One – third of the people are condemned to lifelong poverty

The main objective of public social spending is the search for social equity and social marginalization avoidance. By allocating public funds to education and social assistance, in addition to housing, water, sewage, and public health, poverty can be overcome and equality of opportunities can be installed. At the beginning of the 21st century, public social spending (excluding pension spending and universities) in Argentina was 12% of GDP. Today, it stands at around 15% of GDP.

The National Constitution establishes that the federal government is only responsible for those functions delegated to by the provinces explicitly. Since social functions were not assigned to the federal level, nor were they delegated, the provinces and their municipalities are responsible for financing and managing social services. Notwithstanding this, the federal level concentrates tax resources and interferes in these functions that are not its responsibility. At the beginning of the 21st Century, the federal government invested 3% of the GDP in these functions and currently it invests 5% of the GDP. This is materialized through transfers to the provinces and centrally administered expenses. 

What results were achieved with these federal interventions overlapped by provincial and municipal functions? With data provided by the APRENDER tests and INDEC, the following state of situation can be drawn:

• 50% of children under 14 years of age are part of poor households. 
• 70% of poor children have low performance in language and mathematics. 
• This implies that 35% of children in Argentina are poor with difficulties in reading, writing, adding, and subtracting.

These data show the resounding failure of the federal’s interference in provincial functions. The fact that 1 out of every 3 children ends up poor and lacks education implies that one-third of the population is already condemned to poverty for life. When these children become adults, without education, the social damage is irreversible. For this reason, it is not a false alarm to affirm that in Argentina, informality and welfare are here to stay for many decades to come.

The solution does not lie in increasing public social spending (which in fact occurred) but in improving the management of spending. This is why it is decisive to reorganize the State. It is particularly important to rethink the roles between jurisdictions. The federal level must stop overlapping and interfering in the financing and management of provincial and municipal functions. This does not imply disengaging from the issue of education but focusing on measuring and informing the society of the provinces’ education results so that local leaders are put under the pressure of their neighbors to improve their management. This is the best contribution the federal level can make to social development.

It sounds like a very disruptive change. But it is the way federal countries with excellent social outcomes, such as Canada and Australia, operate. Canada has one of the best education systems in the world and no national ministry of education. Each province runs its own education system and is accountable to its people for results. Canada’s health care system is also highly valued in the world. In this case, there is a national health ministry, but it is not dedicated to assisting the provinces in the financing and management of provincial public hospitals, but rather to coordinating policy guidelines, research, health outcomes measurement, and information to the population. Having national ministries meddling in local functions is a deviation from Argentine federalism that contributes to poor public management.

With the economic crisis worsening, pressures on the government for fiscal adjustment are increasing. The adjustment may mitigate the macroeconomic disaster in the short term, but at the cost of deepening the State’s malfunctioning. To stop the decline and emerge to development, a comprehensive reorganization of the State is needed, leading to fiscal balance as an outcome of a substantial improvement of public management quality.