It’s clear that globalisation has shaped our world since the term was first coined in the 1960s. Whether it has impacted it for the better or not is hotly disputed among economists globally. What this essay argues is that globalisation has had a positive impact on reducing inequality, and specifically how globalisation has impacted economic activities in Brazil. This essay will explore why Brazil fell into economic disrepair and how prior to attempts made by the International Monetary Fund (IMF), failed to reduce economic growth which subsequently led to severe inequalities in Brazil. Additionally, by looking into the theory of globalisation we will explore how inequality has been reduced within countries like Brazil. However, we must define both globalisation and inequality to truly understand the relationship between the two.
Globalisation is difficult to define as there are various interpretations, but in essence dismantles trade barriers to allow for an exchange of goods, services, labour and capital without restrictions that would have previously been in place. There are countless definitions and interpretations of globalisation, however it is Director General Pascal Lamy of the WTO, speaking in Santiago de Chile on the 30th January 2006, whom provides the most detailed definition of what Globalisation entails. He states that “Globalisation can be defined as a historical stage of accelerated expansion of market capitalism, like the one experienced in the 19th century with the industrial revolution. It is a fundamental transformation in societies because of the recent technological revolution which has led to a recombining of the economic and social forces on a new territorial dimension." There are many different forms of inequality. In terms of globalisation, Income or economic inequality are the most prevalent. The United Nations acknowledges this in their ‘Concepts of Inequality’ report, yet still defines it as “the state of not being equal, especially in status, rights, and opportunities… Inequality of outcomes [is defined as] when individuals do not possess the same level of material wealth or overall living economic conditions.”
Brazils colonial past is necessary to truly understand why their global economy remained underdeveloped until recently. There are many countries where economic activities are underdeveloped because of their colonial predecessors, and Brazil is no different. It was colonised by Portugal in 1500 CE and immediately was utilised by the Portuguese to extract its natural resources. All of Brazils exports were shipped directly to Portugal, therefore when Brazil gained independence, in 1822 international trade was limited as they heavily relied upon Portugal for that. Immediately Brazil was thrust into the world economy with limited trading partners and most of their resources depleted. The 19th century and early 20th century saw a mass production of rubber and subsequent exports. However, the government aimed to reduce its dependency on primary economic activities being agriculture, and so attempted to diversify by encouraging the creation of secondary activities, specifically manufacturing. The economy boomed during the 1920s however, it was in 1929 (The Great depression) the government took control of the largest companies, which was heavily criticised. With soaring rates of inflation, the Brazilian government continued to add to its countries deficit by trying to expand, thus contributing further to the countries mass inflation. The military took control in 1964 and all opposition parties. The 1960s and 1970s saw rapid economic expansion yet was still hindered by the severe level of inflation, and most of the population in poverty. Although Brazil experienced some economic success in the 1990s, after the implementation of “Real Plan” it wasn’t until 2002 did the IMF intervene. The IMF supported Brazils economic and financial program with $30.4 billion, over a 15-month course. Horst Köhler, the managing Director of the IMF expressed that the new program ensured the maintenance of the economic policies and the commitment that the leading presidential candidates had given, at the time to the program had helped market confidence. Employment and income increased significantly, and inequality had reduced marginally. With their involvement in Mercosur and the BRICS (Brazil Russia India China and South Africa) organisations it was predicted that their economies would expand further and thus create a larger middle class, thus reducing inequality. Although Brazils development to become the 8th largest economy in the world reduced inequality, it didn’t do so to the degree that was expected.
The reality was that although that Brazil are in a better place than at the end of the last century: compared to other South American countries, Brazils inequality should be significantly lower than what it currently is. Brazil is one of the world’s largest economies, and that’s ultimately down to IMF and government efforts to globalise, and although the amount of poverty was significantly reduced it is not where it should be. At their current rate of progress, it will take 75 years to reach the same level of inequality Britain has currently and are 35 and 30 years behind Uruguay and Argentina respectively. What the richest 0.1% of Brazil makes in a, month would take a citizen on minimum wage 19 years. Although Brazil has reduced poverty by 10% between 2001 and 2015, it is the top 10% of society that contributes to 61 percent of the GDP. It is also estimated that brazil will reduce the wage gap by 2047. What really displays Brazils economic divide is that 6 of the countries richest men share 50% of brazils wealth.
However, despite the inequalities that still exist, the processes of globalisation have only been in place for 17 years and in that time the world experienced a significant economic downturn, and during this period, the main importers of Brazilian produce stopped importing so as to prop up their own economies. We must question, are we being to quick to judge globalisation as being an ineffective way to reduce inequalities. Evidence suggests that the poverty gap is closing – just not at the rate we expected. Oxfam reported that in the last 15 years alone 28 million Brazilian citizens (10% of Brazils population) have broken the poverty cycle. To eradicate extreme poverty and hunger in the world was one of the millennium development goals. Although not fully achieved, was nonetheless extremely successful. In 1990, nearly 50% of the world lived on less that $1.25 a day, that figure is now just 14%. Similarly, those living in poverty has decreased from 1.9 billion to 836 million. This success is primarily down to the 2005 commitment of all 189 United Nations members heads of state to utilise “Fair Globalisation” to achieve the Millennium Development Goals (MDGs). In Brazil, most of the population are considered to be in the lower middle class, and despite recent political and economic success, both income and social inequality have remained stable, and are predicted to remain that way for years to come. Ultimately globalisation has worked to lessen the social divide of inequality and balance income inequalities.
Globalisation has ultimately allowed for social and income inequalities to diminish as trade barriers are dismantled to allow for an exchange of goods, services, labour and capital without restrictions that would have previously been in place. We can see that Brazils colonial past inhibited economic growth after Portugal granted independence, with the emergence of a military state and high inflation, it was imperative to seek help from the IMF, whom helped develop Brazils economy by privatising their state-owned firms and helping Brazil trade internationally. Evidence points towards Brazils inequalities reduce since 2002, ultimately proving that Globalisation has impacted Brazils inequality for the better.