The Globalization of Happiness

Stephen DeAngelis

March 25, 2008

I have often noted that globalization involves the flow of people, resources (like raw materials and manufactured goods), and capital. Ideas also manage to find their way across international borders. The Economist focused on one such idea, “an anti-poverty scheme invented in Latin America [that] is winning converts worldwide” [“Happy Families,” 9 February 2008 print edition].

“Mention globalisation and most people think of goods heading across the world from East to West and dollars moving in the other direction. Yet globalisation works for ideas too. Take Brazil’s Bolsa Família (‘Family Fund’) anti-poverty scheme, the largest of its kind in the world. Known in development jargon as a ‘conditional cash transfer’ programme, it was modelled partly on a similar scheme in Mexico. After being tested on a vast scale in several Latin American countries, a refined version was recently implemented in New York City in an attempt to improve opportunities for children from poor families. Brazilian officials were in Cairo this week to help Egyptian officials set up a similar scheme. ‘Governments all over the world are looking at this programme,’ says Kathy Lindert of the World Bank’s office in Brasília, who is about to begin work on similar schemes for Eastern Europe.”

I first wrote about the Mexican program referred to in the article in November 2006 [Programs that Fight Poverty] and discussed it again in April 2007 [Oportunidades At Home and Abroad]. Oportunidades has been described as bribery for the poor for changing their lifestyles. The decade-old program rewards parents for keeping their children healthy and in school. To qualify for the “bribe,” people must live in extreme poverty, that is, on less than the equivalent of $2 a day. In addition to seeing to the health and education of their children, parents must also get personally involved by attending talks on health, nutrition and family planning. The Brazilian program is very similar to the one in Mexico.

“Bolsa Família works as follows. Where a family earns less than 120 reais ($68) per head per month, mothers are paid a benefit of up to 95 reais on condition that their children go to school and take part in government vaccination programmes. Municipal governments do much of the collection of data on eligibility and compliance, but payments are made by the federal government. Each beneficiary receives a debit card which is charged up every month, unless the recipient has not met the necessary conditions, in which case (and after a couple of warnings) the payment is suspended. Some 11m families now receive the benefit, equivalent to a quarter of Brazil’s population.”

Unlike traditional welfare plans, where end objectives beyond the survival of recipients are often unclear, the Latin American programs aim to create educated and healthy future generations that no longer require assistance. The beef against traditional welfare programs is that they foster dependency in current and subsequent generations. The Latin American programs hope to break the chain of dependency. In some areas of Brazil, the program is so large that it looks like a socialist system; but, results are starting to be seen.

“In the north-eastern state of Alagoas, one of Brazil’s poorest, over half of families get Bolsa Família. Most of the rest receive a state pension. ‘It’s like Sweden with sunshine,’ says Cícero Péricles de Carvalho, an economist at the Federal University of Alagoas. Up to a point. Some 70% of the population in Alagoas is either illiterate or did not complete first grade at school. Life expectancy at birth is 66, six years below the average for Brazil. ‘In terms of human development,’ says Sérgio Moreira, the planning minister in the state government, ‘Alagoas is closer to Mozambique than to parts of Brazil.’ Vote-buying is rife: the going rate in the last election for state governor was 50 reais. ‘People come to us complaining that they sold their vote to a politician and he hasn’t paid them yet,’ says Antônio Sapucaia da Silva, the head of Alagoas’s electoral court. As well as providing immediate help to the poor, Bolsa Família aims in the long run to break this culture of dependency by ensuring that children get a better education than their parents. There are some encouraging signs. School attendance has risen in Alagoas, as it has across the country, thanks in part to Bolsa Família and to an earlier programme called Bolsa Escola. The scheme has also helped to push the rate of economic growth in the poor north-east above the national average. This has helped to reduce income inequality in Brazil. Although only 30% of Alagoas’s labour force of 1.3m has a formal job, more than 1.5m of its people had a mobile phone last year. ‘The poor are living Chinese rates of growth,’ says Aloizio Mercadante, a senator for São Paulo state, repeating a proud boast of the governing Workers’ Party.”

Human capital is important in any country. Brazilian politicians have decided that investing in that capital is as important as investing in infrastructure and they hope they are using the right portfolio to make those investments. The impressive growth rates in economically distressed areas are a good sign. This growth is being spurred by the growth of both businesses and consumption.

“Look hard enough and it is … possible to find businesses spawned by this consumption boom among the poor. Pedro dos Santos and his wife Dayse started a soap factory with 20 reais at their home in an improvised neighbourhood on the edge of Maceió, the state capital. With the help of a microcredit bank, they have increased daily output to 2,000 bars of crumbly soap the colour of Dijon mustard. Nearby, another beneficiary of a microfinance scheme has opened a shop selling beer, crisps (potato chips) and sweets.”

Improving economic conditions, of course, doesn’t guarantee happiness (despite the title of this post). Even the U.S. Constitution only promises people the right to pursue happiness. When families are held tight in poverty’s grip, they don’t have the means to make the pursuit. Help people earn enough money to eat, put a roof over their heads, and take care of their families and you find more smiles and increased laughter. The Brazilian program is not without its problems — not unexpected in any large government program.

“Despite the early success of Bolsa Família, three concerns remain. The first is over fraud. Because money is paid directly to the beneficiary’s debit card, there is little scope for leakage. The question is whether local governments are collecting accurate data on eligibility and enforcing the conditions. Some 15% of municipal councils make the improbable claim that 100% of pupils are in school 100% of the time. Despite this, most of the money does go to the right people: 70% ends up in the pockets of the poorest 20% of families, the World Bank finds. Second, some people worry that Bolsa Família will end up as a permanent feature of Brazilian society, rather than a temporary boost aimed at changing the opportunities available to the poorest. Whether this happens will depend largely on whether Brazil’s public schools improve fast enough to give all their new pupils a reasonable education. Since the scheme began on a large scale only in 2003, it is still too early to tell. Third, Bolsa Família is sometimes equated with straightforward vote-buying. That is unfair. Luiz Inácio Lula da Silva’s name is strongly associated with the scheme, even among some people in Alagoas who are unaware that he is Brazil’s president. But their gratitude does not extend to support for his Workers’ Party. There are signs that mayors who administer the programme well get a reward at the polls while those who do not suffer. For a relatively modest outlay (0.8% of GDP), Brazil is getting a good return. If only the same could be said of the rest of what the government spends.”

Clearly, the final chapter in this story is years away from being written. The positive aspect of the story, however, is that the program under discussion is aimed at creating some of the pre-conditions necessary to sustain development. Brazil, of course, is not a third world country. It is one of the stars among emerging market countries (along with the other so-called BRIC countries: Russia, India, and China). It does have enclaves, as the story suggests, that resemble conditions found in third world. That is why so many are watching how the program works there. If it works in Brazil’s poorest areas, it should work elsewhere around the globe.