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Published by andreaires, 2019-10-28 09:49:05

TRUE_ECONOMIC_DEVELOPMENT

TRUE_ECONOMIC_DEVELOPMENT

PEDRO SISNANDO LEITE

THE TRUE
ECONOMIC
DEVELOPMENT

It is widely known in academic circles and in the observation
of the economic history of underdeveloped countries, that
economic growth is unsatisfactory to achieve poverty reduc-
tion goals and better income distribution. Among the many
reasons why there is this contradiction, two can be highligh-
ted to demonstrate this.
First, underdeveloped countries that have achieved high
growth rates of Gross National Product (GNP) for many years
in a row have also experienced an overall increase in unem-
ployment and underemployment. In fact, the creation of new
job opportunities in modern activities was lower than the
growth rate of the product. Second, the growth of GNP was
accompanied by an increase in income distribution inequali-
ty, in relative and even absolute terms, in some segments of
society in these countries.

THE TRUE ECONOMIC
DEVELOPMENT

Copyright © 2019 by Pedro Sisnando Leite

GRAPHIC DESIGN AND COVER
Carlos Alberto Alexandre Dantas

Alan Emmanuel Oliveira dos Santos

REVIEW
Tereza Porto
Floriano Lopes de Jordão

Cataloging in the Source

L 533 v Leite, Pedro Sisnando
The true economic development. / Pedro Sis-
nando Leite. – Fortaleza. 2019.

260p.
ISBN: 978-85-7915-018-0
1. Economy. I. Title

CDD: 330

For
José Nicácio de Oliveira,

fraternal friend, colleague of Banco do Nordeste do
Brasil and wise adviser to many studies I have done

on regional development.

"Brazil needs to stop admiring
what has not worked out."

Tom Jobim

Summary

PRESENTATION......................................................................... 9
GENERAL INTRODUCTION ..................................................... 13

THE DILEMMA GROWTH AND INEQUALITY..................... 14
FIRST PART ..................................................................................... 19
ECONOMY OF DEVELOPMENT .............................................. 19

INTRODUCTION ...................................................................... 21
Stages of Economic Growth .................................................... 24
Latin American Thought......................................................... 27
The Washington Consensus .................................................... 31
Economic Systems ................................................................... 33
The Brazilian System............................................................... 37
Evolution of Ideas.................................................................... 42
Paths of Developed Countries ................................................. 46
Development Perspectives ....................................................... 51
Grow and Distribute ................................................................ 52
Inequality Impairs Growth ...................................................... 53
Development Sustainability ..................................................... 56
Ecodevelopment............................Erro! Indicador não definido.
Sustainable development ......................................................... 57
The Role of State Policies and Social Capital ........................ 60

SECOND PART ................................................................................ 64
THE DOCTRINE OF FAIR DEVELOPMENT.......................... 64

INTRODUCTION ........................................................................ 66
NEW DEVELOPMENT WITH EQUITY ................................... 69
SOME ELEMENTS OF THE SOCIAL DOCTRINE OF THE
CHURCH ..................................................................................... 71

Uneven Growth and Poverty ................................................... 71
The Ideas of the Model of the Social Doctrine of the Church74
Message and Orientation to the Laity ..................................... 75
HUNGER IN THE WORLD ACCORDING TO THE
PONTIFICAL COUNCIL COR UNUM...................................... 78
Introduction ............................................................................. 78
The Church Is with the Poor................................................... 80
Towards a More Solidarity Economy...................................... 82
The Overcoming of Hunger .................................................... 83
THE FOOD SUPPLY OF THE POOR ........................................ 85
WORLD FOOD PRODUCTION................................................. 87
NEW MODEL OF DEVELOPMENT ......................................... 90
THIRD PART.................................................................................... 95
THE QUESTION OF POVERTY................................................. 95
INTRODUCTION ........................................................................ 97
The Definition Problem......................................................... 101
The Meaning of Rural and Urban Poverty........................... 103
Vicious Poverty Circle ........................................................... 106
Inequality and Equality in the Distribution of Income ........ 110
World Poverty ........................................................................ 116
Situation in Latin America and the Caribbean .................... 125

Policies and Programs for Poverty Reduction...................... 134
Need for a Global Understanding ......................................... 137
The Millennium Development Compact by 2015 ................. 139
Millennium Development Goals............................................ 143
Reflection ............................................................................... 145
FOURTH PART.............................................................................. 149
WEAPONS AGAINST POVERTY ............................................ 149
INTRODUCTION .................................................................... 151
POVERTY IS RURAL............................................................. 153
THE CHALLENGE ................................................................. 158
CREATE PRODUCTIVE EMPLOYMENT ......................... 162
URBANIZING THE CA MPO................................................ 165
MAKING A SOLIDARY AGRARIAN REFORM ............... 169
HELPING THE FARMER WITH TECHNOLOGY ........... 172
EDUCATE TO CHANGE ....................................................... 175
FIFTH PART .................................................................................. 178
NEW STRATEGIES FOR REGIONAL DEVELOPMENT.... 178
INTRODUCTION .................................................................... 180
THE NATURE OF REGIONAL SUBDESENVOLVEMENT
.................................................................................................... 182
GUIDELINES FOR HARMONIC DEVELOPMENT ......... 186
STRATEGIES FOR NORTHEAST DEVELOPMENT....... 191
ROADS FOR FAIR DEVELOPMENT.................................. 194
PRINCIPLES OF THE NEW RURAL STRATEGY ........... 198
SIXTH PART................................................................................... 200

CONCLUSIONS........................................................................... 200
BIBLIOGRAPHIC REFERENCES ........................................... 220
THE AUTHOR ............................................................................. 228

9

PRESENTATION

This book deals with the original causes that led to
serious inequalities and poverty in Brazil, especially in
the Northeast. The objective is to discuss and present
ideas to circumvent or eliminate the unfortunate situa-
tion of underdevelopment that this populous region of
our country is in. Even more now with the re-creation
of the new Superintendence of Development of North-
east.

