Brazil is an enormous and diverse country with a long and turbulent history, and an economy that reflects this. With the seventh largest GDP in the world and a population of over 200 million, no discussion of Brazil is without political or economic significance, both for its people and for the world as a whole. As such, inequalities in income (also reflected in geography, race and gender) certainly matter, and must be a key concern for those who promote the development of the country; these gaps mean that poor members of society gain nominally less from growth, although figures show relative gains , an outcome which is undesirable for various economic, social and ethical reasons. Brazil’s development gaps, including its flagrantly high income inequality, but also its deficient infrastructure, political and social problems, have deep but traceable origins in political institutions.
Historically, this includes Brazil’s economic focus on extracting and exporting natural resources supported by slave labor, a system which benefitted the few landowners and created long lasting racial problems. With the waves of immigrants in the 20th century and the beginning of the modern era, economic successes and failures were more policy-related than societal as Brazil’s southeast industrialized. Leaders initiated import-substitution strategies that led to a protectionist and industry-heavy environment (as opposed to an agricultural past), with a relatively high amount of government involvement in the marketplace. In the last 20 years, the results of this past are reflected in modern income inequality that is high and persistent over time. Some examples include regressive public transfers like pensions for senior officials which makes up the majority of public spending, or the inequitable distribution of education where only one third of the population has postsecondary training. Perhaps most relevant to this argument, however, is the high-skill wage differential, in other words the premium for skilled labor which has arisen as a results of technological change, emphasis on capital-intensive industries, and a relative shortage of highly skilled labor ; the combined effect of these conditions form the primary argument of this paper, which seeks to explain how these inequalities, spawned from past and current economic policies, continue to drive Brazil down a troublesome path to development.
THE 20TH CENTURY: LAYING THE GROUNDWORK FOR INDUSTRIALIZATION
While the shift away from the primary-sector, agrarian economy happened somewhat later than in most developing countries, Brazil, in particular the south-east region, was quick to embrace industrialization, especially at the beginning of the 20th century (so much, in fact, that the government began importing workers from Italy, Germany and Japan to work in its newly government-syndicated factories and production plants). Although inputs were labor-intensive compared to the same industries today, Brazil as a whole...