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Old 11-19-2011, 07:52 AM
 
Location: Fortaleza, Brazil
2,592 posts, read 4,673,752 times
Reputation: 1572

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Quote:
Originally Posted by Antonio84 View Post
But, like I said before, the average person tends to not want to believe in these realities. This is why they favor income distribution policies over growth policies, thinking that it will benefit them more when the opposite is true. For this very reason, income distribution is often more a political issue than an economic one, since its often used to gain politically while economically the benefits are not as great, especially over the long term.

Well... Here in Brazil we have now a a policy of economic growth WITH income distribution.

The two things at the same time, not separated "phases" or "stages".

The income distribution actually HELPS the economic growth. Poor people tend to spend almost all the money that they get (because they have little money, and need to survive).

In Brazil, the Bolsa Familia, the social program that gives between 80 to 100 dollars per month to the very poor families, has helped the development of the economy of the poorest regions in the hinterlands of the Northeast, because it had an effect of increasing the consumer market for basic items.

Also the increases of the minimum wage had a similar effect, specially because many of the retired people who relies in the Public Social Security receives the minimum wage.

Today we see a commercial "boom" in the hinterlands of the Northeast, with an expanding consumer market and many new stores in the small towns. This increased demand obviously helps the manufacturing sector in other regions of the country.
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Old 11-19-2011, 09:43 AM
Status: "Thinking of the future..." (set 12 days ago)
 
5,331 posts, read 8,080,113 times
Reputation: 4290
Quote:
Originally Posted by MalaMan View Post
Well... Here in Brazil we have now a a policy of economic growth WITH income distribution.

The two things at the same time, not separated "phases" or "stages".

The income distribution actually HELPS the economic growth. Poor people tend to spend almost all the money that they get (because they have little money, and need to survive).

In Brazil, the Bolsa Familia, the social program that gives between 80 to 100 dollars per month to the very poor families, has helped the development of the economy of the poorest regions in the hinterlands of the Northeast, because it had an effect of increasing the consumer market for basic items.

Also the increases of the minimum wage had a similar effect, specially because many of the retired people who relies in the Public Social Security receives the minimum wage.

Today we see a commercial "boom" in the hinterlands of the Northeast, with an expanding consumer market and many new stores in the small towns. This increased demand obviously helps the manufacturing sector in other regions of the country.
Of course those measures will have a short term effect, albeit they do create an artificial demand/economic activity. Its just better to have a rise in demand based on increasing productivity rather than on shifting things around. Brazil's economy would actually grow faster if they had less income distribution policies in place, and all sectors of society would see legitimate and long term gains based on increasing productivity for the reasons I already explained in my previous post.

As for the minimum wage, in almost every country a tiny percentage of people actually earn that, most in the formal sector earn well above that. For that reason minimum wage changes has little effect, its mostly a political tool than an economic one. Also, in most Developing Countries, most people work in the informal economy where government regulation (including minimum wage) simply doesn't apply. I haven't checked Brazil's informality stats but probably will later today to see where it stands in all of this.

In the mean time, I'll use the case of Argentina. As you know (or maybe not), in Argentina the government has been forcing the private sector to increase wages at par with the inflation rate, multiple times during the year. This, of course, creates a never ending cycle of wage hikes leading to even more inflation which then is used to justify another wage hike. All of this is done without taking productivity into account. One can only imagine what life is like for an Argentinian or foreigner living in Argentina that makes a living from the informal economy and lives in informal settlements (aka, slums.) Since the legal (but artificial) wage hikes don't apply in the informal sector, all they see is a steady deterioration of their already bad living conditions; all thanks to the high inflation being created by the government policies. Eventually things will correct themselves (aka, crisis.)

I'll check the Brazilian stats later today.
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Old 11-19-2011, 02:11 PM
 
2,862 posts, read 3,782,304 times
Reputation: 3408
I'm all about increasing free market competition and rolling back government involvement in the economy by any means possible, but the reality is that supply side only goes so far. Every Capitalist economist whose ever existed calls Capitalism the science of "Supply and Demand".

