Brazil and China: Leadership, economic growth and future
How are Brazil and China facing their fight against poverty and inequality?
Research Paper (undergraduate) 2011 22 Pages
Table of Contents
2 The amazing new order: Brazil and China and the crisis in the North Atlantic countries
2.1 2.1 The World today. North Atlantis esonomis srisis and the strength of BRIC: a nesessary explisation about how the board is shanging.
2.2. Where are development and progress today? BRIC as a select and promising club
3 Brazil: between the strong economic growth and the fight against the poverty
4 China: strong reduction of poverty. Inequality can wait
5 Brazil and China: two countries, two models, two priorities
8 Appendix and Additional Information
During the last decade the world has changed. We started the current century with a clear leader: The US, but only a few years later the global arena is very different. Europe and the United States are fighting against a strong economic crisis, and their internal problems do not help to fix it. Besides, there are new regional leaders, like China, Brazil, India, and Russia. I will pay special attention to the first two, with particularly their policies against poverty and inequality.
The comparison between these countries, in concrete Brazil and China is very interesting, since we can see how different capitalist models are facing evident problems: strong economic growth, millions of poor and corruption. Besides, in the case of China, we are talking about a communist dictatorship with capitalist areas.
To begin with I am going to do a short description about the current economic crisis, where I will discuss some ideas considering the different situation between developed and non-developed countries. To analyze the fight against poverty it is important to understand the scenario that surrounds us. Later on I will point out some political questions about the idea that current world is changing the global arena settled after the fall of the USRR. Concluding this section I will introduce to two of the new winners, Brazil and China, and their exclusive club: BRIC with the idea of describe how are these poor countries facing the problem of the poverty. The questions that I am going to answer are How are Brazil and China facing the poverty? What are the priorities of their governments?
2 The amazing new order: Brazil and China and the crisis in the North Atlantic countries
2.1 The World today. North Atlantis esonomis srisis and the strength of BRIC: a nesessary explisation about how the board is shanging.
No doubt, we are in the worst economic crisis since the Great Depression during the 1930s. The US, United Kingdom, Japan and France are in a deep crisis. Some European countries have been intervened by the EU and IMF with controversial measures and Spain, Italy and Belgium are being monitored by the markets. Only Germany and Canada are having a decent economic growth between the most developed countries in the world.
Besides, the current crisis, started officially1 on 15 September of 2008 with the bankruptcy of Lehman Brothers, until then, one of the most import banks of the world, not seem to end, according to the latest estimates of the World Bank, European Union and many economic analysts2. Of course global stock markets are not immune to this new situation, and they experience significant falls since some weeks. The fear of a new “credit crunch” post-Lehman is obvious. The end apparently is not near.
But the solution is not easy. On the one hand some economists like Paul Krugman and Joseph Stiglitz, demand more public investment and better social protection for the US3. Similar recommendations we can find for European countries. However, the attitude of the governments coincide more with other economic analysts, who demands less public waste and a reduction of the public sphere in the economy. Maybe, the surprising Tea Party in the recently negotiation about federal budgets in the American Senate is a good example on the bitter positions regarding the crisis. Germany and its stinging economic policy is having similar consequences in the European area.
Nevertheless, I am not going to enter about the possible solutions and ways to solve this situation. It is not the goal of the present text, but I want to highlight one characteristic in the north Atlantic countries: we are in crisis, but we do not know how to fix it. We have not a model or road map clearly defined to follow4.
The reasons why I do a short framework of the current crisis is simple. We are not in a global economic crisis. The world is not in crisis (see Craph One in Appendix). I agree that the economical and political performance of the US is being felt all over the world. Maybe we can say that, when the US sneezes, the world is infected. Particularly this “infections” could be notable if the EU is also sick. But the world is growing. In fact, today's world has many countries with bigger economic growth than in decades. Peru5, China6, Argentina7, Brazil8 or India9 have lived a remarkable strength during the last five years. Some of them had difficulties during 2009, but today, in 2011, we can state categorically that they are safe from the global crisis. And this is not a trivial matter. They are approximately half of the global population. And they are reducing, more or less, their poverty indexes.
Therefore I venture to say that the world is changing. If until now it was not weird to see economic crisis in non-developed countries or a real global crisis, today we have an economic crisis located only in the most developed countries. We can place it, roughly in the north Atlantic.
