Is there a Brazilian model of development?

By Armando Barrientos and Edmund Amann. Originally published in Policy In Focus, a publication of the UNDP’s International Policy Centre for Inclusive Growth.

As the world begins to wake up to the dire social and economic consequences of rising inequality, we must recognise that it is not an inevitable side-effect of economic growth and development. Many Latin American countries, and Brazil in particular, have demonstrated it is possible to achieve inclusive growth, which has reduced inequality and poverty.

Despite its current difficulties, Brazil offers a striking example of inclusive growth. Inequality has fallen sharply over the past decade and a half, a period which has also seen the country lift an estimated 40 million people out of poverty. Although growth rates have been modest in comparison to China or India, Brazil has implemented a raft of measures to ensure the results of such growth have been shared throughout society. While Brazilians have seen their incomes rise, the poorest have benefited most.

PiF

The growth experienced by Brazil hasn’t simply been attained through the unsustainable exploitation of natural resources. Despite serious lingering problems, deforestation rates in the Amazon have fallen remarkably since 2004. New jobs have been created, child mortality has plummeted, and schooling rates have increased.

So how have these gains been achieved, are they sustainable, what challenges remain, and what can other developing countries learn from Brazil’s experiences? These were the questions asked by a team of researchers from Brazil, Europe and the USA who formed the International Research Initiative on Brazil and Africa (IRIBA). This issue of Policy in Focus looks at the findings and insights they have produced.

The foundations of Brazilian progress can be traced back to the transition from a dictatorship to a democracy in the mid-1980s and the vision for the country which emerged. A firm consensus between citizens and politicians to address the ‘social debt’ created by soaring inequality set the country on a new path. After the economy was stabilised in the mid-1990s, the economic management pursued by successive governments enabled innovative social policies to flourish.

As a more inclusive and prosperous Brazil has developed, the public demand for further progress has also grown. The large protests surrounding the 2014 Football World Cup, worries about an economy mired in recession, and deep concern with serious corruption scandals demonstrate that the Brazilian consensus is under considerable strain. Public demand for better public services and transport infrastructure, less corruption and a more progressive tax system must be addressed by the country’s leaders. While much has improved, Brazil faces pressing challenges. It must ensure that the development gains made over the past decade and a half throughout times of economic growth are not eroded or scaled back throughout the troubling economic times it presently faces. The sustainability of those gains may well be the most important piece of any such Brazilian model of development, yet the jury is still out as to what extent this may be possible.

While the Brazilian experience is the product of a unique set of circumstances, it contains many lessons that should inspire debate and critical appraisal in other developing countries. The world is changing rapidly, and there are more opportunities than ever for genuine cooperation between countries of the Global South with recent and direct experiences of radically reducing poverty. This edition of Policy in Focus is essential reading for anyone grappling with how to reduce poverty and inequality while promoting sustainable and inclusive growth.

Download the full Policy in Focus report.

 

At what point will we do something about inequality?

by David Hulme, Professor, Global Development Institute

Oxfam’s annual inequality report finds that extreme polarisation – the ownership of global assets by a tiny minority of the world’s population – has increased. Now, only the 62 richest people in the world own the same value of assets as the 3.6 billion people in the bottom half of global incomes – surpassing Oxfam’s original prediction that by 2016, the wealth of the top 1% will equal the wealth of the remaining 99%.
The Oxfam figures have been challenged  but they are based on the Credit Suisse Global Wealth Report , the best dataset available on present income and asset levels.
It’s not just the figures which are debatable. Contention remains over whether economic inequality is a bad or a good thing and whether governments should do something about inequality.

A graph showing number of billionaires in the world and what sort of transport they would fit on.

How many billionaires does the world need?

Those inclined to the Left will argue that inequality is bad for humanity – it is unjust – and instrumentally it leads to negative outcomes for society as a whole. It may come as surprise to some people but both the poor and the rich suffer from the wrongs of inequality. As Wilkinson and Pickett have shown in The Spirit Level, in virtually every aspect of life (physical and mental health, education, decent work and even life satisfaction) rising inequality in rich nations is associated with lower levels of social indicators.

