Under neoliberal policies, social programs, social security and labor rights, should be suspended in order to reduce labor costs and promote international competition. However, due to recurrent economic crises, trade and financial liberalization has demanded increases in social expenditures, based on higher unplanned state indebtedness (Avelino et al., 2005). Keynesian economics proposes different compensatory responses at each stage of the economic cycle. In times of crisis, it suggests that the State should stimulate consumption; invest in policies to promote employmen, workers' protection and social security; maintain or increase its expenditures on education, health, and works (Stiglitz, 2010; Avelino et al., 2005). This paper describes the predominant economic thoughts, the evolution of social spending and the implementation of different types of social policies, adopted, universalist and focused in the last decades in Latin America (LA). Since the 1950s, universal policies, inspired by the European welfare states, have been implemented. However, contributory pension schemes cover only formal wage earners, while more than 50% of the workers are not wage earners and make up a broad informal sector. Universalism has never existed in LA.
The 1980s are seen as a "lost" decade, with recurrent crises, rising poverty and inequality. During the 1990s, commercial and financial liberalization policies and privatizations of public enterprises were implemented, with increased unemployment, de-financing and privatizing traditional social security systems (Levy, 2013). Since the beginning of the 2000s, Keynesian measures were adopted to protect employment and stimulate consumption, high investment in social policies, including non-contributory pensions, health insurance and monetary transfers aimed at the poor, which increased social spending since 1990, but with positive results on poverty reduction (from 26.8% to 13.3%) and on inequality (around 6 to 3 percentage points), achieving higher levels of inclusión, not universalism.
