Ricardo Hausmann, the founder and Director of Harvard’s Growth Lab and the Rafik Hariri Professor of the Practice of International Political Economy at Harvard Kennedy School, talks about Latin America’s path to economic recovery. He examines a wide range of subjects, including the pandemic, global inflation, decarbonization and the impact of Russia’s invasion of the Ukraine on Latin America.
June Carolyn Erlick:
Welcome to Faculty Voices. Ricardo Hausmann is the founder and director of Harvard's Growth Lab and the Rafik Hariri professor of the Practice of International Political Economy at Harvard Kennedy school. Welcome, Ricardo.
Ricardo Hausmann:
Thank you for having me. It's an honor.
June Carolyn Erlick:
When I first asked you to Faculty Voices, it was to talk about the post COVID recovery period and the economic future of Latin America. I was thinking in terms of the havoc reached by the pandemic with massive destruction of jobs and life.
June Carolyn Erlick:
But as you pointed out, there are so many factors that will shape Latin America's economic future, such as the crisis in Ukraine, the global inflation, de-carbonization. We're going to touch on all those factors towards the road toward recovery.
June Carolyn Erlick:
But first of all, I'd like to ask you a bit about the direct and indirect impacts of COVID. Latin America had some of the worst total lockdowns, perhaps in the world. Could you tell us a bit about what were the direct and indirect impacts of those lockdowns?
Ricardo Hausmann:
Let me start by saying Latin America had a horrible year 2020. 2021 was much more positive. I would say Latin America performed amazingly poorly in 2020 on almost all count. First of all, as you mentioned, the lockdowns were incredibly severe and they were incredibly destructive of economic activity.
Ricardo Hausmann:
Particularly so for the weaker parts of society. But they were particularly ineffective. So it's not that the lockdowns deliver surprising results on the pandemic side, infection rates remain amazingly high and mortality rates remain amazingly high. Now there are a couple of ways in which it did a little bit better.
Ricardo Hausmann:
It was for the first time, it was able to engineer a countercyclical economic policy to buffer the downturn. And it was able to do so with both fiscal and monetary instruments. It was able to increase the fiscal deficits to spend more money in the pandemic and to relax monetary policy.
Ricardo Hausmann:
Not everybody, obviously Ecuador had no space to do so. But in general, I would say that these are other crises where Latin America was forced to tighten up fiscal and monetary conditions because it had lost confidence and market access during the crisis.
Ricardo Hausmann:
Here, markets were supportive, so good macro framework paid off, but it was poorly invested in a bad health policy, both in terms of lockdowns and in terms of the capacity of the health system to withstand the shock. Now, having said that, I would say 2021 was surprisingly good, both economically and epidemiologically. And now, while China is in lockdown, Latin America is in a recovery phase.
June Carolyn Erlick:
Many of our listeners are not economists, Ricardo. So could you explain a little bit about this concept of countercyclical?
Ricardo Hausmann:
Very simply, you would want economic policy, macroeconomic policy to act as a stabilizer. So when things are doing poorly, you want to stimulate the economy. And when things are overheating, you want to slow it down so that the government compensates what's happening to the economy. In previous instances, this was impossible to do.
Ricardo Hausmann:
So for example, during the Asian financial crisis and the Russian financial crisis, the economy would go into a downturn and the government, instead of helping the economy by stimulating the economy with government spending and with lower interest rates, the government was forced to consolidate because the markets got scared and they couldn't issue bonds, they couldn't borrow.
Ricardo Hausmann:
So they were forced into cutting down spending, raising interest rates in a bad time, in a crisis. So they were accentuating the price. And then obviously, when the crisis would stabilize, they would say, "Okay, now we can relax or we can lower interest rates and spend."
Ricardo Hausmann:
So they were expansionary in the expansion and contractionary in the contraction, they were amplifying the cycles. This time, they were really able to engineer something that looked like countercyclical in the sense that they would stimulate the economy when the economy was in a downturn.
