How does Latin American well-being compare to developed nations?

How much has well-being improved in Latin America over time? How does Latin America compare to the advanced nations? Have their differences widened? Why?

Trends in well-being have been drawn on the basis of GDP per head (Bulmer-Thomas 2003, Prados de la Escosura 2007). However, as development is increasingly perceived as a multidimensional process, a more comprehensive approach to living standards has been put forward (Astorga et al. 2005, Bértola and Ocampo 2012).

New answers to these questions can be provided with the help of a new ‘historical index of human development’ starting in 1870 – when large-scale improvements in health, helped by the diffusion of the germ theory of disease (Preston 1975, Riley 2001) and in primary education (Benavot and Riddle 1988) were initiated – and ending in 2007 – the eve of the Great Recession (Prados de la Escosura 2015a, 2015b).

A new historical index of human development

This historical index of human development shows substantial gains in Latin American human development since 1870 – especially over 1900-1980, with the index in 2007 nine times the level in 1870.

Trends in the historical index do not match those observed for real GDP per head (see Figure 1). Human development (excluding its income dimension) grew faster than real GDP per head over 1870-2007, but it is during the globalisation backlash of the 1930s and 1940s when clearer discrepancies emerged. Thus, while real GDP per head slowed down as world commodity and factor markets disintegrated, better health and education practices became widespread resulting in a major advance in human development. Since 1970, the pace of advancement in human development has not matched that of economic growth, with a dramatic contrast in the 1980s when the collapse in per capita incomes paralleled moderate gains in well-being.

Figure 1. Real GDP per head and human development (excluding income) growth (%)

Drivers of human development in Latin America

Social dimensions have driven human development gains in Latin America over the long run. Longevity accounts for the larger share during the first half of the 20th Century (see Figure 2). Access to knowledge had, instead, a leading role in the late 19th century and during the second half of the 20th century.

Figure 2. Drivers of HIHD growth in Latin America, 1870-2007 (%)

The first health transition – that is, the phase in which persistent gains in lower mortality and higher survival were achieved as infectious disease gave way to chronic disease (Riley 2005) – was experienced in Latin America during the first half of the 20th Century, especially over 1938-1950.

Major gains in longevity up to the mid-20th century were associated with advances in medical science and technology, such as the diffusion of the germ theory of disease (1880s), new vaccines (1890s), and sulpha drugs to cure infectious diseases (late 1930s) and antibiotics (1950s) (Easterlin 1999). Economic growth also contributed to expanding longevity through nutrition improvements – that strengthened the immune system and reduced morbidity (Fogel 2004) – and public provision of health.

In Latin America, however, such an advance often did not result in widespread treatment of infectious diseases with sulpha drugs and antibiotics, largely inaccessible to its low-income population, but was achieved through low-cost public health measures and the diffusion of hygienic practices, often during periods of economic stagnation (Riley 2001).

Since the mid-20th century, longevity gains slowed down in Latin America as the early-life first health transition was exhausted.

Latin America and the advanced world

In comparison with OECD countries, an incomplete catching up took place in Latin America between 1900 and 1980, as part of a wider process that embraced all developing regions (Figure 3). Life expectancy only made a substantial contribution to catching up during 1938-1950. Education has been the leading dimension in catching-up, especially, during the second half of the 20th century (but for the 1980s).

Figure 3. Latin America’s HIHD catching-up with OECD, 1870-2007 (%)

At the turn of 20th century a second health transition started in the advanced countries, with mortality falling among the elderly – as respiratory and cardiovascular diseases were fought more efficiently and their health and nutrition during childhood had been better (Cutler et al. 2006). Latin America’s absence from this second health transition helps to explain why the region has fallen behind in terms of human development.

Latin America’s position relative to the OECD differs significantly in terms of human development (excluding its income dimension) and GDP per head. Sustained catching-up took place over the 20th century, with Latin America achieving almost two-thirds of OECD levels of GDP per head after a long phase of stability. Latin America has declined since 1950, representing only one-fourth of OECD levels at the beginning of the 21st century.

