"Seeking Compatibility between Economic Growth and Social Justice : Focusing on the Experiences of The New Brazil"
November
18,
2013,
(Monday)
United
Nations
University
U
Thant
International
Conference
Hall
Organizers:
IDE-JETRO,
The
World
Bank,
The
Asahi
Shimbun
Company
>>>>Event
Guide/Program
Opening Remarks | Keynote Speech | Panel Discussion
Keynote Speech 1: Compatibility between Economic Growth and Social Justice: Brazil’s Recent Experience
(Senior Adviser on BRICS Economies, the World Bank)
In
Brazil,
as
the
middle
class
grows,
the
numbers
of
poor
and
extremely
poor
are
shrinking.
As
a
result,
Brazil’s
Gini
coefficient
has
fallen
sharply
over
the
past
15
years,
though
it
is
still
at
a
high
level
internationally
speaking.
The
4
main
reasons
for
these
positive
changes
are:
jobs
growth
(and
rising
wages,
particularly
for
unskilled
laborers);
demographic
changes
(including
female
participation
in
the
workforce);
drastic
rises
in
the
legal
minimum
wage;
and
the
government’s
income
distribution
policies.
A
glance
at
contribution
rates
to
the
improvement
in
Latin
American
income
inequality
reveals
the
major
factors
to
be
rising
hourly
wage
rates
at
45%
and
income
transfers
at
14%.
In
Brazil
in
particular,
the
rate
for
the
former
stands
at
54.9%
and
for
the
latter
at
12.2%.
Government
initiatives
to
decrease
poverty
levels
and
income
inequality
include:
the
promotion
of
macroeconomic
stability
through
curbs
on
inflation
and
so
on;
improving
public
access
to
education
and
healthcare;
and
the
construction
of
a
social
safety
net
through
the
Conditional
Cash
Transfer
program
(hereinafter
CCT)
and
so
on.
The
CCT
dates
back
to
the
Cardoso
administration.
It
was
expanded
by
the
Lula
administration,
through
the
Bolsa
Familia
(family
allowance)
program,
which
added
allowances
for
food
and
the
like.
It
was
recognized
that
the
money
spent
on
this
program
also
had
a
significant
spillover
effect.
The
program’s
budget
stands
at
around
0.4%
of
GDP,
but
spillovers
include:
a
boost
to
entrepreneurialism
(the
consumption
patterns
of
the
poor
and
the
middle
class
are
different,
so
new
business
chances
are
brought
about
by
raising
the
poor
to
the
ranks
of
the
middle
class);
a
decrease
in
urban
youth
crime;
a
cap
on
underage
pregnancies;
a
decline
in
AIDS
cases;
and
an
increase
in
the
resilience
of
the
poor
to
shocks
such
as
soaring
food
prices.
Problems
include
the
negative
impact
on
competitiveness.
In
other
words,
though
rising
incomes
leads
to
growing
demand,
the
prices
of
non-tradable
items
like
services
have
gone
up,
which
leads
to
rising
costs
on
the
supply
side.
Furthermore,
rising
wages
have
led
to
declining
labor
productivity
and
subsequently
to
a
slide
in
industry
competitiveness.
Horizontal
initiatives
are
needed
to
tackle
these
issues,
such
as
improvements
to
the
business
environment
and
the
promotion
of
investment
that
utilizes
private-sector
funds.
In
other
words,
the
Brazilian
growth
strategy
which
focuses
on
expansion
of
domestic
consumption
is
reaching
the
end
of
its
shelf
life
and
a
new
model
will
need
to
be
devised
in
the
near
future.
(Senior Adviser on BRICS Economies,
the World Bank)
Keynote Speech 2: Recent Developments and Trends in the Brazilian Economy
(Senior Researcher of IPEA [Institute for Applied Economic Research],
ex-Director of Macroeconomic Study Department, Brazil)
An
analysis
of
economic
growth
from
2004
to
2010
reveals
three
major
factors.
