Columbia International Affairs Online: Working Papers

CIAO DATE: 04/2011

Families, Welfare Institutions and Economic Development: Chile and Sweden in Comparative Perspective

J. Samuel Valenzuela

January 2011

The Helen Kellogg Institute for International Studies

Abstract

Since the 1960s, the sociology of development has drawn its explanations for the inadequate development of Latin American countries from culturalist paradigms, such as modernization theory, or macro-structural ones, like the dependency perspective. Setting such perspectives aside, this paper seeks to reinvigorate a sociological focus on development by arguing that it requires “social fundamentals”—and not only the economic and political ones that have taken center stage in recent discussions of this topic. Such social fundamentals have to do primarily with the synergies that are generated between properly designed welfare institutions and the characteristics of a nation’s families. The paper illustrates the importance of family structure (in particular their numbers of children) by showing that it is endogenous population growth, not low economic expansion, that has generated less than adequate growth of per capita income in leading Latin American countries during the twentieth century. This demographic difference with leading European economies produces a different kind of development despite its success in generating economic expansion and high returns to investors. It is the sort of development that concentrates on the production of primary goods and simple manufacturing, with low productivity and very little effort in research and development, because the labor market contains a great abundance of very lowly qualified workers. Such workers stem from the large new generational cohorts that are reproduced decade after decade by the equally large proportion of all national households that are formed by very poor and ill-educated families. By comparing Chile and Sweden, the paper seeks to understand the origins of this different, and ultimately less successful, developmental trajectory. Both of these countries were similar socially, politically, and economically at the beginning of the twentieth century. The key difference between their subsequent development trajectories is that properly designed welfare institutions, in particular a universal old-age pension system, were set in place in Sweden early on. Such institutions had a transformative impact on poor families, reducing their fertility levels, and allowing them to invest in the education of their children. This did not occur in Chile. In sum, old-age pensions and other welfare institutions are not a “luxury” that only rich countries can afford to adopt, but are key contributing elements to creating the most successful form of development in our time.