooperate.

As noted previously, exclusion is multidimensional, and deprivation in one sphere interacts with deprivation in other areas to deepen the limits on the functionings of the excluded. Understanding exclusion as a process that constrains the functionings of everybody, not only the excluded (rather than looking at the outcomes of excluding features of society, as the traditional deficit-focused analysis does), makes it possible to integrate a wide variety of social phenomena within a unified conceptual framework that highlights social interactions as sources of exclusion.

Yet this report does not pretend to offer a conclusive, much less a complete, enumeration of the functionings of individuals and groups engaged in the social, political, and economic exchanges that shape social exclusion, its determinants, and its dynamics. Rather, the chapters in Part II of this report attempt to develop some examples of the ways that looking through the lens of exclusion enables one to question a number of acquired beliefs about the impact of policies and social phenomena. It is hoped that these examples will help other researchers and the policy community to deepen the collective understanding of the mechanisms of social exclusion and the remedies on which to rely in order to advance towards a more inclusive and fair society.

State actions such as privatizations, regulations to increase access to financial services, and provision of identification documents to the population look quite different in the eyes of the excluded, because their access to resources and institutions is more restricted than that of those in the mainstream that policymakers have in mind when designing policies. Privatizations, which have an exclusionary impact on employees who are laid off from the privatized public enterprise, might at the same time have an inclusionary effect by expanding service to previously unserved sectors of the excluded population. Programs aimed at inclusion, such as conditional cash transfers, may nevertheless have an exclusionary impact on those members of excluded groups who do not have the proof of identity required to register for the programs. On the other hand, those programs might still produce an inclusive outcome for their beneficiaries by giving them access to the financial sector via the debit card through which program disbursements are made.

Street protests and other forms of contentious politics that disrupt the normal operation of the political system can be seen both as a sign of a deficit and as a source of increased democratic representation. When looked at through the lens of exclusion, contentious politics highlights both the absence of channels of influence through which the excluded can obtain changes in resource allocation from the political system and the opportunities for inclusion when the political system integrates street demands into its own programmatic agenda. Crime and violence, which have a destructive impact on the social environment in which the excluded live and work, make daily life more difficult for the excluded, who do not have the access to political influence, justice, and police services that the mainstream has.

The multiple angles of social exclusion examined here, and the multiplicity of dimensions that have not been addressed or even mentioned, show quite clearly that social inclusion is a moving and very complex target. An inclusive society is not necessarily devoid of poverty and social ills but is a society where the color of one’s skin or the wealth of one’s parents are not key determinants of whether one is poor or receives a quality education or proper medical care. Equality of opportunities, increasingly representative political representation, and high mobility are characteristics of inclusive societies.

Inclusive policies are not just a matter of outcomes, but more fundamentally a matter of processes that affect who makes decisions and how they are made. Inclusion is central to democracy, and greater inclusion deepens democracy. For this reason the inclusion process is dynamic and interrelated across the many dimensions of social life. Inclusion in one aspect (such as the inclusion and high achievement of women in education) can very well coexist with exclusion in another one (such as a high degree of occupational segregation for women in domestic and clerical work).

For these reasons inclusion is not an end point or an objective in the usual sense of the word. Inclusive public policies result from a dynamic policy process aimed at actively promoting social, economic, and cultural equality of opportunities, at addressing the impact of past discrimination and exclusion, and at achieving diversity. Inclusive policies need to address the changing nature of societies that continually alter the pattern of exclusion and inclusion for different groups.

Advancing inclusion requires changes in the normative framework that governs the fair treatment of citizens on a nondiscriminatory basis, in the operation of the institutions that design and administer laws, policies, and programs, and in the programs and policies that ensure greater equality for excluded populations. Inclusion processes encompass both governments and societies at large in the quest for a fairer, more equitable, and more dynamic society that can offer equal opportunities and access to all of its members independent of the privilege of their birth or the color of their skin.

MAIN MESSAGES

Exclusion is a dynamic, changing process that interacts with social, cultural, economic, and political societal changes. Exclusion is neither the consequence of dysfunctional economic policies nor a fringe phenomenon that growth and modernization are going to eliminate. The changing patterns of exclusion and inclusion in the region are part of the deep social, cultural, economic, and political transformations that democratization, economic stabilization, and integration with the world economy have brought to Latin American and Caribbean societies.

Exclusion affects changing and more diverse groups of the population. Stigmatization of and discrimination against groups easily identifiable by observable characteristics such as ethnicity, race, gender, or disability have been the traditional sources of exclusion in the region. Modern forces of exclusion, largely economic and social in origin, are currently affecting more diverse and visible groups within the population defined not by their ethnic or racial identity, but by the processes (such as unemployment or lack of access to land) that produce and reproduce their exclusion.

Exclusion is a multidimensional phenomenon, and those multiple dimensions are interrelated. Material deprivation is one of the salient outcomes of exclusion but is just one aspect of the deprivations suffered by the excluded. Material deprivation is highly correlated with other types of deprivation (lack of access to justice and high-quality education, disengagement from political participation, and reduced feelings of safety resulting from higher crime, among others), and each of these aspects of deprivation interacts with the others (as, for example, when legitimate business or employment opportunities are very scarce in a crime-ridden neighborhood), augmenting the limitations on the functionings of the excluded.

Exclusion reduces social capital and welfare for the entire population. Trust and cooperation are reduced by social distance. A set of experiments conducted in six large cities in the region found that the larger the social distance (measured by differences in income or education) within a group, the less individuals in the group cooperated with one another. This lack of cooperation in an experimental setting diminished the welfare of the whole group (not just the disadvantaged) in magnitudes between 22 percent and 72 percent relative to the potential welfare that could have been obtained with full cooperation. Though these figures should not be literally interpreted as GDP losses, they are an indication of the social welfare that Latin American societies fail to generate as a result of limitations on trust and willingness to cooperate associated with social exclusion.

Historically, inclusion processes have been driven by an active social and political leadership. History shows that inclusion drives (such as the civil rights movement in the United States in the 1960s or Malaysia’s New Economic Policy in the 1980s; see Chapter 14) have been accomplished through the interaction between an active civil society and its organizations and a sympathetic political leadership. Inclusion does not happen “naturally” as a consequence of economic growth or institutional modernization but requires decisive social and political leadership.

Inclusion is not just about changing outcomes, but crucially about changing the processes that produce and reproduce exclusionary outcomes. Inclusive policies represent a significant transformation regarding the way resources are apportioned, political institutions are governed, and opportunities are accessed. Inclusion aims to achieve equality of access and opportunities for the excluded by bringing them into the social, institutional, and political structures that make decisions regarding access and opportunities. Inclusive policies are thus not merely a matter of creating new ministries or designing new programs; rather, they are about changes in the ways social, economic, and political decisions are made.

Inclusive public policies involve more than changes in the protection of rights of excluded groups. Changes at the normative level are needed to protect and advance the rights of excluded groups. But the institutional framework needs to overcome embedded discrimination and stigmatization of excluded groups that has arisen from and continues as a result of these institutions’ own past practices. In order to make normative changes effective, institutions must change the ways in which they operate, hire employees, and enforce laws and regulations. This in turn materializes as changes in the implementation of programs and policies, which hopefully produce more inclusive outcomes that feed back into the process, strengthening the position of excluded groups to induce changes at the normative, institutional, and policy levels.