A comparative analysis of Brazil and India in the era of neoliberalism ”

This paper compares and contrasts Brazilian and Indian strategies of development during the era of neo-liberalism. At the surface there are striking similarities between the development strategies of the two regions. Both economies have integrated themselves deeply into the world economy and they have emerged as major exporters of sophisticated goods and services. Both have embraced markets but far from limiting their government much of their economic success is attributable to active state intervention. But underlying all these similarities there are far reaching differences. In the case of Brazil, radical labour market interventions and welfare schemes have created an inclusive process of growth. On the other hand, in India the developmental approach has promoted an exclusionary form of growth where the very process of growth has become contingent on wage declines and low employment growth. In order to explain why the two countries have followed such distinct paths this paper analyzes some important differences between the two economies. The central argument that is made here is that in India neoliberalism was carried out gradually and sequentially, allowing the economy to grow at a fast pace without exposing it to the vagaries of international markets. By virtue of this gradualism, big capital, new middle classes and agrarian elites have come to benefit greatly from the pro-capital economic project. Further, the rise of this cohesive social coalition in support of the pro-capital project has gone hand in hand with a weakening of working class resistance. In contrast, in Brazil neoliberalism was undertaken within the context of a severe economic crisis. With macroeconomic stability assuming greater importance than economic growth, Brazil chose to follow deflationary economic policies throughout the 1990’s. As in most transitioning economies, the poorer classes faced the brunt of structural adjustment. However Brazilian industrial interests, agricultural elites and the middle classes were adversely affected as well. The relative inability to form a coherent Assistant	  Professor	  at	  the	  Tata	  Institute	  of	  Social	  Sciences,	  Mumbai,	  India.	  Email:	  rahul.sirohi@tiss.edu dominant coalition has gone hand in hand with a strengthening of popular resistance, pushing the country on an egalitarian path of development.

Where it read: [...] For example public investments in education and health in Brazil amounted to 5.8 percent of GDP and 4.5 percent of GDP in 2012 while in India the numbers were 3.3 percent and 1.2 percent respectively.

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[...] For example public investments in education and health in Brazil amounted to 5.8 percent of GDP and 4.5 percent of GDP in 2012 while in India the numbers were 3.3 percent and 1.2 percent respectively 8 .

Where it read:
[...] Between 2001 and 2012 poverty has declined by 65% (from 24.3% of the population to 8.4%) and extreme poverty has fallen by over 70% (from 14% of the population to 3.5%).

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[...] Given the inherent problems associated with poverty calculations we may also note other indicators of progress. In the 12 year period spanning 2000 and 2012, mean years of schooling increased by 1.6 years, life expectancy has increased by 3.4 years and the under-5 mortality rate has decreased at an average rate of 6.9% per year.

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[...] Given the inherent problems associated with poverty calculations we may also note other indicators of progress. In the 12 year period spanning 2000 and 2012, mean years of schooling increased by 1.6 years, life expectancy has increased by 3.4 years and the under-5 mortality rate has decreased at an average rate of 6.9% per year 10 .

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[...] Of course it is true that the economy had a balance of payment crisis in 1990 but as Patnaik and Chandrasekhar (1995) suggest, the actual dimensions of this crisis never reached threatening proportions and there was actually very little need to resort to liberalization. What all this means is that the neoliberal reforms were not undertaken in response to external shocks as was the case of Brazil; It was a slow and gradual process which by this virtue has succeeded in creating of a strong coalition of support, including not only the big bourgeoisie but also the urban middle class and propertied middle and upper castes of rural India.

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[...] Of course it is true that the economy had a balance of payment crisis in 1990 but as Patnaik and Chandrasekhar (1995) suggest, the actual dimensions of this crisis never reached threatening proportions and there was actually very little need to resort to liberalization 11 . What all this means is that the neoliberal reforms were not undertaken in response to external shocks as was the case of Brazil; It was a slow and gradual process which by this virtue has succeeded in creating of a strong coalition of support, including not only the big bourgeoisie but also the urban middle class and propertied middle and upper castes of rural India 12 . 11 See also Vinaik (2001) and Kohli (2006a).

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[...] Further, unlike Brazil Where taming inflation created a propensity towards deflationary policies during the 1990s and therefore caused significant losses of jobs for the middle class, in India not only was neoliberal policymaking relatively less conservative but the aforementioned bias towards high-tech services also tipped the scale in favor of skilled labour.

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[...] Further, unlike Brazil Where taming inflation created a propensity towards deflationary policies during the 1990s and therefore caused significant losses of jobs for the middle class, in India not only was neoliberal policymaking relatively less conservative but the aforementioned bias towards high-tech services also tipped the scale in favor of skilled labour 13 . 13 In a somewhat exaggerated claim McCartney (2010: 95) states that "Far from providing a constraint on the fiscal maneuverability of the Indian economy and punishing deficits with capital flight, capital market liberalization has in fact allowed a sustained Keynesian-style expansion by the Indian state". Describing the state's policies as "Keynesian" can hardly by defensible given the abject failure to effective demand in any broad sense. Yet the statement also has an element of truth in the sense that even the most conservative policy makers have been relatively flexible on issues of fiscal deficit.