Education and Political Transformation in Brazil

CHALLENGES FOR THE BRAZILIAN ECONOMY

Rio Branco Forum on Brazil

Center for Latin American Studies

University of Califoria, Berkeley

November 4th, 2004

The mistake within the problemTwo ways to look to the economy

From insideFrom outside

For decades: wealth defined by GNP, investment in infrastructure, foreign savings, exports and domestic demand by wealthy income-concentrating class, state as the fostering engine.

Now: preventing return to political voluntarism and fiscal irresponsibilityGiving up the other obsolete or unfair concepts

Challenges in the economy

• Three statements to support the new look to the economy

• Joan Robinson: “But Ricardo never saw the mistake was in the question and kept right on trying to eliminate mistakes in his answers”

• Einstein: “We can’t solve problems by using the same kind of thinking we used when we created them.”

• Roosevelt instead to asking how to resume growth in order to crate jobs, asked how to create jobs in order to resume growth.

Challenges in the economy

• The main economic challenges in the world came from outside:– The discoveries– The technological revolution– The new deal

The failed challenge in Brazilian Economy

• In the 1870’s only five or six big economies• In the 1970’s some others, but Brazil was among the

promising ones to the near future.• In the first decade of XXIth century Brazil lost its pace to

many new come countries. Brazil lag behind regarding China, India, Portugal, Greece, Spain, Ireland, South Corea, Tawain, Malaysia, …

• All of them made a difference, they invest in economy out of the economy, specially in: EDUCATION, basic and high education and

• SCIENTIFIC AND TECHNOLOGICAL CAPACITY.• With that they disrupted the vicious circle of their

poverty.

The vicious circle of Brazilian debts

Poverty Income concentration Economy Finance Culture and knowledge Ecology Sovereignty YouthModel

The virtuous cycle of the debt payment

Economic dynamics Health

Education Productivity and savings Increase in investment Reduction of “Brazil Risk” Decency Cost of omission Complete Abolition and the Republic Model Youth

I nco m e co ncen tratio ndeb t

D ebt un to eco no m y

F in ancial deb t

E co lo gical d eb tL o gical deb t

D ebt un to cu lture and kn o w led ge

D ebt un to so vereign ty

D ebt un to yo uth

So cial deb t

T he vic ious c irc le o f B raz ilian d eb ts

The Golden Curtain

• Economic Growth does not abolish poverty• The income growth does not spread over the

excluded people• The income transfer is not enough to mitigate

poverty • More than unequality a Curtain cut poor from the

rich people• Brazil as a short scale of the global social

apartheid

A new logic to define poverty

H o rizo ntal po verty lin e

n o n -p o o r

p o o r

T he way o ut o f p overty is a sh if t o f th e fam ily in co m e up th e h o rizon tal line

V ertical p overty line

T he way o ut o f p overty is ensuring to th e fam ily th e access to essen tial goo ds and serv ices

e x c lu d e d in clu d ed

Social Shock

• Social policies as the only alternative for a social revolution in a global neoliberal

world.

Inclusive legislation and social incentives

Inclusive Laws:

• Compulsory basic education

• Federalization of basic education, national minimum levels:– teachers wages and teachers skills

– equipments

– contents

• Educational responsibility law

Inclusive legislation and social incentives

Social Incentives :

• Bolsa-Escola• Establishment of a minimum remuneration and increase of teachers’ average salary • Teachers training and federal certification• School equipment • Universal water supply and sewage systems • Poupança Escola (Savings-School) program • Civil service • Elimination of illiteracy • Land reform • Agro-industries • Irrigation in the Northeast • Micro credit • Reform of the Brazilian university system • Housing • Unemployment compensation • Home health care

The Leaps Forward

• Sociallly: to come from 72th to 30th position in the UN Human Development Index, in 15 to 20 years

• Economically: to have an increase on the economic rate of growth since the begin of the program, thanks to a kind of social keynesianism, or a social new deal, or as we prefer SOCIAL SHOCK

The Cost of a Social Shock

• Total Cost R$ 47.3 billion,(around US$ 16 billion) 3.5% of domestic debt, 3% of GNP, 30% of yearly interest charges, 6% of the annual tax burden,

• The Net Cost R$ 12,5, discounting the tax return, the reduction on social costs, the increase on growth.

LOW COST OF THE SOCIAL SHOCK

Cost of Social Shock ( by column 1)

Cost in billions (1)

Gross Net National income 1.600 0,029 0,0078

Public sector budget 720 0,65 0,0174 Estimated primary surplus 45 1,05 0,28 Expenditures with Marketing 5 9,4 2,5 Profit of private banks 15 3,1 0,83 Expected profit of state-owned

companies 20 2,3 0,62

How to finance

• A linear cut of 2% on the 2005 budget costs.

• A National Independence Fund to be repaid with interest by the year 2022, the bicentenial of our Independence.