To put it simply, you wouldn't open a factory or shop to make/sell products if you didn't think there would be anyone there to buy them, right? This is the fallacy countries like the UK and US are facing. Here in the US, the current political fervor is to slash and burn government in the hopes the increased money circulation that isn't flowing into government coffers will stimulate the economy. The reality is that yes there is a short term boost, but in the end the demand for products and services is low due to unemployment issues.

Now granted, if you go too far in the demand direction, you end up like Continential Europe where you choke off and destory innovation and capital. The reality is it's all a balance, not pitched ideological warfare.

As long as Brazil is encouraging free market reforms, cutting red tape, and lowering general taxes, some stimulative welfare spending is probably more helpful than hurtful, if only to get the ball rolling.
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Old 11-19-2011, 05:44 PM
 
Location: In the heights
22,302 posts, read 23,795,177 times
Reputation: 11739
Quote:
Originally Posted by Shizzles View Post
Now granted, if you go too far in the demand direction, you end up like Continential Europe where you choke off and destory innovation and capital. The reality is it's all a balance, not pitched ideological warfare.
A bit unrelated to the topic, but why do you feel continental europe destroys innovation? It seems to me that Europe has been innovating quite a bit artistically, technologically, and scientifically even though much of the eastern portion of it is relatively poor compared to the states. It seems particularly impressive given how little of this innovation seems to depend on immigration of foreign talent (which I feel is a lot of what the US depends on to be a technological/scientific leader).
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Old 11-19-2011, 06:54 PM
 
Location: The Netherlands
2,942 posts, read 4,402,995 times
Reputation: 3402
Quote:
Originally Posted by Shizzles View Post
Now granted, if you go too far in the demand direction, you end up like Continential Europe where you choke off and destory innovation and capital. The reality is it's all a balance, not pitched ideological warfare.
This is absolute nonsense. According to the Global Innovation Index 2011 (http://globalinnovationindex.org/gii/GII%20COMPLETE_PRINTWEB.pdf - broken link), the world's 20 most innovative countries are:
  1. Switzerland
  2. Sweden
  3. Singapore
  4. Hong Kong
  5. Finland
  6. Denmark
  7. U.S.A.
  8. Canada
  9. Netherlands
  10. United Kingdom
  11. Iceland
  12. Germany
  13. Ireland
  14. Israel
  15. New Zealand
  16. South Korea
  17. Luxembourg
  18. Norway
  19. Austria
  20. Japan
The Boston Consulting Group has the following ranking of most innovation-friendly countries:

1. Singapore
2. South Korea
3. Switzerland
4. Iceland
5. Ireland
6. Hong Kong
7. Finland
8. United States
9. Japan
10. Sweden
11. Denmark
12. Netherlands
13. Luxembourg
14. Canada
15. Great Britain
16. Israel
17. Austria
18. Norway
19. Germany
20. France
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Old 11-19-2011, 06:55 PM
 
Location: southern california
55,782 posts, read 74,782,583 times
Reputation: 48344
they did this by 3 ways
energy independence
austerity
no wars
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Old 11-21-2011, 11:43 AM
 
Location: Fortaleza, Brazil
2,592 posts, read 4,673,752 times
Reputation: 1572
Quote:
Originally Posted by Huckleberry3911948 View Post
they did this by 3 ways
energy independence
austerity
no wars

Austerity, but not AUSTEEEEEEERITY, if you know what I mean.

Yes, the Brazilian government tries to keep a balanced budget, and I think this is a good option we are doing. It will avoid future imbalances.

But... To keep a balanced budget, the government here is not afraid of "taxing the rich". And the public opinion is not against taxing the rich. In fact, nobody opens a mouth here to say that it's wrong to tax the rich. And the rich here accept the taxation as a natural thing, without claiming that the country is becoming "socialist" or "communist" because of that.

Of course the small military expenditures also helps to keep a balanced budget. No wars, no money wasted on tanks and weapons.

The Brazilian federal government has a "primary surplus". Excluding the payments of interest on past debt, the government revenue is bigger than the expenditures. If you add the payments of interest on past debt, there is a small nominal deficit. In a not so distant future I believe that the government will have a nominal surplus as well, not just a primary surplus.
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