The
first
involves
the
government
of
Luiz
Inácio
Lula
da
Silva.
When
the
Lula
administration
came
to
power
in
2003,
there
were
doubts
about
whether
the
new
left-wing
administration
would
maintain
the
policies
of
its
predecessors.
As
a
result,
the
foreign
exchange
markets
and
other
financial
indicators
suffered
sharp
falls.
In
the
end,
though,
Lula
decided
to
stick
with
the
policies
of
the
previous
Cardoso
administration
and
adopted
a
conservative
approach
to
fiscal
and
monetary
policy.
As
a
result,
trust
in
Brazil
recovered.
The
second
factor
was
the
advantageous
external
environment
at
the
time,
with
the
global
economy
expanding
and
commodity
prices
rising,
for
example.
The
third
factor
involved
structural
reforms
within
Brazil,
such
as
the
pension
reforms
and
salary-deductible
loans.
The
driving
forces
of
GDP
growth
were
the
services
industry
on
the
supply
side
and
consumer
spending
on
the
demand
side.
Exports
had
pulled
the
economy
along
until
2005
but
lost
momentum
thereafter.
Factors
behind
the
growth
in
consumer
spending
include:
labor
reforms
(expansion
of
full-time
work);
a
hiking
of
the
legal
minimum
wage;
the
Bolsa
Familia
program
;
and
increased
financing.
The
external
environment
deteriorated
after
the
2008
Lehman
Shock.
As
an
economic
crisis
engulfed
the
world,
the
Brazilian
government
responded
by
ramping
up
spending
and
public
investment.
In
the
face
of
rising
inflation,
though,
the
government
has
been
trying
to
curb
spending
since
2010.
Furthermore,
despite
the
government’s
industrial
policy
and
aggressive
financing
by
public
financial
institutions,
growth
began
stalling
from
2011
onwards.
This
shows
that
the
consumer-driven
economic
growth
model
has
now
reached
its
limits.
This
is
partly
because
household
debt
ratios
are
rising.
On
the
supply
side,
meanwhile,
production
costs
are
rising
due
to
inflation
and
so
on,
so
suppliers
are
finding
it
harder
to
meet
demand.
While
productivity
declines
in
Brazil,
the
recovery
in
the
external
environment
also
remains
lackluster.
Brazil
is
now
facing
some
structural
issues.
The
first
is
the
problem
of
labor
productivity.
In
the
2000s,
the
labor
productivity
growth
rate
was
low
and
it
has
actually
fallen
since
2011
.
This
is
mainly
due
to
a
slump
in
Total
Factor
Productivity
(TFP;
productivity
derived
from
technological
advances
and
improvements
in
productive
efficiency
rather
than
a
quantitative
increase
in
labor
or
capital).
In
addition,
investment
(particularly
public
investment)
has
been
slowing
since
2011.
Investment
and
saving
rates
are
also
accounting
for
a
smaller
share
of
GDP,
so
dependency
on
external
funds
is
growing.
As
well
as
the
issue
of
workforce
quality
(or
education
in
other
words),
Brazil
faces
considerable
fiscal
problems
too.
Social
security
costs
may
balloon
as
the
demographic
dividend
period
comes
to
an
end
and
the
population
ages
(the
dependent
population
ratio
is
set
to
rise
from
2020).
As
a
result,
the
deficit
could
expand
from
hereon
(Senior Researcher of IPEA
[Institute for Applied Economic
Research], ex-Director
of Macroeconomic Study
Department, Brazil)
Keynote Speech 3: Silver Jubilee of the Citizen Constitution: Evidences and Challenges of the Newer Brazil
(Professor of Economics at the University of Brasília)
The
1988
Constitution
of
the
Federative
Republic
of
Brazil
was
drafted
by
the
1988
Constituent
Assembly
after
more
than
20
years
of
military
rule.
As
a
result,
it
is
deeply
colored
by
Brazil’s
traumatic
experiences
under
an
authoritarian
system.