The bibliography on regional studies is valuable
and helped me greatly in the formulation of this book.
Even so, I believe that the issue is not adequately clari-
fied by economists and specialists who have studied the
region. The documents prepared by the respected gov-
ernmental institutions end up being compromised for
institutional reasons.

This declaration of principles is not intended to
undermine the excellent studies already carried out, but
to convey to the dear reader my desire to make an ap-
proach based mainly on my understanding and my per-
sonal experience of teaching and professional work in
regional development programs and against poverty,
during the last thirty years.

10

The writing scheme of this book was structured in
order to know "where we are and where we are going",
considering the goal of constructing an integral or
"true" development for the Northeast of Brazil.

For a better understanding of the readers, I
adopted a methodology of analysis devoid of abstrac-
tions and academic language. Of course, all scientific
rigor was preserved in the approaches of the subjects
studied. The book's plan is organized in the form of five
essays that deal with special aspects, but are completed
in the general context of the work.

In a way, I have been guided by the two preferen-
tial approaches to the study of underdeveloped econo-
mies. The first relates to the quest to understand the rea-
sons why some nations are poor and others rich. The
second is to seek as an urgent need to propose ways to
achieve something with a view to accelerating eco-
nomic growth and reducing the high degree of poverty
still prevalent in our country or regions.

According to historian David S. Landes (Wealth
and Poverty of Nations, 1998): "Over the past 600
years, the richest economies in the world have been pre-
dominantly European." Western countries, in fact,
prospered early due to the intersection of a society con-
centrated on work and knowledge. This has resulted in
increased productivity, the creation of new technolo-
gies and the effort to make changes. Meanwhile, others

11

have failed to expect an apocalyptic revolution to cor-
rect errors and generalize happiness, as socialists and
Marxists thought. One explanation of Professor
Landes's failure to advance progress was the nostalgic
mentality of some peoples, wishing to return to com-
munity life and without rationalities. "These paddling
against the tide."

Meanwhile, it is increasingly recognized that
many underdeveloped countries may be economically
disadvantaged not so much because of savings, but due
to the scarcity of skills and knowledge that result in the
limited ability of its organic structure to absorb the cap-
ital investment.

Even so, greater attention was paid to in material
capital to the detriment of investment in education and
human capital. This is the old theory of thinking about
mobilizing muscular force gross domestic product, not
the intellectual underdeveloped. The renowned English
economist Barbara Ward (Rich Nations and Libera-
tion of the Underdeveloped, 1972) states in this sense:
"We need battle more wisely to create the structure of
education and social responsibility progress."

In this book, I try to present a balanced the differ-
ent problems of choice between lower rate of growth,
while preserving the social, cultural and population
lifestyles. Alternatively, when possible, seeking to
grow at the same time for a new style of development
with less poverty and inequality.

12

Today, as never before, I think integral is possible,
as long as we believe it and we all work with the firm
intention of prioritizing solidarity and dignity of the hu-
man person.

I hope this book serves to awaken us to read it, the
feeling of the viability of this new development in our
country and the will with that purpose. It is obvious, but
indisputable, to say: "I do not write to provoke ... I am
interested in persuading.” (JK Galbraith, 1971)

Pedro Sisnando Leite

13

GENERAL INTRODUCTION

"Development is not reduced to simple
economic growth. To be authentic, it
must be integral, that is to say, to promote
all men and the whole man. "

Pope Paul VI

14

THE DILEMMA GROWTH AND INEQUALITY

It is widely known in academic circles and in the
observation of the economic history of underdeveloped
countries, that economic growth is unsatisfactory to
achieve poverty reduction goals and better income dis-
tribution. Among the many reasons why there is this
contradiction, two can be highlighted to demonstrate
this.

First, underdeveloped countries that have
achieved high growth rates of Gross National Product
(GNP) for many years in a row have also experienced
an overall increase in unemployment and underemploy-
ment. In fact, the creation of new job opportunities in
modern activities was lower than the growth rate of the
product. Second, the growth of GNP was accompanied
by an increase in income distribution inequality, in rel-
ative and even absolute terms, in some segments of so-
ciety in these countries.

These two phenomena - growth of unemployment
and increase in the unequal distribution of income - are
in fact connected. At lower income levels, with income
growth, people were unable to obtain employment in
the modern sector, while gains in income growth were
concentrated in groups that were already employed. As
a result, in formulating policies that aim to reduce pov-
erty and better income distribution, growth must be
seen as a result rather than a goal of economic policy.

15

Renowned economists Paul Streeten and Frances Stew-
art defend this thesis.

It is necessary, however, to be attentive to this
issue of income growth versus inequality. There may
be situations that confuse the unsuspecting analyst. In
one situation, for example, where income distribution
is relatively good, a faster rate of increase in income
will benefit all economic and social segments of that
country.

