I am not optimistic about the Brazilian economy in the long term #1

Here in Madrid people ask me frequently about my personal views on the future of Brazil. I do not have anything particularly interesting or insightful to say, but I share the concerns of many fellow economists that there are major problems ahead:

• The huge demographic bonus is going to end soon: here and here;
• The pension system is insane: here (pdf) and here (pdf in Portuguese) and there are no signs of major changes.

(to be continued...)

Is manufacturing indispensable?

Chang versus Bhagwati. I voted "No".

Long thumbnails and development

This also happened in Brazil!
(HT Shikida)

Bureaucratics - Pictures of civil servants all over the world

Bureaucratics - Images by Jan Banning
(HT João Veloso).

"Brazil's achievements and Challenges" by Luiz de Melo

An excellent introduction to Brazilian contemporary economic issues with emphasis on macroeconomics and the educational problems. (HT José Roberto Afonso).

How unequal is Brazil?

A lot. The table bellow shows monthly family income per capita by percentile. (Yes, it includes Bolsa Família, the cash based transfer program that reaches 11 million families).

Percentile	R$	US$
5	53	33
10	100	62
50	375	233
90	1300	807
95	2000	1242
99	4650	2888
Source: PNAD (IBGE, 2009)

1,61 BRL=1 USD (the current exchange rate).

"Development Strategy or Endogenous Process? The Industrialization of Latin America" by Stephen Haber

Latin American industrialization was not a deliberate choice of the elites, or a long term strategy of development.
"Beginning in the 1890s the largest economies of Latin America conducted a 100- year experiment in which they built tremendous manufacturing sectors behind barriers to trade. This experiment was not carried out because public officials were ideologically committed to industrialization or because of economic theories that challenged free trade. Indeed, the growth of large scale manufacturing industry pre-dated structuralist theories by 60 years. Rather, Latin America’s industrialization was kick started by an endogenous process of economic development whose roots were found in the growth of the so-called export economy. Once industrialists got a foothold they lost no time in seeking tariff protection. Governments granted this protection because it came at virtually no political cost: the one class that stood to lose from trade protection, consumers, had no political voice. The result was that by 1914 all of the larger countries of Latin America had become increasingly protectionist, and were undergoing a rapid process of industrial growth.
(...)
The process of Latin American industrial development was always ad hoc. Governments did not grant trade protection because they were committed to a particular vision of industrial development. They did it because they were rewarding politically powerful constituents, some of whom were industrialists and some of whom The process of Latin American industrial development was always ad hoc. Governments did not grant trade protection because they were committed to a particular vision of industrial development. They did it because they were rewarding politically powerful constituents, some of whom were industrialists and some of whom were industrial unions."
This is music to my ears!

Pre-industrial Inequality por Milanovic, Lindert, and Williamson

About 4 years ago Jeffery Williamson gave this amazing paper at a Economic History Association meeting. Now it wil be published in the Economic Journal:

Abstract:

Is inequality largely the result of the Industrial Revolution? Or, were pre-industrial incomes as unequal as they are today? This article infers inequality across individuals within each of the 28 pre-industrial societies, for which data were available, using what are known as social tables. It applies two new concepts: the inequality possibility frontier and the inequality extraction ratio. They compare the observed income inequality to the maximum feasible inequality that, at a given level of income, might have been ‘extracted’ by those in power. The results give new insights into the connection between inequality and economic development in the very long run.

IMHO, the concept of inequality possibility frontier is brilliant and relevant for historians and development economists.

The Obesity of the Nations

Via Economist:

Rio de Janerio murder rate shows a sharp fall

UPDATE: There are strong signs that the governmet has applied "creative accouting" methods in their numbers. Sorry for misleading you.
30 homicides per 100,000 is not a rate to be proud of. Nevertheless, things are getting better in Rio (and in São Paulo as well). I am not following the debate, but possible causes are: demographics, rising incarceration rates, new police practices, and falling inequality and unemployment.
The graph bellow shows the absolute number of homicides since 1991:

(Source, in Portuguese)

Poorest Brazilians are as poor as the world's poorest...

...and the richest Brazilians are as rich as the world's richest. Furthermore, the median Brazilian has an income close to the poorest 5% Americans.
Very cool graph (via Economix; I suggest the whole post):

The graph comes from "The Haves and the Have-Nots,” by Brancko Milanovic. (He is the coauthor (with Lindert and Williamson) of a great paper).

