Poverty in Brazil, A Democracy in the Making

About the Brazilian population

It’s a well-known fact that Brazil is a multicultural and multiracial society. It has this image of “cool”, opened and culture-friendly country. To some extent this is true and you can observe interactions and exchanges between very different ethnic groups within the country. In the history of Brazil, however, immigrants were brought mostly to meet the demand of labor in the agriculture and mining industries; from the vast fields of sugarcane to ore mines.

The first of these forced immigrants were the 4 million African slaves brought for 300 years between the 16th and 19th century. Following this, in 19th century in particular, followed a more European immigration which was part of a policy to “whiten” the population in big cities such as Sao Paolo. Let’s see how this blend of population is affecting the way the country has developed since then.

A culture of discrimination

Black and white...

The waves of white immigrants in the 19th century were brought in to meet the ever bigger demand in labor. Since they somehow refused to blend in the population mix and were rather attached to their own culture, they also built their identity by posing as the real hard-working people, as opposed to the supposedly lazy blacks.

By doing so, they made discrimination against the poor more common and widespread in the population. By doing so, they reinforced the society's prejudices against poverty in Brazil. The poor became the lazy and were responsible of their own misfortune… regardless of the fact that they were slaves or former slaves with no possessions whatsoever.

... Figthing for jobs

Why this discrimination? That’s simple, even if demand was big for agricultural labor, the communities of new immigrants obviously preferred finding jobs for everyone in their community. Thus, building a stereotype of “lazy-black-poor”, helped them get the jobs they wanted (i.e. also the better jobs) in a competition with the local black and indigenous population. The culture of discrimination that they created also shaped governments’ social policies for over a hundred years as they did not bother trying to tackle issues of social exclusion and poverty (until recently).

The demographic impact

Demographic transition & child poverty

As in most countries, poverty in Brazil is the direct consequence of economic, demographic and social issues. What does it mean? It means that, just how poor a country is depends on how wealthy it is and how this wealth is distributed. On top of this, it means that the size, age and distribution of the population also matters in how wealth and resources are redistributed. One of the main characteristics of developed countries is the demographic transition. It consists in a deep transformation of the society: families have less and less children and people live increasingly longer. As for many countries, the demographic transition is one of the first steps leading to less child poverty in Brazil.

This way, parents usually get to invest more in their children’s education in the hope that they can sustain them in their old days – unless a proper pension system is developed later. Obviously, this is only possible if child mortality is very low, otherwise it’s just a bad bet to invest in 2-3 kids when you know that half of them will die before they reach the age of 5.

How demography affects poverty in Brazil

The size of the workforce in Brazil, the number of kids at home and parents to sustain will obviously have a great impact on the extent of poverty in Brazilian households. In fact, the demographic transition that has been ongoing in Brazil for the past few decades has helped a lot in reducing poverty. Less children were born in poorer families and that’s less children that ended up involved in street violence, drugs, gangs and so on. More parents were then able to push their kids to go to school and get an education.

Of course, the situation is still pretty bad in Brazilian slums (favelas), but it’s estimated that the demographic transition had an impact equivalent to + 0.5% in GDP growth, which is not bad at all considering that the average GDP growth (per capita) was about 3% per year at the time. And since this transition happened over 30 years, its impact on the economy is equal to around 15% of growth in GDP (over three decades). Overall, the change in the family structure and in Brazilians’ lifestyle has had a much greater impact on reducing poverty than the speed of the demographic transition itself. On the other hand, the transition did have an influence on wages (e.g. supply of labor) and interest rates in a way that worsened poverty in Brazil (less overall income).

Glitches in Brazil's economy

Debt, inflation and economic liberalization

In the past thirty years, Brazil has had quite a bad (economic) time: debt crisis, high inflation, rising wage inequality and stagnation. Relying on the military state to industrialize the country was a strategy that proved a failure in the case of Brazil. The result was simple: the extreme poverty rate has soared - to be more specific the income of the poorest of the poor went downwards for years while the richer remained just as wealthy. Thus the gap between the two parts of the population only got bigger, which deepened inequalities in the society.

Then in the late 1980s and early 1990s came the liberalization of the economy as required by the Washington consensus in exchange of help to reschedule Brazil’s debt to the US. Local Brazilians also thought it would help fighting inflation and stabilize the economy. Liberalization means that the country’s borders were suddenly opened (and deregulated) to international trade and capital flows. However, it only makes sense if a country can compete with the international competition that floods the new territory.

So, what went wrong?

Brazil was told that liberalization was what helped Japan and South Korea develop so fast, while in fact their export-led model was all but liberal. Each state intervened massively in the economy and heavy regulation prevented excess of foreign investment which allowed local companies to grow and thrive. Then only – when their industries were fully grown – did these two countries further open their borders to the rest of the world (just like China has been doing too).

So, in the end, Brazil just wasn’t ready for liberalization. It had poor growth rate, massive unemployment, lack of educated workforce and huge poverty levels. Liberalization only brought more instability rather than more investments - and caused Brazil's poverty statistics to look even worse both on paper and in real life. Inflation wasn’t under control at the time so growth had to be tempered, which is not very interesting for investors. 

Low growth then made unemployment even worse for the whole 1990s decade. And when capital finally started flowing in, the increase in value of the Brazilian currency - i.e. the appreciation of the currency – ended up harming many local sectors on traded goods. This caused many workers to see their wages decrease (when they did not lose their jobs) and join the ranks of those living below the local poverty line.

Has democracy really helped?

