All roads lead to Brazil this summer, as the World enjoys the soccer Tournament. Many visitors will be there to test and try the Hospitality of the Brazilian people, which should not be wanting. But that is not the only accomplishment of this massive Country; Brazil will show the world its economic miracle, wherein some 40 million persons were raised from near poverty to middle class homes and living styles.
There is plenty of high-end shopping in neighbourhoods like Ipanema, and plenty of poverty in the favelas, or slums. There was also a lot in between. What is most striking to a visitor is how many middle-class citizens there may be, judged by the amount of cars; it means people have enough money to buy automobiles.
Brazil is a country that has seen income inequality drop over the last decade. Unemployment is at near record lows. And the growth of the middle class is quite stunning. By most estimates, upward of 40 million people have been pulled out of poverty in the last decade; extreme poverty, says the government, has been reduced by 89 percent.
For comparison, in the US despite the growth, unemployment only recently dropped below 7 percent. And the middle class is slowly being buried. Income inequality has become a fact of life in the United States, and while politicians decry that fact, they seem incapable of doing anything about it so far.
In Jamaica, we now have a situation as existed in Brazil some thirty years ago. Unemployment is 20%, Production is low, and austerity and taxes to pay our indebtedness has us by the throat. Inequality continues, getting worse each year. The president of Brazil (Sra) Dilma Rousseff adamantly asserts “The main aim of economic development must always be improving living conditions of the people.” A challenge that the IMF does not appreciate, and advice Jamaica does not follow.
Brazil’s objective is being achieved while alleviating poverty, increasing the size of the middle class. Brazil implemented a higher minimum wage, and it has laws that make it difficult to fire even an inept employee. It also subsidises the price of gasoline.
And most striking of all — at least from the point of view of all Nations; for the last 10 years, Brazil has had a program called Bolsa Família, which essentially hands money to mothers living in poverty. In return, they have to ensure that their children go to school and avail themselves of health care services. There is no question that Bolsa Família has been enormously effective in reducing poverty, and improving literacy. Other poor countries practice the same technique: giving or lending poor women in their economy funds to manage themselves and their children.
President Obama taking a cue, declared yesterday, that unemployment insurance will be implemented and the minimum wage will increase by almost 40%. I do belief that our minimum wage increase from $5000 to $5600, insignificant to deal with inflation; our minimum should be around $7500.
It is, of course, possible that Brazil’s economy could hit the wall and some of the gains made could be reversed. A new emphasis on investment and entrepreneurship could probably help it. The spontaneous protests last summer were the results of the new middle class wanting the sorts of things that that they could not afford.
By contrast, in the United States, Congress just refused to extend unemployment insurance. The farm bill envisions cutting back on food stamps. Various other programs to help the poor or the unemployed have been reduced. Even those who oppose such heartless cuts assume that once the economy comes back, all will be well again. Growth will take care of everything. Thus in America and likely Jamaica, they tend to view economic growth less as a means to an end than an end in itself. Growth will contribute: Better services, higher quality schools, less corruption. Still, the Brazil example gives rise to a question we don’t ask enough in this country:
What’s the point of economic growth if nobody has a job? ( Ref NYT Joe Nocera, Jan 20, 2014)