By Alex Liao
Amidst a bustling urban metropolis, millions in São Paolo – Brazil’s largest city – have had little access to education and medical services. This deficit has less to do with the infrastructure available and more with a cycle of poverty that has trapped and marginalized families in the lower classes. Of course, schools can always be reformed, hospitals can always invest in new technology, but the poor often have few incentives to seek such care. Why have a six-year old son at school when he can be working a street job to support the family? Why risk the uncertainties of a medical bureaucracy that, to be fair, has never been completely responsible to the poor?
These questions have often been left unanswered, as Brazilian officials have been more willing to pour money into large social development and infrastructure programs which do very little in terms of substantive improvement. Millions of poorly regulated international funds from the World Bank have done little to significantly change the situation. Rather, they have prolonged the dilemma. As the Argentine debt crisis showed, international institutions founded on neoliberal thought could no longer be trusted. Economic recovery would have to come without the West’s overt influence. Nevertheless, while spending has increased, inequities amongst the Brazilian population have increased. During the 1980s – a period of increased social spending following the end of the military regime and the beginning of democratic governance – the Gini coefficient for Brazil climbed from 0.58 to 0.64. The Gini coefficient measures income inequality, where a value of 0 represents total equality and 1 represents total inequality amongst a population. By comparison, the United States’ Gini coefficient is generally around 0.45. Hence, the traditional Keynesian model of government spending and investment did little to uplift the Brazilian poor from economic and social malaise.
The Brazilian dilemma has far-reaching international implications. Developing countries, of which Brazil, as a member of the BRIC nations, is a leader, will shepherd the next era of innovation that can drive the global economy. If poverty and severe economic inequality continue to plague developing nations, they will never advance from their current positions and gain international recognition and power. Social issues are not isolated to Brazil; rather, China, Russia and much of Europe, as well, face burgeoning questions about their youth’s futures. Meanwhile, countries such as Japan and Canada have seen their population densities tilt towards the elderly. If the most fundamental social problem – poverty – continues to linger, the world may no longer be as interconnected and vibrant as it is today. It is surely time for new solutions, one that does not repeat the mistakes of the past but instead opens new doors and opportunities for the global poor.
The age of failed Brazilian social policies is now sounding its death cry. From 2003 to 2010, Lula’s government expanded the Bolsa Família, a conditional cash-transfer initiative which offers incentives in the form of family grants for a variety of social causes. For instance, families who send their children to school, and keep them in school throughout the year, receive small cash payments. Likewise, receiving regular medical check-ups provides more payments for a family. Instead of throwing money at a problem, the Bolsa Família pragmatically provides small payments to optimize social gains. In Brazil, the small payments are enough to tip the scales and place children in the classroom instead of the factory.
Not only has the Bolsa Família reduced economic inequality and reduced the burden of the poor, it has also paved the way for new poverty-reduction measures. For example, payments could be given to those who start small businesses, or those who start small businesses and hire five other workers. Instead of a loan, which can hamper business growth and create a climate conducive to fear rather than confidence, a conditional cash transfer can spur and provide the seeds for an economic recovery. Expanding further, special tax breaks can be carved out for those who contribute to recycling programs, or for those who take classes in emergency care. The kinds of conditional cash transfers we are seeing today are merely the tip of the iceberg; from here, the economic and social spheres can coalesce to augment progress and break cyclical indigence.
Of course, more information and data are needed to ensure the efficacy of future conditional cash transfer programs. Governments should begin trial programs in various cities, to evaluate where and under what conditions they offer the greatest returns. No two cities are perfectly symmetrical; yet, governments, by looking at data from past programs, can and should engineer specialized programs for each city to meet different needs. In this way, dilemmas ranging from environmental degradation to the uneducated workforce can be diminished.