The end of the dictatorship

The military dictatorship in Brazil ended in 1985 and the new democratic constitution was signed 3 years later.Still, governments have been reducing extreme poverty only since 1995 – 10 years after the end of the dictatorship. They have introduced effective pro-poor policies for the first time, and yet the extent of misery and destitution is such that it will take decades more before the poor in Brazil can enjoy a minimum of dignity. 

This is a question that comes back very often in the field of international development: does democracy help reducing poverty? The theory says yes, since people have the power to vote – and vote out leaders who don’t help them – and they are protected by a constitution that upholds their civil rights. They can create pro-poor political parties and influence their policies via social actions.

What about in practice, then? When looking at the facts and statistics on poverty alleviation, it’s no secret that democracy has been going through a crisis worldwide, and that links between elected governments and interest groups have been exposed in most countries. 

What are interest groups? Wikipedia tells us they refer to: “[almost] any voluntary association that seeks to publicly promote and create advantages for its cause.”

Interest groups vs. the people

Interest groups can be NGOs just as they can be corporations and trade associations. In this case, we’re of course talking about the last two. With the deregulation of markets – for the better or worse – big market players like corporations have obviously become more powerful and have gained in influence with governments. In short, the power of the people is counterbalanced by the power of big organizations that try to protect their own interests. And these interests include keeping workers' rights and wages to a minimum, which creates a huge barrier to fighting poverty in Brazil. The biggest problem remains that this power struggle is not balanced at all. Not a single bit.

What happens is that many politicians end up representing the interests of these interest groups (rather than the people’s) and promote policies that benefit certain companies, make it easy to fire workers and not give them a dime in exchange. This summary is (slightly) exaggerated, but you get the picture.

New policies to reduce poverty in Brazil

New social policies

In a country like Brazil, democracy has allowed left-wing parties to grow and offer policies attractive to the poorer population: social safety nets, welfare and education programs. But now everything depends on whether these programs are well-implemented and their impact measured. What’s more, to boost their impact, they should be coupled with a plan to generate a sustainable growth in the future – rather than an economy based on China’s own growth (to whom they sell their resources). Ideally, this general plan should make sure that the wealth created is equally redistributed to the population. Otherwise, Brazilians will see a same old story repeating itself: the top 1% of capital owners get richer while the rest gets poorer. 

The first, essential change that democracy brought in Brazil was the creation of a poverty line to understand who is poor and what is poverty in Brazil - by local standards. This allows the government to decide who can and cannot get welfare support such as universal health care, financial help to go to school and so on. It’s only by properly targeting the poor that you can know who needs help and how much of it. Conditional cash transfers introduced about ten years ago have been very successful in reducing extreme poverty in Brazil and bringing more kids to school. By offering cash transfers only to parents whose kids regularly attend school and complete their school year, they have provided the perfect kind of incentive that meets both the parents’ and the government’s needs.

Two-tier democracy: another cause of poverty in Brazil

The conclusion of many studies on the role of democracy in fighting poverty is that, in the end, democracy is simply one factor among many that can help solve the problem. It won't solve the whole problem by itself. But, being a democracy also helps many countries in receiving international aid and support from the World Bank for example.

If democracy hasn’t stopped the very rich and influential people in Brazil from getting rich, at least it has helped many of the poor getting out of precariousness. And now that Brazil’s finances are getting better (despite a huge debt to rich countries), it might be the best time to extend its social programs to a bigger share of the population while it can afford it. If it can achieve a minimum level of social protection in terms of health care but also education, this would be a great step to develop the country much further. The only problem remains that the super-rich class in Brazil seeks to protect its own interest and keeps on pushing for a very low poverty line to make sure that social protection remains at a minimum - in fact below the minimum by many international standards.

Restricted access to social assistance

Brazilians remain very doubtful - if not outright cynical - of the virtues of democracy. It’s not that they prefer dictatorship; it’s just that their democracy hasn’t delivered in terms of promises, performance or accountability on tackling the root causes of poverty in Brazil:

• ‍Corruption remains widespread and so is discrimination too;
• Access to social security is far from equal to everyone even if the government is trying to make education more universal;
• Universities are still filled with students from richer backgrounds and primary schools with students from the lower classes.

If the government manages to somewhat bridge this historical gap between the bottom poor and the richer, it will be one big step for democracy and against poverty in Brazil. For more information, facts and statistics on poverty in Brazil, read these two articles on the state of modern slavery and exploitation in the country.

REFERENCES

• ‍Demographic Changes and Poverty in Brazil, Ricardo Paes do Barro et al., Population Matters, Demographic Change, Economic Growth, and Poverty in the Developing World 2003
• Immigration in Brazil: The Insertion of Different Groups, Zeila de Brito Fabri Demartini, Immigration Worldwide, Policies, Practices, and Trends 2009
• Democracy and Social Policy in Brazil: Advancing Basic Needs, Preserving Privileged Interests, Wendy Hunter & N B Sugiyama, Latin American Politics & Society 2009
• External Liberalization in Asia, Post-Socialist Europe, and Brazil, Taylor Lance, OUP 2006
• Soap Operas and Fertility: Evidence from Brazil, Eliana la Ferrara et al., Bureau for Research and Economic Analysis of Development 2008
• Belindia Goes to Washington: The Brazilian Economy after the Reforms, Matias Vernengo, External Liberalization in Asia, Post-Socialist Europe, and Brazil 2006
• The Impact of Public Policies in Brazil along the Path from Semi-Stagnation to Growth in a Sino-Centric Market, Antonio Barros de Castro, Industrial Policy and Development, The Political Economy of Capabilities Accumulation 2009
• Trade Liberalization, Employment Flows, and Wage Inequality in Brazil, Francisco H. G. Ferreira et al., The Poor under Globalization in Asia, Latin America, and Africa 2010