Ricardo Hausmann:
And they were able to finance that, they were able to convince markets that they were good for the money. And this was not just the Chiles and the Perus, the Columbias of this world, but this was true for the El Salvadors, for the Honduras, for the Paraguays of this world.
Ricardo Hausmann:
So in general, I would say Latin America's investment in a more solid macro framework, paid off with the exception of Venezuela and in Argentina that did very, very poorly. But those economic investments were somewhat mismanaged in a not very intelligent lockdown policy and health policy.
June Carolyn Erlick:
Do you think this countercyclical approach is a lesson that Latin American countries have learned?
Ricardo Hausmann:
I don't think it is a lesson in the sense that in previous crisis, they didn't know about it. It's just that they couldn't do it, that in order to do it, you have to have the capacity to borrow. And in order to borrow, you have to have the trust of financial markets. And they didn't have those. Now they do. They develop macroeconomic capabilities that were not there before.
June Carolyn Erlick:
So you say that 2021 was surprisingly good. Could you tell us a bit about that?
Ricardo Hausmann:
Well, for quite a few countries, fall in 2020 was historic. The recovery in 2021 was so fast that it got to 2019 levels of income by the end of the year in many countries, not in all, not in Mexico, not in Argentina, not in Venezuela, but in Chile, in Peru and central America and so on.
Ricardo Hausmann:
So in quite a few countries, the 2021 recovery was pretty quick. Actually, it was faster than the IMF had projected in April 2021 vis a vis what actually happened in 2021. So it caught many people by surprise how quickly the economies came back.
June Carolyn Erlick:
And why?
Ricardo Hausmann:
It's hard to know. In some countries, policies were incredibly accommodating, incredibly stimulated. The world record goes to Chile, which did things that were quite crazy. They threw helicopter money as if it was going out of fashion. They de-capitalized their pension system dramatically taking the savings out and giving it to people to the point that Chile grew something like 12% last year.
Ricardo Hausmann:
And consequently, now they have a serious case of overheating. And the economy is likely to have either a recession this year or something very close to zero growth. So the recovery in some parts was overdone by excessive stimulus.
Ricardo Hausmann:
But I think for the most part, some of the productive damage to the economy was not as significant as we would have expected, that there's more flexibility in the economy than we thought. Businesses were destroyed in the downturn, they sort of came back quicker than we expected in the recovery phase.
Ricardo Hausmann:
And also, something that happened that was fairly positive is that we have had a relatively well behaved banking system. You could have imagined a situation where all companies are told to shut down and so on. They can't pay their loans. Then the banks are starting to have problems with recovering those loans. They start looking wobbly. If they start looking wobbly, depositors get scared and they attack the banks.
Ricardo Hausmann:
None of that happened. It did not turn into a banking crisis. Also, you could have expected that rapidly rising public debt levels in order to fund that stimulus would have led to markets getting really scared and interest rates going way up. That also did not happen, a collapse in confidence in general did not happen.
June Carolyn Erlick:
You've talked about firms, but what about countries that are dependent on tourism? What's the picture like there?
Ricardo Hausmann:
Well, that picture was quite a bit catastrophic, the islands of the Caribbean in particular. There are many countries that have a tourism industry, but the tourism industry is not the be all and end all of the corporate as it is, for example, in Belize, whereas it is in some of the Caribbean islands.
Ricardo Hausmann:
Even in the Dominican Republic that has a huge tourism sector, the economy did relatively well. Surprisingly well for the magnitude of the shock to tourism. The shock to tourism was huge, but Dominican Republic has a manufacturing sector. Manufacturing did well, has an agricultural sector. The Dominican Republic, I thought did much better than I thought it was going to.
June Carolyn Erlick:
Is it causing any of these countries to rethink how they do tourism or if they do tourism?
