Friday, August 6, 2010

Economic Inequality and Political Will: Lula's Brazil

For those of us who have lived the greatest part of our lives in one of the most unequal countries on earth, there are certain conditions which we consider "normal", but that in other societies would be a cause for scandal. For example, it becomes normal the lack of opportunities for large segments of the population and its contrast with the growing wealth of a minority; it becomes normal for many not to aspire to something very different from what is offered by the closest social group where one was born; it also becomes normal to live with economic injustices and the knowledge that, most likely, none of this will change in the near future. But perhaps most unfortunate from this scenario is the appearance of justifications -considered for some "reasonable"- for this state of affairs.

The growing gap between the rich and the poor, mainly affecting some African and Latin American societies, seems to be associated with a natural disaster, something that is completely out of the scope of their leaders and other citizens, and something that, no matter how sad it is, we have to learn to live with. Inequality indices become just another statistic next to economic growth, inflation or the exchange rate, to name a few. However, unlike these indicators, which governments can influence but mainly respond to a multitude of variables beyond their control, the levels of inequality can be modified by means of a clear social policy aiming at it. The main ingredient to correct economic inequality in a society is the political will to do so, as it is shown by the Brazilian case during the government of Lula, which is coming to an end.

Luiz Inacio Lula da Silva, who in the early eighties served as a trade-union leader, represented the leftist Workers Party in the elections for the presidency of Brazil in 2002. His discourse revolved around issues such as changing the economic model, the State's responsibility for income distribution, and the definition of a clear social policy. Along with his rise in popularity to the highest office, the financial markets went into panic at what they saw as a threat to economic stability and its possible impact on the region. However, the uncertainty about a possible government of Lula was dissipated when he reached the presidency and continued with the stabilization plan launched under the government of Fernando Henrique Cardoso (1995-2002), which had brought important outcomes in terms of inflation, external debt and debt service, but had been much less successful in terms of economic growth and the reduction of unemployment.

While continuing the macroeconomic adjustment, Lula began his flagship programs in social areas, including the well-received Bolsa Familia, which provides extremely poor families with cash transfers from the State conditioned on keeping their children in school and taking them to health-care centers. The achievements of this program have been remarkable to the extent that today more than 12 million of the poorest Brazilian families are part of the program, and similar versions of it have been recently implemented in other developing countries like Mexico, Jamaica, Nicaragua and Colombia, and in some parts of the United States.

However, Lula's social policy is not limited to Bolsa Familia. According to some studies,  this program explains only one sixth of the significant reduction in economic inequality during this period (the Gini coefficient, which measures economic inequality has been reduced during these years by about 7%, but it is still quite high according to the international standards). A clear educational policy has also led to an increase by more than two years in the average time of education of Brazilian workers. The set of programs aimed at correcting the historical social inequality in the country has resulted in a 20 million reduction in the number of people in poverty over the past eight years. It has also been observed an increase in the income of poorer families much faster than that of the richest ones,  all this accompanied by the creation of nearly 13 million formal jobs. No doubt a great political asset for the officialist candidate to the presidency and leader in the polls, Dilma Rousseff.

This situation displays a stark contrast with that of neighboring Colombia where the government ending this week has been considered a success story while the country remains with alarmingly high rates of unemployment, poverty and indigence, and it now occupies the first place in the indices of inequality in Latin America -a region notorious for its poor performance in this area. Unlike the Brazilian case, the State subsidies program is not part of a comprehensive social policy but, on the contrary, it has been used as a tool for political manipulation of the beneficiary families, as it was evidenced in the recent contest for the presidency.

In addition to this, welfarism, which embodies the Colombian social policy, has its limits. Proofs of this are the difficulties that Bolsa Familia has shown in Brazil. For example it has shown the existing asymmetries of these conditional cash transfers programs, in terms of their effect on rural households vis-a-vis those in urban areas; it has also evidenced the change in the household structure according to whom receives the benefits of the program; and, finally, it has made clear the difficulties that this program has is reducing child labor in urban areas. Thus, although these initiatives are able to calm some of the people's needs, they are not by themselves the solution to the great inequalities of these societies and, therefore, they must be accompanied by policies of income and land redistribution, together with educational programs and plans that allow the public to have access to credit.

It's been time already that countries -the citizens and the governments- with extreme levels of economic and social inequality take firm decisions in this field, which is always possible of being improved, as Lula's Brazil exemplifies. Inequality not only denies opportunities to the underprivileged but it also has serious consequences in terms of the social fabric, work ethics, delinquency, organized crime and political stability, among many other economic, political and social variables.

We have been told to believe that inequality is not a major issue, that it only affects a few poor people, and that charity, either from the citizens or from the State, will resolve the issue in the short term. Nothing is more false than this. Inequality affects the rich and the poor; it preserves unfair conditions over time and it generates dramatic social tensions. As William Ospina said in his influential book And Where's the Yellow Strip?: "fortified walls, with electronic keys and private armies of guards and hounds nearly authorize [the rich] to say that this is a safe country [and] wonder why wealthy people from other countries do not have to settle in small residential and commercial ghettos but can walk through their cities and their fields to fully enjoy the world. They have been resigned to living behind the walls and do not ignore that something is rotten in the world that they have so jealously defended."

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