Large plantations hindered Brazil’s development, says economist – 02/24/2023 – Market

A citizen of Jerusalem from the 1st century, if he were taken to the 18th century by a time machine, would not find things so strange: there would be more people and new customs, but life expectancy and ways of working, such as planting and making utensils, they had changed little.

However, a citizen of the early 18th century who was brought to the present day would not understand anything when seeing cars, cell phones and robots that produce things, points out economist Oded Galor, in the book “The Journey of Humanity” (ed. Intrinsic) .

In the work, Galor presents his view on what factors led humanity to make an impressive technological leap in just over two centuries, after millennia of slow advances, and how this change generated huge inequalities.

Creator of the unified theory of economic growth and professor at Brown University, he considers that the main drivers for this leap were the advancement of education and the reduction in birth rates: with fewer children, it was possible to invest more in their training. In a virtuous cycle, more people with knowledge began to invent things and advance the technological revolution, which facilitated access to new products for more and more people.

However, most of the world’s societies are left behind: they industrialized late and were unable to achieve the quality of life of developed countries. In a video call conversation with SheetGalor spoke about how he sees the prospects for Brazil and Latin America.

How do you assess social inequality in Brazil? Much of it stems from forces arising hundreds or thousands of years ago. In Brazil, one of the historical obstacles to prosperity is that the country’s geography favors agricultural cultivation in large plantations. These plantations led to the emergence of an elite that controls the political agenda and the shape of institutions.

Thus, institutions have an extractive design. These entities are formed in order to sustain inequality in society and maintain the privileges of the elites.

The agricultural aristocracy has no incentive to invest in the education of the population, because education is a vehicle that allows individuals to move into the urban sector. The elite, historically, in Brazil and elsewhere, have been engaged in trying to block educational reforms as a way to prevent workers from moving and avoid a decline in their income. Low investment in education and extractive institutions lead to the emergence of inequality that we see today in Brazil and elsewhere.

How do you see Brazil’s chances of overcoming inequality? The country is in a good position to join the world’s rich. It can take advantage of its natural resources and diverse population to advance. But the emphasis needs to be on having an educated and more future-oriented population. Corruption must also be reduced as much as possible.

How do you see the importance of making direct payments to poor people, such as Bolsa Família in Brazil and the aid given in the US at the height of the pandemic? It’s a temporary solution. The path is to guarantee equal opportunities for children to have access to an excellent education and, thus, each individual can fulfill his potential.

Transfers may be unavoidable if people are starving, but they are not a long-term policy. A long-term policy must ensure that people are educated with a future-oriented mindset. If you look at future-oriented measures like savings rates, Brazil is lagging behind. Income transfers can simply encourage the habit of living from one paycheck to the next.

Can the advancement of artificial intelligence help reduce inequality between countries? Or can it concentrate more wealth for the countries that dominate it? When we think about the inequality that has emerged in the world economy over the last four or five decades, which is quite significant, part of it has to do with globalization and part of it with technological acceleration, which evolves rapidly.

Part of the reason for this huge inequality is that some segments of society do not invest appropriately in education. The advancement of AI will put even more pressure, it will require more investments in preparation.

AI technology is a great boon for mankind. Maybe it will allow us to produce a lot and have more leisure time than before. At the same time, it will generate great inequality. Society needs to be more generous. Individuals who are unable to participate in this process need to have some safety net.

Can the effort to combat climate change hinder development and reduce inequalities? Climate change is perhaps the greatest challenge humanity has ever faced. I’m optimistic about our ability to contain it. In my research, I explored the evolution of humanity. Our ingenuity is always there to save us from the big challenges. Perhaps in the next two or three decades, revolutionary technologies will emerge. We can move towards environmentally friendly technologies, and we must collaborate in enforcing stricter and firmer environmental standards.

Can this environmental effort help reduce inequality between rich and poor countries? I do not think so. It is possible that rich economies will feel that they need greater cooperation from less developed societies, and will be able to pay for reducing carbon emissions. For Brazil, there is the possibility that the country will be paid substantially to keep the Amazon alive, and consequently will benefit from this need.

However, the big question will be that less developed societies will invest less in technologies to mitigate the physical consequences of climate change, such as building dams against floods. Human suffering will be much more unequal in the future.

In a recent lecture, you said that Latin America has some countries with very homogeneous societies, and that this could affect development. Could you explain better? An important dimension to economic disparity is the degree of diversity in society. Diversity is a source of fertilization of ideas that generates innovations.

On the other hand, this diversity can generate a lack of social cohesion. More diverse societies tend to be less trusting and more prone to conflict.

Unlike many Latin American societies, Brazil is diverse. The obstacle is the lack of social cohesion and desirable education policies that prepare people to have greater tolerance and respect for pluralism.

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oded Galor, 70, is an Israeli-American economist who created the unified theory of economic growth. He is a professor of economics at Brown University, a member of the Academia Europaea and the Econometric Society.