Ricardo Hausmann:
I would say no. I think that everybody is hoping for the return of tourism and if it's returning. And we are still not at 2019 levels, but it's returning and it's very hard to replace tourism in many of these places with other things that generate as many low skilled jobs as tourism does and so much economic activity.
June Carolyn Erlick:
In a 2007 co-authored paper, you wrote, "What you export matters." So looking at the pressures on Latin American Caribbean countries recovering from COVID now feeling the impacts of the Ukraine crisis and de-carbonization, is that statement still true? Does it still matter what you export?
Ricardo Hausmann:
Definitely. I mean, in the long run, the countries that grow don't grow by just exporting more of the same. They change what they are good at towards things that are more knowledge intensive, more complex, you might want to call them. Those trends have been happening in some Latin American countries and not others.
Ricardo Hausmann:
So for example, Costa Rica went from exporting coffee to exporting textiles, to exporting electronics, to getting Intel to medical devices, and now IT et cetera. So they were able to significantly change what economists call their areas of comparative advantage, which is just a fancy way of saying what they're good at.
Ricardo Hausmann:
So they became good at things they were not good at before. And that has been an important engine of growth. In many other countries, take the case of Columbia, they used to export coffee, then they moved into oil and coal and there's very little else that grows on the export basket of Colombia.
Ricardo Hausmann:
I chaired a presidential commission last year to look at ways in which you can dynamize the way in which Colombia connects to the world. And this is by the way, is in spite of the free trade agreement with the US, in spite of the Pacific basin trade association with Mexico, Peru and Chile.
Ricardo Hausmann:
So there's many countries. I would even put Peru in that basket, Chile in that basket, Brazil in that basket, Argentina in that basket. Where what they're exporting now resembles enormously what they were exporting 30 years ago. It's all very natural resource based with very little technology. I'll make the exception of Argentina.
Ricardo Hausmann:
Argentina has a very big role in agro tech, in developing technologies that have made them better at agricultural products than anywhere in the world. Those technologies have diffused not only to Uruguay and to Brazil.
Ricardo Hausmann:
And now there's a lot of interest in those technologies in Africa and other parts of the world. By the way, it's because of policies that have made a bet on the role that science and technology can do for economic growth.
Ricardo Hausmann:
In particular, in the case of Argentina, it has paid off big time important companies like [inaudible 00:12:25] et cetera, that are important agro tech companies that have mixed our natural comparative advantage with knowledge to do things that were undoable before and to do things that were doable before, but dramatically better.
June Carolyn Erlick:
Do you think that this COVID crisis has accelerated that process?
Ricardo Hausmann:
No, actually. I think that it's in spite of COVID. One of the things that is really important for knowledge creation and so on is moving brains. I have done a lot of research on the role of human mobility for technological diffusion and so on.
Ricardo Hausmann:
I even published a paper last year on the role of business travel in generating technology adoption, productivity increases, jobs and exports. We shut down business travel, right? The pandemic has made it harder to put brains together to innovate. And many of the stories I just mentioned in Argentina are pre COVID.
June Carolyn Erlick:
Okay. Now I'm getting really confused because I heard you talk about tele-work and what the pandemic had given us in terms that learning that we don't have to be in a physical place. That sounds like a contradiction to me. And I imagine it's not, but could you explain it?
Ricardo Hausmann:
Yes. That's one of the positive things that might come out of this pandemic. With COVID, we learned that what we used to do in the office we can do from home. And what you can do from home, you can do from. That means that many of the jobs that can be done from home, we call tele-workable jobs.
Ricardo Hausmann:
Many of those jobs could relocate globally. The US has a significant chunk of its jobs that could be done remotely. We did a paper exploring what is this new idea of being able to do things remotely, how it might change the global distribution of jobs.
Ricardo Hausmann:
And in particular, we analyzed what jobs could move to say, Columbia incentivized by the fact that which levels in Columbia are significantly lower than in the US, dependent on how tele-workable those jobs are, or those activities are to operate at a distance.