Those inclined to the Right will refute such arguments. Economists will cite Art Okun whose book Equality and Efficiency: The Big Trade-Off persuaded many (especially in the US) that efforts to reduce inequality lead to reductions in efficiency that constrain enterprise and economic growth. Such ideas informed leaders such as Reagan and Thatcher and fed the belief that ‘greed is good’. Inequality, it was argued, spurs people to make greater efforts and fuels competition.

But it’s not just the Left declaiming inequality. IMF researchers recently concluded that: “…it would still be a mistake to focus on growth and let inequality take care of itself… because the resulting growth may be low and unstable…redistribution, and the associate reduction in inequality, is thus associated with higher and more durable growth”. The IMF identifies a “tentative consensus…that inequality can undermine progress in health and education, cause investment-reducing political and economic instability, and undercut the social consensus required to adjust in the face of shocks…it tends to reduce the pace and durability of growth”.

Warren Buffett, the world’s most successful investor, has pointed out that the share of income tax he paid the US Internal Revenue Service was lower than the clerical staff in his office: “How can this be right?…There’s class warfare, all right…but it’s my class, the rich class, that’s making war and we’re winning”.

Whatever your view point, it’s undeniable that inequality is rising at spectacular rates. While different measures (wealth or income), different datasets (national accounts or taxation) and different analysts disagree on the detail, they all agree that the wealthiest are getting richer faster than anyone else (except in Latin America). The real income of the global top 1% rose by more than 60% over 1988-2008.

Share of global wealth in 2015 in US dollars.

Share of global wealth in 2015: not equal

The reasons for such growth in inequality are complex but two factors stand out. First, contemporary capitalism is based on economic processes that permit those who manage to amass money by their brain power or political connections or both, to increase their wealth faster than others. As Thomas Piketty tells us – the returns to capital (owning physical and financial assets) are greater than the returns to labour (working), as is the historical record for all but a part of the 20th Century. So the rich get richer.

But, there is also a political economic reason. Those with so much wealth are able to shape national and international public policies so much that they can ensure that they get wealthier. They can ensure that national and international patent and competition laws allow them to dominate the markets in which they operate and that taxation laws allow them to avoid paying tax. By gaining control of the media plutocrats can even persuade the public that inequality is good for everyone.

What can be done? The revolutionary solution – seizing and redistributing land and assets – has few supporters. More reformist measures – taxation and fiscal redistribution through public expenditure in pro-poor education, health services and social protection – are gaining support.

One solution is effective public expenditure on domestically-financed education, health and social protection raises the prospects for sustained growth, structural transformation and welfare advances. The evidence for such policies is clear but, enacting them in the places they are most needed is very problematic. The nature of domestic business and political elites – often greedy, extractive and predatory – allied to international business elites and the social norms they transmit, means that socially beneficial policies are not effectively implemented.

The power of the “1%” may appear unassailable. Will we have to wait for a miracle? For businesses and entrepreneurs to obey regulation in ways that do not undermine domestic revenue mobilization? For governments to promote broad-based growth, prosperity for all and welfare…and for that plutocracy can be replaced by democracy? Or, will a growing tide of protest and its consequences (sometimes socially progressive and sometimes regressive, as in Egypt) persuade the 1% that they will not get the world they want for their grandchildren if they continue to promote inequality as a global social norm?

Want to debate this view point? Come along to the Global Development Institute launch on 17 February and hear Winnie Byanyima, Oxfam Executive Director deliver a keynote lecture on inequality and the future of global development.

LISTEN | Melissa Leach on equality, sustainability & security

The Global Development Seminar Series got off to a great start on Wednesday with a lecture by Institute of Development Studies Director Melissa Leach. Melissa spoke on Equality, Sustainability, Security: Towards Transformations in a Global Development Era.

We’ll be announcing details of next week’s seminar, with Dan Brockington later today. For now, here’s the audio from Melissa’s talk for those who missed out – or wish to recap!

The Global Development Seminar Series brings together scholars involved in cutting edge research on international development. It aims to facilitate dialogue and discussion, providing a space for leading development thinkers to share their latest research ideas with Manchester’s staff and students.