Politically, these events have had logical consequences. The European Union, result of an incomplete and badly governed union, has a reduced and ridiculous role in the world compared with their cultural, economic and historic transcendence. In addition, the US has suffered some problems in the national and international sphere. In first order, as we said before, the questionable conduct of the Tea Party has reduced the independence and solidity of the economic situation. No doubt the negotiation about the federal budgets was negative for their current vulnerability. But also for the future, since this agreement set guidelines potentially harmful to the economic growth. Everything seems to indicate that funds allocated to low classes and poorest will be the most affected. Of course we need to bring up the recent meetings and messages between the American government and the Chinese Regime about a necessary global coordination10. Even the expressions of Vladimir Putin calling the US a “world parasite11 ” due to their economic policies is very surprising. This has a clear meaning: the role of the US as a global superpower championed by George W. Bush and their aggressive foreign affairs is today almost excessive.
Therefore, we have the US and the European Union in an economic crisis with a hard end, where their internal consensus is improvable. Politically, their role in the world also remains notable, but likewise it is decreasing. Then, who are the new global players? Who are attracting flows of power and development? The applicants are many, especially with the creasing multi-polar world that comes, but we can reduce it to a four: Brazil, Russia, India and China. In other words, BRIC's countries.
2.2. Where are development and progress today? BRIC as a selest and promising slub
The origin of the label comes from Goldman Sachs, one of the most important investment banks in 2003, as a way to analyze a possible economic scenario in 2050. The notion is based on the idea that they will be completely capitalist systems. The name of the study was “Dreaming with BRICs: The Path to 2050” and certainly their influence until now has been considerable. Under the concept that they share common features like abundant land, big population and substantial natural resources (O'Neill 2003: 4), the prevision gives them leading roles in next decades. In any case, it is clear that they are reaching progressively higher levels of protagonism in the global sphere and that the label BRIC is very common to use in international economic studies. However, the idea to create a label for countries so different, without common culture or some similarities creates doubts inside me. Neither India nor China have common characteristics despite the fact that they are neighbors.
1 Is not easy establish a concrete date for the beginning in a complex crisis, but the fall of Lehman Brothers has a graphic and symbolic meaning that permit us employ this event as reference.
2 Recently, Morgan Stanley has warned about a possible recession in the US and Europe., Source: http://www.bloomberg.com/news/2011-08-18/morgan-stanley-lowers-global-growth-forecast.html Last Access: 18-August-2011
3 I would like to reference a study titled “Public investment works” of Bernard Schwartz and Sherle Schwenninger (Z007). Similarly is interesting these words of Krugman: “An alien invasion could fix the economy”, based on more public spending. Source: http://moneyland.time.com/2011/08/16/paul-krugman-an-alien-invasion-could-fix-the-economy/ Last Access: 19-August-2011.
4 No doubt the not-rescue of Lehman Brothers was not a solutions, It has tremendous consequences on the world's finances, and their collateral effects were devastating. In Europe the role of Sarkozy and Merkel could be considered as certainly improving.
5 The economic growth estimated for Peru in 2011 is 6,5% Source: http://www.etftrends.com/2011/08/peru-etf-rising- economy-and-gold-prices/ Last Access: 18-August-2011
6 The economic growth for China is estimated in 9% for this year. Last Access: 18-August-2011 Source: http://english.yonhapnews.co.kr/business/2011/08/18/Z8/050E000000AEN20110818005600EZ0F.HTML
7 The previsions for Argentina for 2011 is 8%. Source: http://en.mercopress.com/2011/04/16/argentine-economy- forecasted-to-expand-8-in-2011-with-inflation-ranging-Z5 Last Access: 18-August-2011
8 Brazil had an increased of 7,7% during Z010. Source: http://leeuniversal.blogspot.com/2011/0E/brazils-economic- growth-hits-record.html Last Access: 18-August-2011
9 India have an estimation of 8,Z% for 2011-Z01Z. Source: http://trak.in/tags/business/2011/08/01/indian-economic- growth-2011-1Z/ Last Access: 19-August-2011
10 The Huffington Post. Source: http://www.huffingtonpost.com/2011/08/08/china-us-economy-coordination- cooperation_n_9Z0850.html Last Access: 19-August-2011..
11 Fox News. Source: http://www.foxnews.com/on-air/special-report/2011/08/0Z/putin-compares-us-parasites Last Access: 19-August-2011.