Ricardo Hausmann:
So we have different filters, different ways of narrowing it, asking ourselves, for example, are these things currently being traded? Is there already activity in those trades? Does Columbia have the capacity to do it? Do they have the labor supply? Is the wage differential there to encourage it?
Ricardo Hausmann:
I'm very optimistic that this is going to be a potential engine of growth. This is more of simply doing tasks remotely. Previously, I was mentioning the importance of brain mobility for innovation. We did a lot of stuff through Zoom, but every author is going to tell you that we make so much progress when we're in person than when we try to work through Zoom.
Ricardo Hausmann:
So I think that Zoom is a great invention, a great innovation, and allows us to do things remotely that were not doable before, and it's going to bring some good things. But I think that living through the pandemic was probably a bad thing for invention, innovation, scientific creation.
June Carolyn Erlick:
So you believe your studies have shown that you need physical presence for that innovation?
Ricardo Hausmann:
For some activities. And in some sense, Zoom is a compliment to mobility in that if you go and visit your coauthor, then you advance and you have a set of tasks, you can follow up more easily through Zoom. But I'm looking forward to a return of human mobility.
June Carolyn Erlick:
So you have 2020, which is a disastrous year for Latin America in that pandemic stage. You have 2021 with a surprising road to recovery. Then just as you're recovering from COVID, Russia invades Ukraine. What's been the impact of that, and what do you see as being the future impact of that on Latin America?
Ricardo Hausmann:
Let me start with something that happened before Russia invaded Ukraine. Both the Americans and the Europeans were very focused on a quick recovery out of COVID with a little problem that they overdid it. They overdid it in terms of economic stimuli. And that led to inflation.
Ricardo Hausmann:
We are living in a period of global inflation that is going to be aggravated by Russia invading Ukraine, but it's broader than Russia invading Ukraine. And that has led to a very rapid rise of inflation in Latin America.
Ricardo Hausmann:
And that has led to central banks putting on the breaks 2022. And actually, Latin American central banks having had a history of high inflation that is much fresher in their minds than in the US, the central banks responded much more quickly than the fed. The fed, everybody perceives is way behind the curve in the sense that they had interest rates close to zero when inflation reached 9%.
Ricardo Hausmann:
And they're barely hoping to bring interest rates to something like two 2.75% by the end of the year. I think they will end up increasing more this year, but they're sort of playing catch up, trying to raise interest rates sufficiently quickly without scaring too much the market.
Ricardo Hausmann:
Latin American central banks have tended to us much more forcefully. They've raised interest rates quite a bit, and some of them are expecting to be sort of where they want to be by this summer. So the first thing is that inflation is up in Latin America big time.
Ricardo Hausmann:
In addition comes Russian invading Ukraine. And that has destabilized three different markets. First market it destabilizes the energy market. With the recovery of the global economy because of the stimuli oil prices went back up from say 30% that they were in 2020, $30 per barrel in 2020 to 80, 70 dollars per barrel.
Ricardo Hausmann:
But right now with the Russian invasion, they are at 110. So you see this quadrupling of oil prices since 2020. So high energy prices, ridiculously sky high natural gas prices in Europe. Natural gas prices were at something like $2 in the US. And now they're at $8. What's at $8 in the US is at over $60 in Europe.
Ricardo Hausmann:
So energy markets got quite dislocated. That is adding all sorts of pressures because many governments don't want consumers to feel that increase in energy prices. So they're protecting consumers from that increase in energy prices by subsidizing the energy imports.
Ricardo Hausmann:
And that's worsening the government's fiscal accounts at the time when they should be consolidating and taking back the stimuli that they used during the pandemic. So energy is one thing. Food and metals are another thing. Metal prices are way up. Food prices have been dramatically affected because Ukraine and Russia are important suppliers of cereals mainly.