Read Aarti Krishnan’s reflections on Melissa’s talk.

The SDGs in Pictures

We’re counting down to the UN summit to ratify the 17 Sustainable Development Goals. Over on Twitter and Facebook, we’re sharing an SDG a day along with a morsel of research from our academic staff and students. Below are a selection of this images, showing the breadth of The University of Manchester’s research on Development.

Ralitza Dimova's research: http://bit.ly/ralitzadimova

Ralitza Dimova’s research: http://bit.ly/ralitzadimova

Our research and its impact on social protection http://bit.ly/socprotection

Our research and its impact on social protection http://bit.ly/socprotection

Sharon Morgan's research: http://bit.ly/sharonmorgan

Sharon Morgan’s research: http://bit.ly/sharonmorgan

Diana Mitlin's research: http://bit.ly/dianamitlin

Diana Mitlin’s research: http://bit.ly/dianamitlin

The impact of our research: http://bit.ly/cocoaresearch

The impact of our research: http://bit.ly/cocoaresearch

International Women’s Day

womensday

by Brooks World Poverty Institute

International Women’s Day on Sunday 8th March celebrates the economic, political and social achievements of women. Brooks World Poverty Institute research demonstrates that women play a vital role in improving global value chains – as workers, farmers, producers and consumers – which can have a significant impact on pro-poor development.

The Capturing the Gains project, led by Professor Stephanie Barrientos, shows that more equitable participation of women in the workplace can be achieved by investing in training, valuing the particular contribution of women and promoting gender equality. This enhances value chain upgrading, improving women’s lives and promoting more inclusive development.

In the value chains covered by our research women accounted for up to 75-80% of workers. Women’s contributions though are often undervalued as they play ‘invisible’ roles in entrepreneurship and production. Smallholder agricultural crops like cocoa are often thought to be cultivated by men, but in reality many depend on female family members, casual, or unpaid female workers.

Managers consistently report that women are more honest and more reliable than men, helping to reduce absenteeism and creating a culture of trust, which translates in to productivity gains. Women’s social skills have much to offer global value chains, enhancing team building and adapting to new production networks, and their perceived ‘nimble fingers’ are suited to tasks related to quality of output such as flower picking and the fermentation and drying of cocoa beans.

Women workers should therefore be treated as an asset. Women’s contribution needs greater recognition and remuneration, with training and education for workers.

Job designation is too often determined by gendered norms. These create barriers for women to progress despite their skills. 70% of tourism workers, for example, are female, but in Africa, women are not usually tour guides, so they are excluded from higher-end trips and training opportunities.

Women are also concentrated in low-status work, and even in the same work, gender pay gaps persist. In Ugandan floriculture the majority of senior supervisors are men whilst 70-85% of harvesters are women. Harvesters take home a salary of around 14% of that of senior supervisors in 2011 and in Indian cocoa, women are paid less than men for the same work.

Research also found evidence of widespread sexual harassment of women in the workplace; this is damaging to women and a barrier to decent work and a productive environment.

The recommendations from our research are that women should be offered improved promotion opportunities and career paths. Workplace policies to address discrimination and sexual harassment, and support women worker’s rights will attract and enhance women as a skilled, productive and committed workforce. Civil society organisations have highlighted women’s poor working conditions in global value chains which has helped regular workers, but casual workers (the majority of which are women) are overlooked. Buyers can have a role by creating incentives, training and helping suppliers to address demands for a ‘living wage’ and gender equality.

Gender equality legislation is often poorly implemented. Government promotion of women in global value chains can help in pursuing a ‘high road’ to economic and social development, and Government-CSO collaborations can be effective in reducing sexual harassment and promoting gender equality. Trade agreements and Aid for Trade initiatives may include social clauses, but they should have a stronger gender focus.

Working in value chains provides millions of women with jobs and incomes which can bring greater economic independence, social connections and voice. With higher incomes, women are more likely than men to support household welfare and children’s education. Promoting pro-poor development can open doors to new life opportunities. These are powerful reasons to support women and greater gender equality in global value chains.