If there is a strong concentration of income and in-
equality previously, growth will certainly occur in the
most dynamic sectors of the economy, aggravating the
concentration of income. This is the case in Brazil,
where growth has occurred in the more prosperous re-
gions and more modern segments of the economy. In
the case of underdeveloped economies with low per
capita income and poor living conditions, there is no
other solution to change this situation than through in-
come growth, including higher rates than in other coun-
tries or regions. Only in this way will it be possible to
reduce the income gap between them. Otherwise, in a
stagnant economy, it would be to try to distribute pov-
erty or withdraw from the rich, who are enabling
growth, to transfer to other, less productive sectors.

The strategy being implemented in Ceará offers an
adequate alternative to solve this dilemma of the equa-
tion: growth x distribution. It is a policy that associates
the two components in a simultaneous action, that is, to

16

reduce poverty and inequality through economic devel-
opment. In this model, intersectional actions and spatial
structure are included, making the growth produce so-
cial dividends and be accelerated by the better distribu-
tion of income and use of territorial resources and re-
gional vocations.

The focus is as if the economy of the interior were
globalized to compete with each other, while the met-
ropolitan region no longer polarizes the migratory
flows of rural areas.

On the basis of all this, I understand that develop-
ment consists of growth and less inequality with pov-
erty reduction. It is an elevation of the standard of living
of the entire population.

Development is also the qualitative transformation
of a society as a whole. The evolution of new forms of
thought and, consequently, new relations and new
methods of production.

This broad process of change must include the ma-
jority of the population. In addition, the modernization
of capital should not be limited or for the benefit of the
wealthier classes. Development goes hand in hand with
human development and solidarity. It is not just the ac-
cumulation of investment and capacity building.

The true sustainable development, or integral, is a
process of activation and channeling of social forces, of
associative capacity. It is a sum, a process of social and

17

cultural change. Conditions that only political activity
can channel these synergies.

Historical development has no predetermined des-
tiny as some eighteenth-century philosophers thought.
The future will be as we do it. There is no need for a
violent revolution, but reforms designed socially for an
economically more just society. These are minimum
levels of health and educational conditions. Job oppor-
tunities that need to be established and implemented
with well managed and supervised investment.

It is worth remembering in this context the con-
ception of the renowned economist M. Todaro, namely:
"Development is the process of improvement of all hu-
man lives." (New approach to economic development
and conventional theories, Vivali, e-book, Sisnando,
2007).

That is the underlying promise throughout this
book, the flagship driver in pursuit of true integral de-
velopment.

The content of these pages is the result of many
years of study, reflections and discussions about eco-
nomic development in academic circles where I taught
this discipline for many years. I have also participated
in regional development programs as an economist at
Banco do Norwest do Brazil for three decades. As Sec-
retary of State for Rural Development of Ceará during
the period 1995-2002, I coordinated a broad program to

18

combat rural poverty. I have done many study trips
abroad to visit and learn about practical initiatives for
development in developed and underdeveloped coun-
tries (The struggle for regional and rural develop-
ment in the world, Sisnando, 2006).

This is an essentially practical book, although it is
a work based on theories. It seeks to reconcile the doc-
trinal elements with the reality of the world in which
we live in Brazil.

I hope it is useful in every way. Not only for those
who wish to take action to change what needs to be im-
proved. But also for those who want to know the prob-
lems and policies that may guide us in the future.

Each part of this book contains special meaning,
but together they are interdependent and aim at the
same goal: to reduce poverty and inequality, without
harming economic growth.

19

FIRST PART
ECONOMY OF DEVELOPMENT

20

The pursuit of greater social jus-
tice and a more equitable society

has become, in recent years,
unanimous at national and inter-

national level.

21

INTRODUCTION

The literature on studies of underdevelopment and
development is vast and complex. Within the limits of
the objectives of this book will be treated only the most
relevant contributions of the development modus op-
erandi.

A new economic order emerged in the wake of the
World War, overcoming the foundations of the princi-
ples of economic free trade.

In the first phase of this innovative process, the
problems of underdevelopment were analyzed based on
Keynesian theory. According to this former economist,
the situation of poor countries could be interpreted as a
situation of economic depression in developed coun-
tries in a chronic form.

The Generative Theory (of employment, interest,
and coin) of the English economist John Maynard
Keynes was reported in 1936 as a consequence of the
world economic crisis of 1929 (mainly the United
States and England). Neoclassical theory was unable to
indicate solutions to what happened as a result of mod-
ern interventionism on economic liberalism.

Keynes directed his studies on determinants of the
level of employment and national income and proposed
that the state should participate directly in economic ac-

22

tivity. This is to compensate for the decline in invest-
ment caused by economic downturns. Keynes's inter-
ventionism, however, had to focus on the large seg-
ments of the economic system.

With this approach, the revenue recommended by
this analysis was very simple, and consisted of two fun-
damental measures: 1) the realization of large invest-
ments in public works; 2) the adoption of a policy of
cheap money, that is, credits with low interest rates.

In this book, it is shown that this conception fails
to consider strategic aspects and other issues that need
to be taken into account in solving the problems of un-
derdeveloped countries. It should be noted, however,
that many countries, including Brazil, still continue to
follow the Keynesian doctrine, with little circumstan-
tial arrangements. However, the application of these
principles has undergone a resounding failure in many
parts of the underdeveloped world, as economic history
demonstrates.

This first Keynesian view, however, gave way to
other approaches and theories that have contributed to
broaden the discussion of this problematic. Many stud-
ies and books were published in the following years
with the thesis that underdevelopment was a time delay
in achieving prosperity. That is, the underdeveloped
countries were those that lagged behind in the race for
economic growth.