Ricardo Hausmann:
The war and sanctions also impacted Russian exports of fertilizers. Russia is a big global producer of fertilizers with 20 some percent of global supplies. You use natural gas to make fertilizers and they have a lot of it. So they developed that industry a lot. And now that industry is not producing as much as before.
Ricardo Hausmann:
So there's a shortage of fertilizers around the world. That's hurting countries that need those fertilizers to sustain their agricultural production. It's probably going to lead to agricultural problems in the next few crops. But these sets of shocks hit Latin America in very heterogeneous ways.
Ricardo Hausmann:
There are some countries that are energy exporters. So for them, it's good news. There are some countries that are food exporters, for them it's good news. There are some countries that are major fertilizer importers, and for them it's bad news. There's some countries that are energy importers and it's bad news, and so on.
Ricardo Hausmann:
Many countries of south America, I would say that the net shock is positive, not negative, but in the context where they're importing a lot of global inflation. So it's not that they're getting poorer because these things went up in price. Many of them are getting richer because these things have gone up in price.
Ricardo Hausmann:
So a country like Colombia makes more money out of oil. A country like Peru and Chile make more money out of copper. A country like Argentina makes more money out of their food exports, and a country like Brazil makes more money out of everything, oil minerals and food.
Ricardo Hausmann:
They're struggling with the fact that they won't have enough fertilizers to sustain their current level of production. Central America is the opposite. They import the energy, they don't produce the minerals, they need the fertilizers.
Ricardo Hausmann:
So for them it's bad, bad, bad shocks. The US is slowing down. Remittances might slow down in the US. So for central America, it's more challenging. For South America, it's more about inflation management. For central America, it's more than just inflation, it's also bad shocks that make the countries poorer.
June Carolyn Erlick:
In terms of the countries which produce energy, which produce food, do they have the capacity to respond to an increase in demand?
Ricardo Hausmann:
Well, it's a good question whether they have the capacity and whether they want to. As you know, one of the big debates I see coming in Latin America, and to some extent it's there already in Chile, is the idea that if the world is going to decarbonize, it's going to need to electrify. And in order to electrify, it needs metals and the metals come from mining.
Ricardo Hausmann:
And that's why prices are high, because demand is high. Demand is high because everybody wants electric cars. Electric cars means that you're not going to use fuel oil, you're going to use more electricity. So you need more electricity production and more electricity transmission, more electricity distribution.
Ricardo Hausmann:
All of that uses metals. And who produces the metals of the world? Well, Latin America produces a lot of them. So you would want Latin America to make a contribution to the de-carbonization of the world, by expanding its mining sector. But mining has a bad reputation in Latin America. It's socially very controversial.
Ricardo Hausmann:
There have been environmental NGOs that have been organizing against mining and so on. Vice president of Peru being associated with the radical anti-mining position. So the largest mine in Peru is shut down. I think that in some sense in Latin America has the geological capacity to expand supply, it has the technological capacity to expand supply.
Ricardo Hausmann:
It doesn't have the political consensus to expand supply. And in some sense, we need a debate between environmentalists because climate change has to do with carbon emissions. If we want to save the atmosphere, we need mining. And mining hurts the earth.
Ricardo Hausmann:
So there's a trade off between saving the atmosphere and saving the earth. That's the debate between environmental, is what's the right balance between saving the earth and saving the atmosphere? We wish we could save both, but now mining is required to save the atmosphere, but it hurts the earth.
June Carolyn Erlick:
Where do you stand personally on this subject?
Ricardo Hausmann:
I think that we need to make mining consistent with environmental sustainability, but we need to continue mining. Otherwise, we're going to be cooked in this earth. We won't be able to move out of carbon.
June Carolyn Erlick:
What does it mean for mining to be environmentally sustainable?
Ricardo Hausmann:
It means that you have to worry a lot about the environmental impact of your activity, that you want to have very responsible management of the water, you want to have a responsible use of energy. There are ways of minimizing environmental impact of mining.
