What can the BRICS teach us about reducing poverty?

November 19, 2009

     By Duncan Green     

An excellent new paper from the prolific Martin Ravallion, head of the World Bank’s research department, compares the successes in poverty reduction in three of the biggest beasts of the developing world: China, India and Brazil.

Between them, these countries are home to a bit less than half the world’s PR in China, India and Brazilpoor people, but it used to be a lot more. Each has combined market-oriented reforms with different kinds of social policy, producing different combinations of growth, inequality and poverty reduction that hold lessons for each other, and for other developing countries seeking their own paths out of poverty. Some highlights:

‘Brazil, China and India have seen falling poverty in their reform periods, but to varying degrees and for different reasons. History left China with favorable initial conditions for rapid poverty reduction through market-led economic growth; at the outset of the reform process there were ample distortions to remove and relatively low inequality in access to the opportunities so created, though inequality has risen markedly since.

By concentrating such opportunities in the hands of the better off, prior inequalities in various dimensions handicapped poverty reduction in both Brazil and India. Brazil’s recent success in complementing market-oriented reforms with progressive social policies has helped it achieve more rapid poverty reduction than India, although Brazil has been less successful in terms of economic growth.

In the wake of its steep rise in inequality, China might learn from Brazil’s success with such policies. India needs to do more to assure that poor people are able to participate in both the country’s growth process and its social policies; here there are lessons from both China and Brazil. All three countries have learned how important macroeconomic stability is to poverty reduction.’

Similarly this week’s Economist has an excellent 14 page special report on Brazil:

‘The country is enjoying probably its best moment since a group of Portuguese sailors (looking for India) washed up on its shores in 1500. Brazil has been democratic before, it has had economic growth before and it has had low inflation before. But it has never before sustained all three at the same time. If current trends hold (which is a big if), Brazil, with a population of 192m and growing fast, could be one of the world’s five biggest economies by the middle of this century, along with China, America, India and Japan.’

And long before then, if it continues on its current path, it will have become Brazil v US inequalityless unequal than the US (see graph). See here for previous blog on Brazil’s achievements on inequality.

November 19, 2009
Duncan Green