This
explains
why
the
constitution
strongly
champions
freedoms
of
speech,
religion
and
political
beliefs,
for
example.
It
also
contains
safeguards
protecting
citizens
from
arbitrary
action
by
the
state.
Furthermore,
it
establishes
important
social
rights
such
as
the
right
to
education,
public
health
and
social
security.
These
characteristics
explain
why
the
document
is
known
as
the
“Citizen
Constitution.”
The
constitution
set
down
the
rules
for
political
battles
from
thereon.
It
also
established
an
extremely
important
basis
for
other
systematic
changes
such
as:
the
establishment
of
a
Public
Ministry
,
which
was
established
under
the
1988
constitution);
voted
to
slash
the
infrastructure
budget
for
the
World
Cup;
and
approved
a
resolution
decreeing
that
any
profits
from
“sub-salt”
oil
fields
be
used
solely
for
spending
on
education
and
healthcare.
Judging
from
past
examples,
it
seems
these
demonstrations
occurred
during
a
historically
important
moment
in
Brazil’s
history.
There
is
no
consensus
about
the
nature
of
the
recent
demonstrations,
but
I
will
now
introduce
you
to
several
different
interpretations.
Firstly,
after
studying
street
protests
in
Latin
America,
Machado,
Scartascini
and
Tommasi
argued
in
a
2011
paper
that
“where
institutions
are
strong,
actors
are
more
likely
to
participate
in
the
political
process
through
institutionalized
arenas,
while
where
they
are
weak,
protests
and
other
unconventional
means
of
participation
become
more
appealing.”
In
other
words,
if
citizens
harbor
doubts
about
the
effectiveness
of
the
system
and
political
representation
in
particular,
they
will
take
to
the
streets
to
try
to
affect
change,
just
like
they
did
in
Brazil.
Secondly,
in
a
paper
published
earlier
in
2011,
ex-president
Cardoso
explained
the
social
short
circuit
theory
that
says
that
in
society,
as
in
electrical
systems,
an
electrical
wire
that
loses
its
insulation
may
generate
an
unexpected
short
circuit
any
moment,
but
the
short
circuit
is,
in
fact,
a
consequence
of
long-lasting
careless
maintenance
of
the
electric
system..
Thirdly,
Francis
Fukuyama
calls
Brazil’s
protests
a
“middle-class
revolution.”
He
analyses
the
protests
as
a
manifestation
of
a
more
general
phenomena
spreading
across
the
world.
His
argument
goes
as
follows.
New
middle-classes
have
started
to
appear
in
several
nations.
Members
of
this
class
are
highly
educated
and
have
high
expectations
with
regards
to
the
government
and
ethical
behavior.
They
are
also
passionate
about
the
establishment
of
citizenship
.
However,
many
members
of
Brazil’s
burgeoning
middle
class
are
in
a
weak
position
and
could
easily
fall
back
into
poverty.
As
such,
they
tend
to
react
very
angrily
to
price
rises.
The
recent
demonstrations
were
the
result
of
swelling
expectations
among
these
new
middle
classes
for
effective
and
ethical
public
policy
conduct,
together
with
the
government’s
inability
to
meet
these
expectations.
In
conclusion,
despite
criticisms,
I
think
Presidents
Cardoso,
Lula
and
Dilma
Rousseff
have
made
great
steps
in
tackling
Brazil’s
problems.
From
here
on,
though,
the
government
will
need
to
tread
more
carefully
when
choosing
policies.
Higher
incomes
and
better
education
have
led
to
a
new
type
of
citizen,
one
with
higher
demands
when
it
comes
to
public
goods.
The
emergence
of
the
new
middle
class
is
imposing
a
new
challenge
on
the
Brazil’s
leaders.
They
now
need
to
lead
the
country
from
the
“New
Brazil”
to
the
“Newer
Brazil."
(Professor of Economics at
the University of Brasília)
Opening Remarks | Keynote Speech | Panel Discussion