Ricardo Hausmann:
I think that we don't do it, the Australians will do it, the South Africans will do it, the Africans will do it, the Americans will do it, the Russians will do it. We're not going to stop expansion of mining, we are just going lose our market share.
June Carolyn Erlick:
What about oil production?
Ricardo Hausmann:
The world needs to reduce its oil production. If the US cuts its oil production that triggers price increase, which stimulates others to increase production so that there's no reduction in global production. The US might have cut production. It doesn't stop global warming.
Ricardo Hausmann:
For the world to stop global warming, total world production of oil and gas has to start coming down. Now where that happens, it doesn't matter. The atmosphere doesn't care who emitted the CO2, just cares how much CO2 was admitted. So I think we face a strategic opportunity right now to have the bulk of the production cut happen in Russia.
Ricardo Hausmann:
The average cost of oil production are dramatically lower than current prices. People who make oil make a lot of money in general. And there are some people who use their money that they make out of oil to invest in education, healthcare, infrastructure, whatever. And other people use that money to invade their neighbors.
Ricardo Hausmann:
So you don't want that oil to be done by countries that use the proceeds to invade their neighbors. So I think that we should try to develop an agreement to dramatically reduce Russian oil and gas. And that can only be done if everybody else doesn't cut production or might even increase production, because otherwise we would generate an energy crisis.
Ricardo Hausmann:
So I would say that we have an opportunity to align the incentives of saving the atmosphere, saving the Ukrainians and safety and security in Europe and the interests of oil producers. We don't have to fight them right now, we can fight them later.
Ricardo Hausmann:
But in the meantime, it means that Colombia, Brazil and so on, have a few more years of oil production that is compatible with the path to de-carbonization because the bulk of the effort, the bulk of the production reductions should happen in Russia. And the West can make it happen in Russia, by cutting their access to finance, by cutting their access to technology and by cutting their access to markets.
Ricardo Hausmann:
In short, I would say our contribution to global stability and to de-carbonization has to be the fact that we are reliable energy suppliers, expanding mining suppliers, and that those things are good for the world and good for Latin in America.
June Carolyn Erlick:
You talked in terms of de-carbonization, something I've never thought about is that sun and wind are geographically located, whereas fuel oils can be sent here and there. Could you expand a bit on that idea and say how it pertains to Latin America?
Ricardo Hausmann:
One thing that happened with oil and not so much with natural gas and was not the reality of the world before is that oil is incredibly dense energetically. Per unit of volume and per unit of weight, it is amazingly full of energy. And as a consequence, that makes it super cheap to transport.
Ricardo Hausmann:
And because it's so cheap to transport, you can send it to whichever country is energy poor at a marginally higher cost because of transportation. As a consequence, energy poor countries specialize in energy intensive products.
Ricardo Hausmann:
Said differently, China, South Korea, Japan could be good at steel, even though they were energy poor. Steel is a very energy intensive product, requires a lot of energy to make steel and you can make it competitively in those countries because they can import the energy.
Ricardo Hausmann:
Renewable sources of energy are very local in where they occur in the same way as oil is very local, but it's costly to transport. Electricity is costly to transport long distances. It's impossible to transport cross oceans. If you don't want to transport the electricity, you can make it into hydrogen.
Ricardo Hausmann:
But hydrogen is super expensive to transport. If that's not enough, make it into ammonia. But you lose a lot of energy making the ammonia with the electricity. And so on the end, the electrons come at a certain price, but if you try to transport them, they become much more expensive.
Ricardo Hausmann:
As a consequence, it makes sense to locate energy intensive activities close to these green sources of energy. The steel industry will have to move out of these energy poor countries into countries that are richer in renewable energies.
