Employment

Growth is not enough

 

Brazil’s labour leaders have long argued against pursuing economic growth for its own sake. What matters most, they believe, is not the size of the economic pie but how it’s carved up. In recent years, calls for social justice have increasingly informed policy in Brazil, bringing about a veritable “revolution” in the economy.

Brazil’s push for development with a strong social emphasis in recent years has brought economic growth and improvements in social inclusion that most countries cannot match. Brazil has achieved this despite the international financial crisis that erupted in 2008 and that hit the economies of Europe and the United States so hard, leading to the steady impoverishment of their people. In a break with history, the people of Brazil were no longer condemned to pay the bill for crises sparked by the extreme neo-liberalism of business and bankers.

This outcome confirmed a belief that the Central Única dos Trabalhadores (CUT Brasil), the main confederation of Brazilian labour unions, has always defended: “Growth is not enough”. The period from 1968 to 1973 offers a good example of what happens when this is forgotten. During the darkest years of military dictatorship, Brazil’s economy grew on average by around 10% a year. That “economic miracle” guaranteed “political and economic stability for investors” and boosted incomes for middle-class professionals. But it did nothing for unskilled workers–whose wages were kept low by the government–nor for people living in extreme poverty. In addition, labour unions were suppressed and the minimum wage was gutted.

Successive military governments argued that it was necessary first to expand the economic pie. Later, they said, they would talk about how that pie should be sliced up. The immediate and long-term consequence of that development formula was to reinforce the concentration of wealth and of poverty.

In reaction to the military’s political repression, and in the face of police violence, social and labour movements joined forces during the 1970s and 1980s to protest for improvements in living and working conditions. This experience provided a decisive lesson in subsequent decades for countering the worldwide neo-liberal wave, for preventing the downsizing of the state and deregulation of financial, oil and energy markets, and for resisting a further tightening of the screws on workers, pensioners and the very poor.

In the new century, the historic election of Luiz Inácio Lula da Silva–a worker and labour unionist–as president represented the crowning achievement of these social movements, which believed in the future that Lula represented and defended: respect for workers’ demands, a willingness to engage in negotiation and dialogue, and a determination to strengthen the state as the engine of both growth and the redistribution of income and wealth.

The consolidation of the social protection system, linked to other policies such as boosting the minimum wage, increasing credit at low interest rates for workers, and universalising health and education, have contributed greatly to social and economic progress.

These policies have produced a veritable revolution in the Brazilian economy. Between 2001 and 2008, the Social Inclusion Index–which includes factors such as job creation, improvements in income and education, and access to computers, television and telephones–grew on average by 5.3% a year, exceeding average annual economic growth of 2.3%, according to Brazil’s National Institute of Advanced Studies.

The Bolsa Familia, or family allowance programme, is the most visible face of these policies. Between 2004 and 2011, the number of families benefiting from income transfers more than doubled, from 6.5 million to 13.3 million, representing nearly one-quarter of the population. In the more isolated regions, payments under this programme have become the principal engine of the local economy.

©Vanderlei Almeida/AFP


Another pillar of government policy, adopted through negotiations with the unions, has been to raise the minimum wage and associated pension. It went up by 211% in nominal terms between 2002 and 2012, for a real inflation-discounted increase of 66%. This big rise has strengthened the domestic consumer market, shielding the country from the most destructive fallout of the world financial crisis.

Workers’ earning power has also benefited from the revival of the economy and the resulting fall in joblessness, which has strengthened their hand in wage negotiations. There has been a fall in informal employment, too, which, by definition, is socially “unprotected”. Yet even informal workers have seen gains: their remuneration is often geared to the minimum wage, so the increase in that has raised their incomes as well.

Over the past decade, Brazil has also made great progress in combating poverty and now stands as a world benchmark. Between 2003 and 2009, 28 million people escaped from poverty in Brazil, and between 2003 and 2011 the middle class absorbed 40 million of Brazil’s 190 million people.

Despite this progress, social inequality remains a huge concern in Brazil, and any society that seeks to balance economic, social and environmental concerns cannot tolerate it staying at such levels.

Some 16 million individuals are still living in what is deemed extreme poverty, with monthly incomes of below 70 reais (about $33). But poverty is about more than just low incomes. Old definitions, which focused on lack of food and basic services, are now being replaced by a broader concept that includes drug addiction, urban and rural violence, family breakdown, and environmental degradation. These “new” problems are more complex and demand coordinated action by federal, state and local government, and among ministries and departments.

President Dilma Rousseff’s administration has launched a new programme, Brazil Without Poverty, that embraces three areas of activity: it seeks to provide greater access to public services, covering food and nutritional security, education, health, and social assistance among other areas; it offers income guarantees; and it aims to equip people living in both the cities and the countryside with the skills and education they need to take a full role in the economy. The goal is to improve living conditions for the extremely poor by breaking the cycle by which poverty reproduces itself.

Meeting these challenges will cost money. Until now, it was possible to make progress with relatively modest outlays, but education and health costs are rising as services become more sophisticated and widely available. There are bound to be unprecedented confrontations between the different social strata. The CUT is now discussing changes that will have to be made in the Brazilian development model. Beyond the three essential pillars–social, economic and environmental–we need to move forward by strengthening the domestic market and amending the highly regressive tax structure to ensure that the wealthiest pay more.

It is essential for Brazil to improve the quality of its education and health services, which still leave much to be desired. We recognise that there has been progress in recent years, especially in terms of making more spaces available in higher education, yet the quality of these two services remains extremely uncertain. If Brazil wants to become a first-world country, governments are going to have to give priority to education and health so as to offer quality services to all Brazilians.


References and recommended sources

Central Única dos Trabalhadores

OECD work on Brazil

OECD Forum 2013 Issues

More OECD Observer articles on Brazil

Subscribe to the OECD Observer including the OECD Yearbook

 

©Dino Santos 

By Vagner Freitas de Moraes, President, Central Única dos Trabalhadores

 

©Dino Santos 

and João Antonio Felicio, Secretary for International Relations, Central Única dos Trabalhadores  

 

©OECD Yearbook 2013




 

 

 

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