Human development versus basic needs

A comprehensive depiction of human development needs to incorporate the opportunities individuals have in the choice of life, which includes exercising their political capabilities and influencing public decisions (Sen 1999, Ivanov and Peleah 2010).

The case of Cuba provides an extreme contrast between the success in achieving ‘basic needs’ in health and education and the failure to enlarge people’s choices – the core of human development – as agency and freedom are curtailed by the political regime. The same caveat applies to fascism and other totalitarian regimes under capitalism that suppressed freedom and agency across Latin America. Nonetheless, it is reassuring that, since 1950, human development and democratisation are correlated in Latin America and their association grows stronger as their levels get higher.

A development puzzle

A development puzzle presents itself, raising several key questions.

Why are trends in GDP per capita and human development uncorrelated over long periods of time when increases in per capita income would surely contribute to better nutrition, health and education? Does the explanation lie more with public policy (e.g. public schooling, public health, the rise of the welfare state), or with the fact that medical technology is a public good? Indeed, why did life expectancy stop being the driving force of world human development as the first health transition was concluded? Why has Latin America been left so far behind in the second health transition? Is it due to a lack of public policies, or the unequal effect of new medical technologies? To what extent did restricted access to health and education, as a result of income inequality, play a role?

These and other more detailed questions deserve further investigation. The answers are likely to have far-reaching policy ramifications.

References

Astorga, P, A R Bergés, and E V K FitzGerald (2005), “The Standard of Living in Latin America during the Twentieth Century”, Economic History Review 58(4): 765-796.

Benavot, A and P Riddle (1988), “The Expansion of Primary Education, 1870-1940: Trends and Issues”, Sociology of Education 61(3): 191-210.

Bértola, L and J A Ocampo (2012), The Economic Development of Latin America since Independence, Oxford: Oxford University Press.

Bulmer-Thomas, V (2003), The Economic History of Latin America since Independence, Cambridge University Press, 2nd edition.

Cutler, D, A Deaton and A Lleras-Muney (2006), “The Determinants of Mortality”, Journal of Economic Perspectives 20(3): 97-120.

Easterlin, R A (1999), “How Beneficient is the Market? A Look at the Modern History of Mortality”, European Review of Economic History 3(3): 257-94.

Fogel, R W (2004), The Escape from Hunger and Premature Death, 1700-2010. Europe, American and the Third World, New York: Cambridge University Press.

Ivanov, A and M Peleah (2010), “From Centrally Planned Development to Human Development”, UNDP Human Development Reports Research Paper 2010/38.

Prados de la Escosura, L (2007), “When Did Latin America Fall Behind?” in S Edwards, G Esquivel, and G Marquez (eds.), The Decline of Latin American Economies. Growth, Institutions, and Crisis, Chicago: NBER/University of Chicago Press, 15–57.

Prados de la Escosura, L (2015a), “Human Development as Positive Freedom: Latin America in Historical Perspective”, CEPR Discussion Paper 10613, forthcoming in Journal of Human Development and Capabilities, doi:10.1080/19452829.2015.1056644.

Prados de la Escosura, L (2015b), “World Human Development, 1870-2007”, Review of Income and Wealth 61(2): 220-247.

Preston, S H (1975), “The Changing Relationship between Mortality and Level of Economic Development”, Population Studies 29(2): 231–248.

Riley, J C (2001), Rising Life Expectancy. A Global History, New York: Cambridge University Press.

Riley, J C (2005), “The Timing and Pace of Health Transitions Around the World”, Population and Development Review 31(4): 741-764.

Sen, A K (1999), Development as Freedom, Oxford: Oxford University Press.

This article is published in collaboration with VoxEU. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Leandro Prados-de-la-Escosura, D. Phil. (Oxford) and Ph.D. (Complutense, Madrid) is a Professor of Economic History at Universidad Carlos III, Madrid.

Image: Rio de Janeiro’s famous “Christ the Redeemer” statue is reflected on the glass facade of a building. REUTERS/Ricardo Moraes.