23

As a consequence, the essential issues to be ad-
dressed should be the search for the causes that may
have motivated this delay and the alternatives to over-
come such a problem. In this regard, two renowned
economists have distinguished themselves worldwide
for their scientific contributions at this pioneering stage
in studies of underdevelopment. Were them is Arthur
Lew and W. Rostow. I had the opportunity to meet the
latter when I was in Fortaleza at the invitation of the
Bank of the Northeast of Brazil and the Superintend-
ence of Development of the Northeast (SUDENE) in
order to give lectures to its technicians.

As for Professor Lewis's thinking, the central issue
that holds down underdeveloped countries is the short-
age of capital compared to an unlimited supply of labor.
It is well to remember that at the time when Lewis's
ideas emerged a real "demographic explosion" was tak-
ing place in the underdeveloped countries. From this
thesis, it was suggested that a policy of expansion of
capital investments was urgent. To this end, the partic-
ipation of both the public sector and the private sector
was necessary, given the scope of surplus labor.

The countries that followed these guidelines ran
into serious difficulties. Underdeveloped countries do,
in fact, have a large supply of labor power, but with lit-
tle training and largely illiterate.

24

Stages of Economic Growth

The theory of Walt Whitman Rostow is expos will
ta in his famous work The stages of economic growth
(1961) that became since then guide for economists
worldwide. The theory of Rostow proposes a growth
model comprising five mandatory stages ranging from
traditional society to society of con juice in bulk, pass-
ing the turning point hitch (take off).

Its political formula, which marks the emergence
of new peaceful borders, provided the ideas behind
President Kennedy's program of assistance to underde-
veloped countries.

According to Rostow's own words, growth has a
relatively limited meaning. In contrast, it uses the term
development as the stage at which modern science and
technology are developed and diffused through various
sectors and subsectors of the Economy. It includes fac-
tors such as the development of a sense of nationhood
and a fair tax system. Another factor that reflects the
development is the quality of education and equal edu-
cational opportunities.

In short, the stages of growth begin with the stage
of traditional society, or do not regularly absorb a flow
of technology. Explain Rostow that traditional societies
were not historically static, because they lacked science
and innovations, but there was no stable flow of tech-
nological innovations. These societies (Chinese, Greek,

25

Roman, Hindu, or African) could expand and to some
extent, but faced with technological limits.

This cyclical repetition of history was interrupted
in Britain in the late eighteenth century. The colonies
of America and Western Europe found themselves in
what Rostowcalls the preconditions for the take off, or
boot. All these countries are progressing farther from
the stage of industrialization. But it was expanding its
national markets with roads and channels for improving
the media. They expanded their foreign trade and their
educational systems became. The task facing eight-
eenth-century Europe was not different from what
Latin America and Asia have to face: building infra-
structure, educating people, developing trade, and pre-
paring for industrialization. The uprooting usually
takes place in a small group of sectors and is uncom-
mon in a few regions of the country. The duration for
the stage of technological maturity lacks decade to
reach full industrialization and those of more regions.

Following the uprooting, one has what Rostow
calls "mass consumption" which is one in which all
these technologies occur in parallel with a high average
income of the population. As examples, we can cite the
United States that reached this stage in the 1920s. West-
ern Europe such as Japan was in it in the 1960s. In his
book Politic and the stage of growth, Rostow added
another stage to what he termed “Quality Search." It is

26

a stage in which certain public and private services ex-
pand rapidly: education, health, urban pollution con-
trol, and so on. The United States reached this level in
the 1960s, Western Europe and Japan in the 1970s.

The Rostow method attempts to place the story in
a sequence d and stages, revealing a elements important
and logical of growth process. Marxist theory also
adopts similar orientation by proposing in the historical
process the sequence of Feudalism, Capitalism, Social-
ism, and Communism. For Marx, communism is the
stage at which scarcity gives way to the abundance and
well-being of society.

In Mikhail Gorbachev's report to the plenary ses-
sion of the Communist Party of the Soviet Union on
October 15, 1985, he stated: "It is impossible to go di-
rectly to the uppermost stage of communism by trans-
posing socialism, just as it would be wrong imagining
the Socialism as independent formation. "

To reject Rostow's interpretation of the stages of
development, Marxists assert that sub development is a
structural deformation, an anomalousness that presents
itself in terminated country as a consequence of the de-
velopment of the capitalist mode of production, of the
class struggle that is the motor of the history of socie-
ties. In the investigation of the evolution of humanity,
Karl Marx distinguishes between socio- economic for-
mations, while Rostow emphasizes the technical-mate-
rial aspect and minimizes the importance of political-

27

ideological. In fact, Prof. Sílvio Baró Herrera, econo-
mist at the University of Havana, states in his work on
Critical Notes on the Thought of Three Economists
contemporary bourgeois: " In realidad, su work in per-
sigue truly exponer una de la periodización economic
and social de la evolución humanity, but to write anti-
Marxist libero. "

Latin American Thought

Interest in the Economics of Development also
brought economists from Latin America to research
areas related to the specific situation of the Region
itself. The research team at the United Nations Com-
mission on Latin America and the Caribbean
(ECLAC) led this think tank. The director of this cen-
ter, which was the renowned economist Raul
Prebisch, developed a model that prevailed in the ac-
ademic world and in the development policies of that
continent, beginning in the 1960s.

This model was based on the so-called theory of
economic dependence whose mechanism consisted in
the domination of the central (developed) economies
and a certain subordination of the peripheral and under-
developed economies. In this simplistic model, a sys-
tem of trade relations prevailed in which Latin Ameri-
can countries exported raw materials to the rich nations
and imported industrialized goods of high added value.

