The Left at work

by Jerome a Paris
Thu Jul 31st, 2008 at 06:22:24 AM EST

Strong Economy Propels Brazil to World Stage

While the top 10 percent of Brazil’s earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent, according to Marcelo Côrtes Neri, the director of the Center for Social Policies at the Getulio Vargas Foundation in Rio de Janeiro.

This is exactly the opposite of what has happened in the US, and it is boosting growth, as spending by the middle and lower classes increases sharply. And it is the result of strong re-distributive policies, aimed specifically at combatting poverty amongst the worst-off. And it has happened under an unashamedly leftwing government, led by a former trade unionist.


Oh, of course, the NYT tries to soften things a bit:

Despite investor fears about the leftist bent of President Luiz Inácio Lula da Silva when he was elected to lead Brazil in 2002, he has demonstrated a light touch when it comes to economic stewardship, avoiding the populist impulses of leaders in Venezuela and Bolivia.

Instead, he has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs

There is a "light touch" (which presumably means not too much regulation) and "respect" for financial markets (meaning, I'm guessign again, no unreasonableincrease in taxes or wages), so it's not all so bad, right? But this would seem to demonstrate, surprise, surprise, that progressive policies are not incompatible with sound economic policies.

In fact, leftwing policies consistently show better results for everybody, except possibly for a very thin layer (the top 0.1% at most). But we know what the goal of "reform" and "growth" is, right?

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I would just like to use a different word than "leftwing" -to start with, the centre is not the same in all countries, and left/right is too reductive to describe policies.

Let's say that progressive redistribution works better than laissez-faire (not to mention upwards redistribution), for everyone but for very few extremely wealthy souls. And even for them, they may only be worse in purely financial terms (one need not ascribe no value to living in a land where poverty has disappeared, whether for altruistic or even selfish reasons, like less fears of violence).

Also, there are a number of fields where a level of government intervention is simply more efficient for all. Healthcare, energy supply are obvious examples.

But there are also some "leftwing" policies that do not work so well.

"The womb that spawned that thing is fertile yet"

by Cyrille (cyrillev domain yahoo.fr) on Thu Jul 31st, 2008 at 07:08:34 AM EST
So what does this mean for

  1. Europe (this is ET, after all);

  2. The US.

I'm a problem solver.  How do we get from here to there?  Does ET have a role?

McCain/Palin ... total sacks of SHIT!
by THE Twank (paszeski__aaaaaaatttttt__yahoo.com) on Thu Jul 31st, 2008 at 07:09:00 AM EST
Talking point:

Far from being DFHs, peasants, losers, or whiners, the Left plays an essential role in societies by protecting the rich from the consequences of their own bad decisions.

The Right always creates disasters. Far from being 'the party of individuality and enterprise', the Right is the party of chaos and insecurity.

Only progressives can offer stable prosperity.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Jul 31st, 2008 at 09:31:13 AM EST
Can you provide anything, what Lula actually has done, to produce such results?
The income increases are not at all a safe sign, that redistributional policies were at work. Convincing would be e.g. if the pretax income would have been developed inverse to the cited aftertax(?) numbers.

Globalisation leads tendencially to an equalisation of wages across the globe. As the poorest people of Brasil were probably poorer than the average, an increase in their wages can entirely by a result of market forces. With European welfare above the world average wage, the same policies here could do just nothing.

That 'the rich' didn't become much richer is anyhow not too surprising. Looked how the stock market has performed in that time? Effortless income was meager in the last decade. Interest income was low, too - and is globally similar, e.g. a western capital owners can invest in Brasil, getting the same amount back, as a Brasilian capital owners. But a Brasilian worker of course gets higher wage increases than a western worker, as there is an equalisation tendency, and he starts lower.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Thu Jul 31st, 2008 at 09:44:38 AM EST
Globalisation leads tendencially to an equalisation of wages across the globe

Does it? On what timescale?

by Colman (colman at eurotrib.com) on Thu Jul 31st, 2008 at 09:49:10 AM EST
[ Parent ]
infinite(?) for Africa - in the absence of major catastrophies.
Currently we are in such a process, empirically it is of course impossible to say, if the current trends will go on forever, but I think there are some reasons to believe that for some time they will.

It is not the same speed in every country, because it depends on productivity increases. If a country provides the legal framework to make investments attractive - property rights, not too much corruption - I don't see a reason why it should not reach ~half of the level of the productivity in developed countries.
For China in maximum 50 years the wages should be at least half of western European ones. Full wage equalisation may not come, because physical proximity to those who own more capital may boost wages a bit, but currently the differences are much bigger than that.
In Eastern Europe adaption to western Europe living standards is something like 1-2% per year (was so for Spain, Greece, Portugal after they joined the EU), starting from 30% or so in case of Poland. Again, I expect some gap will remain for a long time, but your oursourcing project should make profit taking such equalisation into account - of course outsourcing is one of the main reason for the wage equalisation.

There may be some jobs, such as currently hedgefund managers, who got wages up to a billion $ per year. But I think we have seen a peak for a long time in financial engineering payment, and at some point I guess, the financial industy will diversify as well a bit more around the globe, leading to both, more competition in this area and if this uberwages remain, they will be at least diversified.

Lich King/Caribou Barbie 08
Pain brings Katharsis

by Martin (weiser.mensch(at)googlemail.com) on Thu Jul 31st, 2008 at 10:43:44 AM EST
[ Parent ]
While the top 10 percent of Brazil's earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent

The Brazilian model anyone?

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid (arvid.hallen at gmail.com) on Thu Jul 31st, 2008 at 11:15:42 AM EST
What I wonder about is what this gives in actual income improvement... Pulling people into a money economy means very large increase of income, obviously, but how many actual currency does that correspond to ?

Auferre, trucidare, rapere, falsis nominibus imperium; atque, ubi solitudinem faciunt, pacem appellant.
by linca (antonin POINT lucas AROBASE gmail.com) on Thu Jul 31st, 2008 at 12:20:52 PM EST
[ Parent ]
That's an interesting point.

One of the points made in the article was that Brazil had used a basic welfare payment to bring people into the regular economy.  People used the welfare payment to cover basic needs, and then were able to take microloans to build businesses that are in the formal economy.

So the question is how much of this improvement is economic formalization and how much is a change in the underlying distribution of income?

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Thu Jul 31st, 2008 at 12:39:57 PM EST
[ Parent ]


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