Bolsa Familia vs. Reforms

Is populism a real problem in Latin America?  I’d say it is – as it diverts attention and resources from the much needed reforms.  Populist leaders run on platforms of addressing the needs and concerns of the ignored segments of the population – the poor.  To simplify – there two ways of doing it.  One, is giving a handout – i.e. subsidizing food prices, providing free services, etc.  There is an interesting story in the Washington Post on one such program in Brazil – Bolsa Familia.

Bolsa Familia is the cash assistance program that pays more than 11 million low-income families in Brazil about $40 per month in cash if they meet conditions such as ensuring their children regularly attend school and have regular health checkups and vaccinations. The assistance was enough for Rodrigues da Silva to afford his first television set, and it has been instrumental in helping President Luiz Inacio Lula da Silva overcome corruption scandals and build a lead of more than 20 points in opinion polls heading into the runoff against former Sao Paulo state governor Geraldo Alckmin.

Such programs may help Lula win elections.  They may even address some of the short-term concerns of the poor.  But, they do not fix the underlying problems. 

An alternative to populist programs, or handouts as I call them, is reform - economic and political reform that secures political and economic liberty and provides the poor with access to political and economic institutions.  It has much to do with lifting people out of poverty altogether, creating new opportunities, and giving them a chance to create their own future – rather than providing some assistance within a system that offers few opportunities for development and growth.

There are some signs that Lula will not be able to get by on promises and programs such as Bolsa Familia in his second term.  As this CSM story highlights, he will have to do more to get corruption under control and fix the economy:

“Everyone agrees, I think, on what needs to be done,” says Helio Magalhaes, chairman of the board at the American Chamber of Commerce in Brazil. “The tax burden needs to be reduced, government spending has to come down, and social security needs to be reformed because it generates such a huge deficit. And the government needs to invest in infrastructure to create the conditions for long-term investment. From a business point of view, those are the fundamental things.”

Will Lula stay the course of Bolsa Familia?  Or will he move towards real structural economic and political reforms? 

6 Responses to Bolsa Familia vs. Reforms

  1. No personal offense directed at the author, however this is perhaps the worst blog posting i may have ever read. Real long term refroms take place through education and health care – basic stuff. We want a functioning healthy economy? Educate the people so that they can thrive in the modern interconnected world. The reason why children are not in school is because they are sent out into the streets to earn money for the family. This payment to the family is made to compensate them for the “lost income”…not a vote buying bribe. If it works, then Cardoso (the program originator) and Lula should get the credit they deserve.

  2. I regret the fact that my comments were interpreted as if education and health care are not important. They are – and I don’t want to underestimate their significance.

    That said, there is a fundamental flaw with your argument that education is the driver of economic reform. It is not. Real long-term reforms take place through institutional change, not education. You can put people to school and give them some basic skills but what they do with that education is much more important. If you have no opportunities for them to apply their skills – that education is not worth much. In other words, it is not education that matters – its what you can and can’t do with that education that does. You can get the best business education – but if your country erects numerous barriers to trade, if you have to spend a huge amount of resources just to register a business, or if you face inefficient labor regulations, etc. – that education will not help you much in running a business, creating jobs, or getting a job. I remember growing up in the Soviet Union – there were a lot of well-educated, bright people. The Soviet economy did not do so well. Look at some countries in the Middle East. They have a lot of problems creating jobs – and it is not the education problem that lies at the core of it.

    Economic reforms are about institutional environment. So, going back to the situation in Brazil – the program does not address the underlying reason the kids are out in the streets. As you seem to indicate, they are in the streets to earn money – because their parents do not make enough. Why are they poor in the first place? Why are children compelled to work o the streets rather than go to school? If you can answer these questions, you might gain some insights into what can be done to address the situation. Because giving them some extra cash – may be helpful, but is not the same as solving the problem. (Also, where is that cash coming from? What happens when its no longer there? Are people going to be back where they started?)

    Overall, I do not suggest that this is vote buying. It is, however, diverting attention from more fundamental problems that the country is facing, some of which are referenced in the CSM article linked above. My main point is that if Lula were to focus on addressing the structural economic problems, he could create a more sustainable way of getting kids of the streets, putting them to school, helping people get medical care, and, overall – lifting millions out of poverty. It is free market reforms, not redistribution that is the solution to poverty.

    If programs such as this are positioned as a substitute to structural economic reforms, then I have a problem. But, complementary to economic reforms, they serve a very important purpose, which again I did not mean to discount. And this is the question that Lula is facing going ahead — will he complement initiatives such as Bolsa Familia with real economic reforms that will lift people out of poverty, rather than help them deal with it?

  3. This is a longer explanation of my statement that “Such programs may help Lula win elections. They may even address some of the short-term concerns of the poor. But, they do not fix the underlying problems.”

  4. And who, Mr. Shkolnikov, is going to implement the reforms you talk about? The sick and uneducated? Rather, these people are going to be more susceptible to populism. The incentives that Lula has to implement reforms that take very long to come to fuition are much lower than the incentives he has to give handouts that allow for immediate relief for those in need. Come election time, voters will vote for changes that have occured within their lifetimes.

    Also, you should know that real life problems are most often a lot more complicated than textbook examples and their solutions.

  5. Agreed with your comment. Again, I am not arguing against the program. All I meant that it must be complemented with structural reforms. Otherwise, it is a temporary relief not a solution.

  6. I agree with Alex\’s premise that Bolsa is not a be-all end-all solution to economic inequality in Brazil, however it is, indeed one component that will lead to more prosperity in Brazil. People do need to be fed, educated, and provided universal human rights. Basic needs must be met at the same time as structural reform is enacted to allow these changes to effect real change.

    As far as vote-getting is concerned - I believe that the increase in these Fome Zero programs before the election did encourage people to vote for Lula, and arguably a way to \”buy\” votes. This is always a slippery slope, so no definitive judgement can be made in my opinion. These increases were promised during his first campaign, so one call also say that he was attempting to fufill his campaign promises to in an attempt to be relected