28

In order to aggravate the unfavorable effects for
underdeveloped countries, ECLAC experts argued that
over the years there was a deterioration of the "terms of
exchange", characterized by the increase in average
prices product manufacture of imported and depressing
the prices of raw materials and exported. This external
trap ended up leading Latin American and, indeed,
other countries around the world, to a state of economic
stagnation and pauperism.

In order to neutralize these trends and generate a
dynamic center of economic birth in underdeveloped
countries, ECLAC proposed policies, strategies and
guidelines for action. Idealized policies included subsi-
dies to selected activities, price controls, the introduc-
tion of trade barriers, and measures of fiscal protection
against industrial products and imported foods.

This policy, in practice, generated a particularly
active governmental participation in the industrial pro-
duction of goods and services, and in agriculture. These
were called the strategic areas for development. It was
the period in which the agrarian reform occurred in sev-
eral Latin American countries. The government’s insti-
tutions began to control the markets for local and for-
eign products.

Because of this interventionist action, most coun-
tries in the region have created highly protected eco-
nomic sectors dependent on government support. In

29

general, these industries have motivated the accelera-
tion of economic growth rates and a positive sense of
autonomy and prospects for economic progress. This
process of advancement has been compromised once
the financial resources to maintain this subsidy mecha-
nism have exceeded the ability of countries to carry out
such financing with their own resources.

To address these deficits, the governments have
dealt with loans with financial institutions and the in-
ternational private banking system. Hence the so-called
"lost decade” when public policy concerns were con-
centrated on foreign debt management and generalized
inflationary processes.

Considering the 25 countries whose external debt
represented 80% of the total debt of the middle-income
nations, there was an increase in this indebtedness from
US $ 78 billion to US$ 125 billion between 1973 and
1980, at real prices. The most difficult of this was that
63% of this value came from private sources with rela-
tively short deadlines. This situation has generated a
burden of payments abroad that has caused economic,
social and political upheavals.

With measures taken to restrict consumption and
stimulate the mobilization of domestic resources, this
combination of mismatches in the evolution of eco-
nomic policies has led to increased poverty, even
though some countries have managed to achieve sur-
prising rates of income growth. The import substitution

30

policy in Brazil, for example, allowed a raised average
annual rate of 10%, although not remain con followed
TAVEL s. With the strategy of economic openness in
the 1980s, it finally began to bear fruit in the 1990s,
even though growth has been more modest than before.

As the debt of the Latin American countries in-
creased, it became evident that structural adjustment
was needed. Then it was the very pressure of the inter-
national financial institutions that rushed such
measures. It is from this time the widespread applica-
tion of the so-called “neoliberal policies." From then
on, the situation of the regional economy became com-
plex and contradictory, with advances and setbacks in
the economic and social situation. ECLAC estimates
that in this period poverty increased and income ine-
qualities worsened.

The recommendations that were stipulated in the
negotiating rounds of the external debt of each country
were promoted according to the principles of the inter-
national organizations. The set of economic policy
measures applied to Latin American countries would
result in growth and stabilization of. These guidelines
became known as the "Washington Consensus," ac-
cording to the World Bank economist John Williamson.
All these analyzes of the dependency theory have been
the subject of a series of criticisms based on economic
and ideological arguments. According to these opin-

31

ions, the history of the evolution of nations is not bal-
anced and autarkic development. In the process of
growth, they explain, nations stand out while others
over time add to the more advanced ones. Thus, it is
normal for nations to experience the sense of depend-
ence arising from their relative development.

In the seventeenth century, the English felt this
way towards the Dutch, just as today the underdevel-
oped countries feel towards the United States or Eu-
rope. Sometimes this dependence was direct as in the
situation of colonialism. It was the Americans who
first set out the doctrine that relates industrialization
to the sense of dependency (or independence). Alex-
andre Hamilton, in 1791, presented a document to the
Congress of the United States in which the Latin
American left adopted the banner of development
ideas in the region.

The Washington Consensus

The policies envisaged by this consensus fiscal
discipline to eliminate the public deficit and inflation-
ary pressures, with priority in public spending on edu-
cation, health and infrastructure. Tax reform, with
higher tax burden indirect. Financial liberalization,
with exchange rate competitive. Liberalization of for-
eign trade and the end of restrictions on external capital.
Adoption of privatization of loss-making enterprises.

32

Deregulation of labor relations and defense of intellec-
tual property and patents.

These policies were the cause of heated debates
since its adoption in 1989. With rare exceptions, this
restructuring was far short of expected. To evaluate the
results of all this, the economist John Williamson has
organized a book for take stock of policy theory and
policy suggested in the past. The book's name is After
the Washington Consensus (Editora Saraiva, 2003).

In self-criticism, Williamson identifies institu-
tional nature and evaluation error as to effects of eco-
nomic growth, their serious problems of income distri-
bution and poverty. The new Agenda proposed by the
collaborators of said book can be summarized in the
following reflection: "The to combat inequalities lies in
the economic emphasis.” Among the recommenda-
tions, which are now being called the "Washington Dis-
sent", are the most relevant for emerging countries: op-
portunity for small businesses for being responsible
most of employment; social protection networks as a
way of guaranteeing a minimum income for the popu-
lation; schools for the poor because education is the
most rapid and visible form of social and economic;
sustainable agrarian reform. Other guidelines con-
ceived in this new proposal are also recommendations
on increasing the taxation of rich and fiscal discipline;
settle the external dependency and strengthen the rights
of workers and services accessible to the poor.

