Inclusive economic growth and Brazil's protests

EDITOR’S NOTE: Brazil’s week-long protests spearheaded by the middle class are a wake-up call for the government to strive for truly inclusive economic growth and do more to fight corruption, writes Isobel Coleman, senior fellow at the Council on Foreign Relations.

Brazil’s weeklong protests, which have brought hundreds of thousands of people into the streets across the country, have scored their first victory: Officials in the major cities of Sao Paolo and Rio de Janeiro have agreed to rescind the 20 cent bus fare hike that sparked the protests in the first place. But this conciliatory move, far from placating the crowds, seems to have energized their demands. Large marches are planned for the coming days with demands now focused on better education and health care and greater efforts to tackle corruption.

So far, Brazil’s rising middle class has been the backbone of this protest movement: as their economic prospects have improved, their expectations for better public services have grown. Between 1999 and 2009, Brazil’s middle class expanded by 31 million, and successive governments have done a laudable job in tackling poverty. The country’s Bolsa Familia program — a conditional cash transfer program that disburses cash to poor families in exchange for good behaviors such as sending one’s children to school — has achieved significant success and now covers more than 12 million families. As the Financial Times notes in an article about Bolsa Familia: “In the ten years to 2011, the proportion of the population in extreme poverty fell from 14 per cent to 4.2 per cent. The income of the poorest 20 per cent rose seven times faster than the richest during the same period.” How many countries can claim that? Indeed, the opposite dynamic has been the case in the United States.

Despite these real gains, this week’s demonstrations attest to the fact that Brazil’s government can’t rest on its laurels. In a new Council on Foreign Relations book that I co-authored, “Pathways to Freedom: Political and Economic Lessons From Democratic Transitions,” one clear takeaway is that “the trajectory of emerging democracies depends fundamentally on whether political democratization can also deliver shared opportunity and inclusive growth to materially improve people’s lives.” In the book’s chapter on Brazil, author Carlos Pio makes the case that increased government spending on education has certainly improved primary school enrollment and raised literacy rates, but real problems with educational quality remain. Brazil’s 15-year-olds score in the bottom quintile of the OECD’s PISA (Program for International Student Assessment) tests. Brazilian parents recognize that their schools are falling behind in educating their children.

Frustration with corruption is another motivation for Brazilian protesters. Specifically, the large amounts of money that have been spent on readying the country to host the World Cup and the Olympics have proven a flashpoint. Although Brazilians have shown great pride in being chosen to host these international events, there is understandable anger about lack of transparency in how the money is being spent — and the huge sums. By some estimates, the Olympics and the World Cup will cost Brazil about $31.3 billion in public expenditures, which — based on a 2011 GDP of $2.47 trillion — is equivalent to 1.26 percent of GDP. In contrast, its signature poverty alleviation program Bolsa Familia costs around 0.5 percent of GDP.

So far, President Dilma Rousseff has shown restraint and struck a conciliatory stance with respect to the protesters, even praising them for strengthening democracy. She’s right. The country’s peaceful demonstrations are a sign of healthy democracy and civic participation in the country. The challenge now for the government is to reassure citizens that it is committed to and capable of implementing economic strategies that not only grow the pie, but also ensure inclusive growth. This will require more effective and transparent investments in the very areas that the middle class protesters are demanding: Education, health care, and infrastructure.

Edited for style and republished with permission from the Council on Foreign Relations. Read the original article.