17 Outcomes in the social arena were even more disappointing. Consider first poverty. The expectation was that the pickup of growth in the 1990s, modest though it was, would lead to a proportional reduction in poverty.<sup>22</sup> That expectation was not realized. While the region’s per capita GDP increased by a cumulative 12 percent from 1990 to 2000, poverty rate (measured at 4 dollars a day in PPP terms) did not decrease (Figure 11). Moreover, the absolute number of poor in the region (calculated on the basis of countries’ own definitions of the poverty line) remained roughly constant, at around 200 million people throughout the 1990s (World Bank, 2009). Similar figures from ECLAC (2010) give a 1.5 percent yearly growth from 1990 to 2000 rate for Latin America and the Caribbean along with a slight decrease in poverty from 48.3 percent to 43.9 percent. Only in Chile did the poverty rate fall sharply, from 38.6 percent in 1990 to 20.2 percent in 2000.

The distributional outcomes were equally frustrating as income inequality remained stubbornly high throughout the 1990s (Figure 12). The non-weighted average Gini coefficient for income distribution in the region increased somewhat, from 50.5 in the early 1990s to 51.4 in 2000, while the weighted average remained virtually unchanged (World Bank, 2004).<sup>23</sup> Even Chile’s Gini coefficient was stuck at around 55 during the 1990s. The fact is that income inequality is stickier than poverty everywhere and has remained stubbornly high in the region for decades (declining later on for the first time, and only modestly, in Brazil and Mexico during the 2002-2007 period of faster growth).<sup>24</sup> From a strictly technical point of view, the limited progress on social outcomes might have been foreseen. The Washington Consensus reforms, as will be seen later, were mainly meant to liberalize and stabilize the economies and allow for growth, not reduce inequality. But to the extent that the 1990s became in the public consciousness the decade of the Washington Consensus reforms, and those reforms became synonymous with expectations of social and economic growth outcomes, expectations were disappointed.

# **5.2. Counter-Factual Overview**

There is little doubt that outcomes during the 1990s in terms of growth, poverty and inequality were disheartening relative to expectations. But would the assessment change if the focus is placed on reform impacts not relative to expectations but compared to the counterfactual—i.e., to what would have happened in the absence of Consensus-style policies? This line of inquiry—evidently of greater interest to academics than to the average citizen—has given rise to copious empirical research. When all is said and done, the preponderance of the econometric evidence arising from this research suggests that Latin America would have been worse off without the reforms. Per capita income and output in the 1990s would have been lower and poverty deeper. Moreover, the relatively strong performance of Latin America during

> 22 In a well-known article, Dollar and Kraay (2001) find a robust empirical regularity that the per capita income of the poor increases proportionately to average per capita income.

> 23 To the extent that public goods provision is not incorporated into the income-based Gini measures, inequality may be overstated.

> 24 The situation in the unemployment front was varied but job creation was generally weak during the 1990s and informality tended to increase (Stallings and Peres, 2000; and World Bank, 2007).