33

In an interview with Veja magazine (August 27,
2003), Professor Williamson stated that " way the gov-
ernment Fernando Henrique Cardoso I was already
worried about all these issues; it's the of Lula seems that
he will also face the same challenges.” He concludes:"
The Washington Consensus could be called without
any problem: Consensus of Brasilia. "

Economic Systems

Economic system is the denomination that the
economists give to the organizational structure and of
an economy. Included in this conceptualization of the
nature of ownership and control of productive re-
sources.

In general, countries are classified in this particu-
lar as pure market capitalism, capitalism market social-
ism, in addition to of “mixed " systems. In recent years
it has, lost importance of the so-called socialist system
directed practiced in the former Soviet Union, China
and some Eastern European countries.

In Economics classes, students often request clar-
ification on the meanings of the denominations of eco-
nomic systems mentioned. Because of the influence of
the press, a tendency to classify the economies in "Cap-
italists" and “socialists." It is the bipolar idea of the left
versus direct formulated from the "cold war" led by the
United States and the Soviet Union.

34

For this reason, essential characteristics of each
predominant type of economic systems. Our task here,
therefore, is not to compare or analyze the different sys-
tems according to their qualities and defects.

We can start by saying that the "economy of capi-
talist market "is a model based on the ownership of all
productive assets. The elements of this system are the
institution of property private enterprise and free enter-
prise, supported legal guarantees. The focus is of pro-
ducers' profits and of maximization of consumer satis-
faction. The mechanisms for achieving these objectives
are the market and the price system.

The model of pure capitalism presupposes the ex-
istence of thousands of products and consumers that,
alone, cannot influence the price paid or purchased for
productive goods and services or consumption.

Another condition is that each economic unit pos-
sesses "perfect knowledge of all alternatives prices.”
Thus, producers can maximize profits and consumers
can maximize the satisfaction. This is what is techni-
cally said to be a perfect competition situation. This
system, as is easy to observe, does not exist in the real
world, but only in textbooks.

The so-called "capitalist market economy" devel-
oped "is the system adopted mainly in the First World
countries, such as America Northern Europe, Western

35

Europe, Australia, Japan etc. In this system property re-
gimes prevail and economic and private decision-mak-
ing public policies. To discipline the functioning of the
system private sector, governments are working control
over economic activity. These are monetary and fiscal
policies, acting directly productive activities in the
form of state-owned enterprises and investment pro-
grams. Governments play also actions to regulate activ-
ities of corporations and private corporations. Others of
the public sector are the control of wages, interest rates
and various modalities of taxes.

In this way, the market economy is constituted the
institution of private property and freedom economic
development, but living with elements of public inter-
est. It is, in fact, the private sector and the public sector.

The third system is called market, with planning.
"Is it a modality very similar to the previous model, but
with characteristics not yet fully developed. In this
case, for variable degrees of private ownership of re-
sources side by side with the public participation of
economic activities.

Examples of this system are Brazil, Argentina,
Mexico and most of the economies of the Third World.
A common element in these countries is the use of gov-
ernment planning as an instrument of economic policy.

The "market" socialist economy uses the prices
and capitalist economic efficiency of the market. The

36

goal is production egalitarianism and socialist distribu-
tion. Yugoslavia would be the example, before the fall
of the Berlin. In fact, this system is the alternative that
emerged from the market system directed with central
part of the former Soviet Union and the Popular of
China. In the latter case, property private sector is still
very limited, of tools, rural houses, some townhouses
and small plots of land, after the last renovation based
on family property.

In recent years, with capitalist modernization of
China, it can be said that virtually all the countries for-
merly members of the Soviet Union and Eastern Euro-
pean countries are gradually adopting the modality of
economic systems socialist market or mixed economy.
Today, only Cuba remains governed by the principles
of state market economies or centralized socialism.

In this way, M. Todaro, after analyzing all these
denominations of economic systems, states that these
issues are rhetorical in nature governmental or aca-
demic and ideological writings. His recommendation to
students is "to analyze a given economy, its economic
system through a way in which they are really orga-
nized, "Todaro concludes quoting a satire once set in a
bulletin board of the University of Warsaw: "Capital-
ism is the exploitation of man by man; communism is
the reverse.” Ideologies play an important role in the
but the distance is substantial between the theory and

37

practice. In this way, labels such as capitalist, socialist
and communist used responsibly.

The Brazilian System

Knowledge of theories, concepts and meaning the
terminology of economic science is a need and an obli-
gation of the people who deal professionally or wish to
understand reality of the world in which they live. This
statement applies to all branches of the exact and social
sciences.

The economy, however, is complex and under-
stood, although everyone speaks directly about it or live
experiences of their own life, whether rich or poor. This
because involve certain intangible elements, such as
cultural patterns and social values. Features dimensions
political and human, as well as economic priority. Of-
ten a historical framework that explains the raison d'être
of events.

The colonization system is an example of influ-
ences. The financing of the economy of a country may
depend on external factors. uncontrollable, as well as
internal forces that may be susceptible to change. In the
political area, there are people in Brazil who think
growth is better economy with the loss of some civil
liberties. Others think that the desirable it is a slower
growth, however with social justice.

38

The economic systems in the world are marked by
the process of globalization. Although this is not a new
process, the of communications has broadened the eco-
nomic processes, social and cultural rights those of na-
tional nature. By virtue of the increasing gravitation of
economic processes, national strategies are taken to be
outlined with incorporation into the world economy.