Ricardo Hausmann:
And that opens up opportunities for some value chains to relocate potentially to Latin American countries. And we see a lot of activity in the North of Chile. They have this fantastic place that has both a lot of sun and a lot of wind, Atacama desert.
Ricardo Hausmann:
They're thinking of producing green hydrogen, take water and split the water molecules to make hydrogen and liquefy the hydrogen, sell the hydrogen or transform the hydrogen into ammonia, sell the ammonia. But they'll realize soon enough that if they have so much energy back there, we might as well use it there, not just transport energy, but use the energy there. So I think it can generate new sources of growth for Latin America.
June Carolyn Erlick:
So it's time to bring out your crystal ball. Are you optimistic or pessimistic about Latin America's future, economic future in five years? And what do you think economically the region will look like in 10 years?
Ricardo Hausmann:
Well, I think that right now, Latin America is changing politically. The pandemic is likely to lead to a desire to change government schemes, change political parties. And that means that the governments are moving towards the left. That happened already in Peri, It happened in Chile. It may happen in Brazil. There is more optimism that president Boric might deliver a sensible government.
Ricardo Hausmann:
And the one that is very focused on technology and structural transformation and some of the themes that I've mentioned in this conversation. In Peru, it's more of a question mark. I think that in Peru, they have a very powerful legislative. And the legislative chambers are not where the president is. It's been a long, long while since a Peruvian president finished his term.
Ricardo Hausmann:
So I would not be surprised that the political situation in Peru might be different in a little while than what it currently looks like. I think unfortunately AMLO is a fairly old president. And I don't mean about his age, but about his ideas. He's all focused on oil and refining and some crazy projects that are not conducive to the kind of growth that I think Mexico is capable of.
Ricardo Hausmann:
So Latin America, I hope that it doesn't squander its possibilities. I think those possibilities are there. I'm less interested about the ability of governments to propose redistributive policies. Latin america has done a lot of redistribution. What Latin America has done less of is inclusion.
Ricardo Hausmann:
And I make a big distinction between redistribution and inclusion. I think that redistribution is compensating people for their exclusion. It's really palliative. It's not curative. And what we need really is a much more inclusive policy that uses all the willingness to work of our people.
Ricardo Hausmann:
We should dignify their effort with higher productivity. That requires empowering people with access to job opportunities. And when I say job opportunities, I mean a job that is not two hours away from your home, so that it doesn't mean that you have the choice of either taking care of your kids or working but two things cannot be done because you're out of your home for 12 hours a day and you spend half of your salary trying to get to work.
Ricardo Hausmann:
An inclusive society would have cities that have a different structure, a different housing policy, a different transportation policy. We use more public transit. We locate low income housing, not in an apartheid way in peripheral sections of town where there's no dentist among your neighbors, there's no water among your neighbors.
Ricardo Hausmann:
Kids are surrounded by kids of exactly the same social economic background and very little diversity. This is kind of like a social apartheid that has been imprinted in Latin America, inadvertently through our higher solve housing deficits.
Ricardo Hausmann:
It's been a policy in my mind that has been clearly at fault for many of the defects of Latin America, but we have yet to correct it.
Ricardo Hausmann:
There's some interesting things that have been done in Columbia lately on this moving from subsidizing just the construction houses that are designed and built in places that the government says with the technical requirements that the government designs for demand subsidies, where you give them money to people and it's people who decide where they want to live and what kind of house they want to have.
Ricardo Hausmann:
So I think that there's a big agenda on inclusion. I hope that Latin America develops both a left wing and a right wing that compete for good ideas on how to make our societies more inclusive and to make our societies much more productive and more knowledge intensive.
June Carolyn Erlick:
Thank you very much. You've been listening to Ricardo Hausmann. He's the founder and director of Harvard's Growth Lab and the Rafik Hariri professor of the Practice of International Political Economy at Harvard Kennedy school. Thank you so much for being here with us today on Faculty Voices.
Ricardo Hausmann:
Thank you for having me.