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1. Introduction

2. Social Inequality, Poverty and Economic Growth

3. Historical and Cultural Context of Social Inequalities in Brazil
3.1. The Colonial Past
3.2. Industrialization and Welfare Policies

4. How Could Brazil Reduce its Inequalities?
4.1. Impacts of Economic Growth and Lower Inflation Rates
4.2. Impacts of Cash Transfers
4.2.1. Achievements of Bolsa Família
4.2.2. Criticizing Bolsa Família

5. Conclusion

6. References

1. Introduction

Social equality is essential for every country, not only as an end itself, but also as tool for promoting economic growth (Skidmore, 2004). Brazil is one of the most unequal countries in the world, with a Gini Index of 0.567 in 2005 (CIA, 2010). Although this is still high and leaves Brazil the 10th most unequal country out of 134, the inequalities are improving significantly (in 1998 the Index was 0.607). This essay will focus on two questions: What has caused the striking inequalities in Brazil? Why did these inequalities improve in the recent years?

2. Social Inequality, Poverty and Economic Growth

It is crucial to understand the relationship between poverty, inequality and growth. The high inequalities in Brazil mean that – without change in inequality – Brazil would need even higher growth than China to achieve the same results in poverty reduction. Inequalities implicate the legacy of social exclusion, as they constrain the ability of the poor to participate in economic growth, and also limit their benefits from growth (Ravallion, 2009). Hence, the development of human capital is constrained, and so is growth. On the other hand, growth alone is unlikely to reduce poverty sufficiently (Thomas, 2006). Considering this context, Brazil´s achievement in decreasing its inequality is especially significant, since it enabled the country to reduce its poverty rates even with modest growth.

Only considering income measures provide a limited picture of inequalities in Brazil. Besides the significant average income differences between regions, most significantly between the Northeast and the Southeast, there are also inequalities between people with different age, color, and gender (Thomas, 2006). The data of inequality improve when basic public services like basic education or basic health care are included, which have enhanced significantly, though quality is still an issue. Simultaneously, other aspects would worsen the real inequality. For example, poor people are affected dis­pro­­portionally by crime or the impact of environmental degradation (Thomas, 2006). However, monetary distribution remains important, and thus the Gini Index is used here, providing an overview of income inequalities within Brazil.

3. Historical and Cultural Context of Social Inequalities in Brazil

There are some external reasons influencing Brazil´s inequalities. For example, the income distribution worldwide has become more unequal – in developing as well as in developed countries (Skidmore, 2004). However, most of the causes for its striking inequalities are embedded in Brazil´s culture and history, as well as in economic and political aspects. Due to the limited scope of the essay only to important aspects will be outlined.

3.1. The Colonial Past

The Portuguese merely aimed at exporting to the Crown and at spreading their faith in Brazil. Their culture was characterized by anti-egalitarian, patrimonial, and personal values which reinforced the power of the elite and the obedience of the rest. As the colonial power neglected education, the first university on Brazil was only established in 1932, much later than in the rest of Latin America. They also prohibited the printing press, making it hard to develop a free public opinion. Moreover, the use of slavery added color to system of social stratification (Skidmore, 2004). The Portuguese economic mercantilist system included a closing of the economy, as well as the ban of industry with a strong focus on mining and agriculture, resulting in extreme regional inequalities. For example, the coffee industry in Southeast spoiled the region´s development (Skidmore, 2004).

3.2. Industrialization and Welfare Policies

The industrialization and welfare policies of Getúlio Vargas (president 1930 - 1945, 1950 - 1954) reinforced inequalities, as for example, he created favorable laws for urban workers who only constituted a small fragment of the whole population, while rural workers were excluded from this social welfare. Opposition was weak because the left was fragmented, revolutionary tradition did not exist, and the bureaucracy facilitated keeping opponents down. The left was also weakened by the general perception of the left, and of anyone favoring equality, as dangerous. The later funding of industry was one main factor for Brazil´s enormous foreign debt, which in turn contributed significantly to the high inflation that had severe distributive effects on income (Skidmore, 2004).

4. How Could Brazil Reduce its Inequalities?

In the past, Brazil´s government often prioritized other issues over fighting social inequalities, such as the exchange rate, foreign exchange reserves and foreign direct investment (Skidmore, 2004). For example, the hyperinflation of the 1980s and early 90s led the political focus away from income distribution. The Real Plan by Fernando Henrique Cardoso helped the government to control inflation in 1994, shifting the focus more towards social policy (Ravallion, 2009).

4.1. Impacts of Economic Growth and Lower Inflation Rates

The acceleration of economic growth can reduce inequalities (Skidmore, 2004). To be most successful in this, growth should be targeted to sectors and regions. Ravallion (2009) argues that the main factors in Brazil´s success in reducing poverty was the reduction of the inflation rates in combination with the expansion and reforms in the social assistance spending. The lower inflation rates brought macroeconomic stability, which benefitted the poor proportionally more than the wealthy. By creating stability the Real Plan helped in maintaining the buying power of working class, removing the distribution effects caused by the hyperinflation that Brazil had faced before 1994. Thus, Brazil has proved that macroeconomic and trade policies do not necessarily need to hurt the poor, but can contribute to poverty reduction (even if that is not their main goal).



ISBN (eBook)
ISBN (Buch)
445 KB
Institution / Hochschule
Escola de Administração de Empresas de São Paulo Fundação Getulio Vargas
social inequalities brazil




Titel: Social Inequalities in Brazil