According to the conditions of each country, the
globalization may present opportunities for develop-
ment, but due to international organizations, increase
the risks arising from sources of commercial and finan-
cial instability. Thus, the characterization of what is an
economic system country depends on the assessment of
the external vulnerability and socioeconomic policy,
modality of systems or innovation and development
and complementarity between institutions global, re-
gional and national levels.

Although the Brazilian model is of "capitalist", the
label is illusory. The pragmatic policy Brazil has used
the capital, technology and entrepreneurship. Brazil,
throughout its history, has been receptive to capital and
foreign firms has stimulated private national companies
and established large companies in critical or strategic
production areas. It is true that the Brazilian economic
system is much more reliant on the market than on the
comprehensive and comprehensive budgeting of gov-
ernment agencies. The government, however, has

39

played a central role in guiding, formulating and direct-
ing the market, by means of some checks, incentives
and through fiscal and monetary management.

The main strategy has been to accelerate industri-
alization and to export exports to the external markets.
Even so, the role of is relatively low in relation to GDP,
more or less 10% compared to other countries where
this ratio reaches 70%. In compensation, the Brazil was
immune to external crises.

The Brazilian strategy for private investment for-
eigner is another important example of pragmatic pol-
icy. Brazil has always had much concern about the dan-
gers of foreign control of the economy. Taking care to
make it prevail national interests over external interests
of multinational companies.

The process of political development has by sev-
eral phases. Since bureaucratic government under the
military regime (1964-1974), the or influence of agrar-
ian and urban elites until the system of political parties
supported by corruption. However, it has prevailed in
recent fifty years the system of popular elections multi-
party

Renowned Professor Stefan H. Robock of Univer-
sity of Columbia (USA), wrote an excellent book (The
Brazilian development in debate, Rio de Janeiro: Li-

40

vraria Francisco Alves) where he makes interesting ob-
servations and analyzes about the Brazilian model. He
remembers that:

The development process is complex and insuf-
ficiently understood. It involves many intangi-
ble factors, such as such as cultural standards
and social values. It presents political and hu-
man dimensions, as well as economic ele-
ments.

It should also be added that it depends on uncon-
trollable factors, as well as political conditions internal
controls. Brazil has adopted flexible policies with re-
gard to the use of private and public undertakings, do-
mestic and foreign. With the exception of petroleum
and radioactive materials, Brazil has never striking. In
public services, the electric power is responsible for
80% by production and 60% by distribution. The Na-
tional Bank Economic and Social Development
(BNDES) has lent funds for the construction of infra-
structure works and the creation of large companies like
EMBRAER.

As for multinationals, they find in Brazil a favor-
able environment. Example of effective policies was to
induce multinationals in exports of manufactured
goods, as occurred with the Auto Industry.

The development of the Brazilian model has been
limited by many obstacles your physical environment.
Other geographic helped for the country's development.

41

The economic expansion achieved by Brazil, in
the 1930s and 1940s, resulted mainly spontaneous
forces and external factors. In the period, which fol-
lowed the Second World War, the development came
about with national providence. The average annual
growth rate of the Product of Brazil was 5.1% and the
industrial sector 6.5%. From 1948 to 1956, with the
new programs of import substitution, the Domestic
Product Gross revenue grew by 6.4% in real terms and
the industrial, 8.8%.

The SALUT Plan of the Dutra government (1946-
51) and the work of the Joint Commission on Develop-
ment of Brazil / United States (1951-53), under the of
Getúlio Vargas, were decisive for these results. With
regard to the new policies planning, the National Bank
was created Economic Development and, in 1953, the
Petrobrás. It is from this time also the creation of the
Northeastern Brazil, as well as the Company San Fran-
cisco Hydroelectric Plant (Getúlio Vargas).

With the Juscelino Kubistcheck government, In
January 1956, a Board of Directors was National De-
velopment, which drafted the program goals "based on
based sectors." In 1962 was created the Ministry of
Planning, whose minister Celso Furtado elaborated the
Triennial Plan that life, with the institution of the mili-
tary government (1964). The Government's Economic
Action Program (Roberto Campos) continued the expe-
rience planning to the present day.

42

As can be seen, based on the example there are no
universally accepted standards that can be used as "sys-
tems models economic.”

Each country, in its historical and political con-
text, has its economic system.

Evolution of Ideas

In the last fifty years, there has been a growing
understanding of the development process economic.
We now know that development deliberate is possi-
ble, but it is not inevitable. We know also that there
are no magic formulas for success. Some strategies
worked well for sure then failed. Others work well in
a country, but fail in another. In a sense, one-can eco-
nomics theories have contributed for both good re-
sults and frustrations.

The most frequently asked questions over the last
few decades are: factors that explain the differences in
income between rich and poor countries? How to re-
duce poverty and major economic inequalities in the
underdeveloped?

The interest for a better understanding of these
phenomena comes from time immemorial. In season in
which Adam Smith published, his work on The Wealth
of Nations (1776) already noted a noticeable and in-
creasing difference in growth levels various parts of

43

Europe and between Western Europe and most of the
Continent Asian.

However, without these statistics it was impossi-
ble to measure the differences and define some reason
of this phenomenon. A few centuries earlier Europe
was poor and few centuries later, it prospered and
passed other continents. Economists speculating about
reasons for these changes did not dare to assume that a
cycle had broken down and that society was in an in-
definite period of growth cumulative and self- moti-
vated.

Quite the opposite. Time after Smith, economic
literature spoke of the prophecy about a steady state.
According to this theory, economic growth was con-
tained because of some limiting factor such as popula-
tion growth, the law of diminishing returns or a chronic
tendency to save in excess (HW Singer, 1969).

