Brazil – Jamaica’s perfect model for decreasing Income Inequality

All roads led to Brazil this summer, and the World enjoyed the soccer Tournament. Many visitors were there to test and try the Hospitality of the Brazilian people, which was not wanting. But that is not the only accomplishment of this massive Country; Brazil points out to the world its economic miracle, wherein some 40 million persons were raised from near poverty to middle class homes and living styles.

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.

Jamaica and Brazil economiesFor 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, there is 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) DilmaRousseff 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. Growth is not only funded by production output, but generous subsistent allowances.

Brazil’s objective is being achieved while alleviating poverty, increasing the size of the middle class: Implementing 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 BolsaFamília, 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 BolsaFamília 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 recently that unemployment insurance will be implemented and the minimum wage will increase by almost 40%. I do believe that Jamaica’s minimum wage increase from $5000 to $5600, is 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 region:

What’s the point of economic growth if unemployment does not decrease, yielding to increased social problems.(NYT Mocera Jan 20, 2014)

All of this, notwithstanding any gains and economic benefits from the football tournament;which are being assessed at this time. The Opinions favour more wins than losses. The World Cup brought in billions to Brazil’s economy, and many protestors claim this money will remain in the hands of a well-connected few.

Brazilian officials say the World Cup has boosted infrastructure projects and created some jobs but the country has experienced wide protests over hosting the World Cup.

“This World Cup is not for the Brazilians,” a vendor replies when asked whether Sao Paulo has experienced the boon she expected. “It is for the foreigners and FIFA friends.”

One of the tour guides remarked:”The World Cup is bringing benefits to Brazil but it’s to the economic and political elites — not to street vendors, not to small companies, entrepreneurs and not to workers in general,” she said. Key to this debate are the spiralling costs of building new stadia across the country to host matches, but I suspect that the capital costs will not be wasted. Indeed, the stadia will be available for further sporting events and creates a Capital Gain to the Brazilians.

In total funds, loans and credit lines from the public purse for stadium projects, was first tagged as US$3.8 billion, and then revised to 4.5 billion.The stadiums are in a way very good for big engineering companies to make money,” the construction chief opined, pointing out that much of the money will trickle down to the employees.

People have also been evicted from their homes to make way for projects relating to the World Cup, and there has been the “calming in the slums”, which has seen police forcibly occupy some of the poorer areas in the city. All across Brazil, street protests have raged in the last year while popular committee groups have also sprung up in the major cities criticizing the costs involved.

A multitude of grievances, not all directly related to the world Cup, have driven this discontent — including rising transport prices, higher living costs, housing concerns and accusations of police brutality.

 Naturally, fairness and equality are at the heart of these concerns. All-together, it is estimated that $11.6 billion US were spent in costs, and $13.8 billion received, plus capital stock, and tourism inflows coming after the extended stay of many visitors. (goldman- sachs}

Written by Ramesh Sujanani

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