China overtakes USA!!!

In 2008, the China's GDP per capita was US$6,725. This is a little bit higher than the GDP per capita of the USA... in 1928! Source: Maddison.

Commodity Lottery, XXI edition

The idea of a commodity lottery is well known among the students of Latin American economic history. It goes like that: the path of development that each country took was related to the characteristics of its main (natural resource based product) natural product exports: income elasticity and price, the possibility of linkages and global competition ... Exporting bananas or rubber is very different from exporting meat or coffee.
Well, now the argument of bad luck comes back. The great "New Economic Geographer" Gordon Hanson writes (via MR) in Why Mexico is not Rich? that the reason behind Mexico's misfortune is that its specialization pattern lies in goods similar to those of China.

China’s size, high rate of growth, and increasing outward orientation mean that its emergence is surely changing international prices, improving the terms of trade for countries that produce its importables and deteriorating the terms of trade for countries that produce its exportables. Mexico fits squarely in the latter camp, whereas Argentina, Brazil, Chile, Colombia, and Peru fit in the former.

Services or Manufacturing. Which sector is the main driver of growth?

Bhagwati challenges the manufacturing fallacy. In addition, this article argues that the services sector played a major role in the revival of Indian manufacturing. (HT Escolhas e Conseqüências).

I am convinced that Colin Clark's division of the economy in three sectors is not that useful anymore. For instance, how much of a US$200 Nike shoe was produced in the services sector?

"Living Standards in Latin American History: Height, Welfare, and Development, 1750-2000 "

The book -just published!- is part of the David Rockefeller Center Series on Latin American Studies, is distributed by Harvard University Press , and it is available at Amazon. One of its papers is Growth and Inequalities of Height in Brazil, 1939-1981, an anthropometrical study written by Nogueról, Shikida and myself. A previous version of the paper is available here.

Melissa Dell "The Persistent Effects of Peru's Minning Mita"

...Using data from the Spanish Empire and Peruvian Republic to
trace channels of institutional persistence, I show that the mita's inuence has persisted through its impacts on land tenure and public goods provision. Mita districts historically had fewer large landowners and lower educational attainment. Today, they are less integrated into road networks, and their residents are substantially more likely to be subsistence farmers.

The paper is awesome and it is forthcoming in Econometrica.
The CV of Melissa Dell is impressive: she is a graduate summa cum laude at Harvard, has a doctorate from Oxford, Ph.D. candidate at MIT, ultra marathon runner (100 km), founder of a NGO in Peru ... and she has a severe vision impairment.

"Education Performance: Was It All Determined 100 Years Ago? Evidence From São Paulo, Brazil"

de Carvalho Filho, Irineu and Colistete, Renato P. (2010): Education Performance: Was It All Determined 100 Years Ago? Evidence From São Paulo, Brazil. Unpublished.

"This paper deals with institutional persistence in long-term economic development. We investigate the historical record of education in one of the fastest growing and most unequal societies in the twentieth century – the state of São Paulo, Brazil. Based on historical data from an agricultural census and education statistics, we assess the role played by factors such as land concentration, immigration and type of economic activity in determining supply and demand of education during the early twentieth century, and to what degree these factors help explain current educational performance and income levels. We find a positive and enduring effect of the presence of foreign-born immigrants on the supply of public instruction, as well as a negative effect of land concentration. Immigrant farm-laborers established their own community schools, and pressured for public funding for those schools or for public schools. The effects of early adoption of public instruction can be detected more than one hundred years later in the form of better test scores and higher income per capita. These results are suggestive of an additional mechanism generating inequality across regions: the places that received immigration from countries with an established public education system benefited from an earlier adoption of the revolutionary idea of public education."

Unintended consequences

This is so sad.
"The equipment in this digital 
cemetery come mainly from Europe and the United States, sometimes as secondhand donations 
meant to reduce the "digital divide'' — the disparity in computer access between poor 
nations and rich".

Sustainable food

Influential food writers, advocates, and celebrity restaurant owners are repeating the mantra that "sustainable food" in the future must be organic, local, and slow. But guess what: Rural Africa already has such a system, and it doesn't work.

North Korea, the worst place on Earth

• The former chief of the planning and finance department of the Workers' Party was executed;
• Reality X Fantasy.

(Via boingboing)