It is very difficult to point out some century econ-
omist XIX century or the first years of the supports the
view that the chasm between rich countries and poor
was destined to increase without limit predictable. But
when the phenomenon began to be perceived, econo-
mists began to treat it as an outbreak.

Seeing that one country after another followed the
treadmill of England and reached it, tended to adopt the
optimistic opinion that it was only a matter of time.

44

Thus, the whole world economy would be in motion
and the march for development would be initiated.

The emergence of an explicit interest in problem
of poverty and inequality started to occur during World
War II. With the creation of new international organi-
zations (IMF, World Bank, etc.) with economic respon-
sibilities and technical assistance, economists began to
problems of the underdeveloped countries. Of these
United Nations Organizations, statistics and studies
have provided a basis for economic development.

From that moment, the public conscience became
aware of the poverty of the nation’s Africa, Latin
America and Asia. Another determining factor to the
political awareness of these countries have come to de-
sire independence politics and the economic freedom
that wealth can provide.

An international aid program, which many hopes
in underdeveloped countries, was called the Marshall
Plan. With an expense of US$ 13 billion, about 4% of
its Domestic Product the United States was able to re-
vitalize the economies of countries destroyed in Europe
by war. In just two and a half years, industrial produc-
tion of these countries went from forty percent and ag-
ricultural production surpassed the levels of before of
conflict.

Based on these data, the belief of that there was a
mobilization of resources of all industrialized countries

45

for the promotion of world development, the results
would be equally spectacular. It was undoubtedly stim-
ulated confidence that inspired the statement of Presi-
dent Kennedy in his inaugural address:

To the new states of the fight to break, the
bonds of misery will do our utmost to help them
help themselves. Same period, during any pe-
riod required. If the free society cannot help-
ing the many who are poor, never you can save
the few who are rich.

We must take into account the fact that, whatever
are the difficulties between countries at the interna-
tional level, these difficulties are repeated in a surpris-
ing way, within the underdeveloped countries them-
selves. The problem of reconciling development and
these undesirable difficulties is not the greatest obstacle
facing those countries would like to contribute on the
side of the elimination of poverty and backwardness
technological development.

It is difficult to form a satisfactory judgment on
the aid, which must be proportionate to the underde-
veloped countries. But it's very clear. That there are
many things that must be done by the parents. Devel-
opment is not just an issue of having abundant money,
nor is it simply an economic phenomenon. It covers
all aspects of social behavior. At the international
level, there are three main lines of action: financial

46

aid, technical aid, and freer trade for products of un-
derdeveloped countries.

In summary, however, the problem of poverty is
superficially economic in nature. In sense deeper, for
example, the key is the educational issue. Poverty to be
destroyed is not a source in the lack of the external as-
sets of the property industrial architecture. The power
to create assets that it requires stems from knowledge
and experience, ability and power to look forward to the
future with to do things and adapt to change.

There is no country that can call itself even if there
is no education in the form of industrial civilization.
Farmers have to enter the market economy and agri-
business, with workers employed in factories and in the
services sector. It should apply to economy the fruit of
science. And above all this, it must arise, as a continu-
ous element in the life of the country, a group of lead-
ers, politicians and administrators that you depend on
to start up the innovations continuously. Education is
not, as it is said, something that is only in schools or in
universities. But it must be a general and continuous
process of the entire population.

Paths of Developed Countries

The conditions under which countries are cur-
rently seeking to embark on a process of development

47

differ in many ways from what occurred during the pe-
riod in which the industrialized countries the path of
economic growth.

Focusing on these experiences one can conclude
that, in fact, there is more than one way possible for
the development. What is best within circumstances
of a country is not necessarily better under the condi-
tions of another.

England, which was the first country to have a
modern industry in the nineteenth century, made a de-
liberately development list government. However, as
the new Economy has taken shape, the State played an
important role in boosting the and curb private sector
abuses. In the twentieth century, the adoption of “wel-
fare state" was based on a combination of private enter-
prise and socialism.

In terms of economic development, United States
of America with private initiative. But the role of the
state should be underestimated. The US government
has areas for colonization. Build channels and railroads
that allowed internalization of development. The role
of government in the adoption of free education was
one of the most revolutionary of the time.

Typically, Japan was the first to develop a modern
economy. Japan lacked all the conditions for economic
development. He did not have the resources and its ter-
ritory was mountainous, leaving only 20% of their land

48

for agriculture. Isolated from the rest of the world, the
Japanese self-reliant and resistant to influences the sec-
ond half of the 19th century.

Nevertheless, within a few decades it became an
important nation in international politics of the Far
East. A strong grant program governmental organiza-
tion was employed in exports and the sea. The itinerary
of Japan was fascinating. The government was a pio-
neer in the important industrial projects. Based on the
restoration of Meiji (1868), he constructed a system
public education that until today is the of its modern
industrial society.

Government participation in this process was sup-
plemented by large private trusts and dozens of thou-
sands of small private company’s contribution to
growth economic. Even with social and political distor-
tions in its initial phase, in terms of development the
Japanese system worked. Currently is the world is sec-
ond largest economic the country with the best income
distribution in the world.

In the Soviet Union, development took place until
the fall of the Berlin Wall in 1989, dominated by the
single and absolute party. The system of global plan-
ning was centralized and company’s state-owned com-
panies operated the entire industry, and services. In ag-
riculture, it was the collective enterprises or coopera-
tives that operated the productive system. Even if, clan-
destinely, family producer of horticultural articles had


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