THE MEANING OF DEVELOPMENT: BRAZIL AND COSTA RICA Economic development is the presumed solution to absolute poverty and to many of the world’s other most pressing problems. But what is development, and how do we know it when we see it? The term, development, has been used in several ways. Traditionally, it was equated with growth of per capita income. Since the 1970s, other indicators of development have become widely used by development scholars and development agencies such as the World Bank. The meeting of basic needs (or, equivalently, reduction in absolute poverty), the creation of modern employment opportunities, and the achievement of a less unequal distribution of income and farmland have all become important criteria in determining the level of development. Traditional measures of growth, especially in developing countries, may be misleading in that they fail to account for the environmental destruction that often accompanies spurts in temporary and unsustainable economic growth; and economists are devising measures of the national capital stock that includes environmental wealth. The United Nations has placed both educational attainment and health standards on equal footings with per capita income as development criteria, in the widely followed United Nations Development Program human development index (HDI). Some leading development scholars, such as Amartya Sen, Denis Goulet, and Dudley Seers, have gone further.
They argue that more intangible goals, such as expanded ability to choose (including political as well as market freedoms), enhanced self-esteem, and self-actualization must be considered development criteria in their own right, if not its only meaningful measures. Thus, development is not necessarily the same as growth, although in poor countries growth is generally a precondition for meeting important development goals, such as poverty reduction. But if growth is a necessary condition for development in poor countries, it is not a sufficient condition. This case study comparing Brazil and Costa Rica brings out some of these contrasts in national development performance when different aspects of development are stressed. These two Latin American countries are good cases to examine carefully because while Brazil is often cited as an example of a country experiencing growth without development and Costa Rica is often cited as a case of successful development, a close examination of these two countries reveals the great complexity of these issues. Costa Rica is of special interest because it has stood virtually alone throughout the last century as an example of democracy and slow but steady economic development in an otherwise violent and stagnant Central America. In fact, the Costa Rican government was very active in efforts to bring peace to the Central American region in the 1990s. Brazil is of special interest because its growth performance from the 1960s through the 1980s was the best in Latin America, with at least some parallels with East Asian policy and performance. At the same time, other indicators of development in Brazil lagged, eventually undermining growth prospects. Without being torn apart by civil war and benefiting from much higher incomes than Central American countries, it would seem that Brazil should have been in a much better position to fight extreme poverty and improve economic and social equity. Instead, it has continued to see an extremely high percentage of its population in extreme poverty for an upper middle income country, and remains one the countries with the highest levels of inequality in the world. Average Income and Human Development Levels. In 2000, Brazil’s per capita income was $3,750. Using purchasing power parity (PPP), its average income was $7,320. In Costa Rica, income per capita had reached $3,960 by 2000, with a $PPP income of $8,250. In Brazil, growth has been highly erratic, with large swings over time. In Costa Rica, growth has been modest but respectable and relatively steady. Costa Rica still maintains a substantial human development lead, as reflected in the United Nations Development Program’s Human Development Index. As of 1999 (the most recent data available as of July 2002), Costa Rica had attained high human development status, ranking 41st in the world, six positions higher than would have been predicted using its income rank alone. In contrast, Brazil ranked 69th, twelve positions lower than would be predicted by its income. These differences are largely accounted for by gaps in health and education performance. Costa Rica’s life expectancy at birth in 2000 was 77 years, the same as in the United States. But in Brazil, life expectancy at birth in 2000 was just 67 years. Similarly, Brazil’s under-five mortality rate is 40 per thousand, compared with just 14 in Costa Rica. In the education sphere, Brazil’s adult literacy rate is 85%, while that of Costa Rica is 95%. Helping to explain this difference, in Costa Rica, six years of school attendance are mandatory and 99% attendance is reported. Inequality.
A comparison of the distribution of income in the two countries can be seen in Table 1.1, derived from various World Bank World Development Reports. Table 1.1: Some Comparisons Between Brazil and Costa Rica Income 2000 per capita income 2000 PPP per capita income Brazil $3,750. $7,320. Costa Rica $3,960 $8,250. Poverty: percent below $1 per day 9.0% 6.9% Inequality Quintile Lowest 20% Second quintile Third quintile Fourth quintile Highest 20% Highest 10% Percent share in: Brazil Costa Rica 2.1% 4.0% 4.9% 9.1% 8.9% 14.3% 16.8% 21.9% 67.5% 50.8% 51.3% 34.1% Brazil 0.59 Costa Rica 0.46 Gini coefficient Growth Growth, GDP per capita, 1965-1990 Growth, GDP per capita, 1990-2000 1.4% 1.5% 3.3% 3.4% Gary Fields concluded that relative inequality substantially increased in Brazil from the early sixties to the early seventies. This trend continued through the 1970s, as the World Bank estimated the Gini coefficient measure of inequality in Brazil to have risen from 0.565 in 1970 to 0.590 in 1980. Increases in inequality were largest in the agricultural sector. In 1980 the top 5% of farms comprised 69.3% of the farmland in Brazil. Most observers have concluded that an even steeper increase in income inequality took place in Brazil during the 1980s, as is confirmed by comparing income distribution data in successive World Development Reports. In recent years inequality in Brazil has slightly moderated but seems to have levelled off at a high rate, comparable to 1980. But inequality in Costa Rica is also fairly high and only appears low in comparison to an extremely unequal country like Brazil. Poverty Fields concluded that the proportion of Costa Ricans below the absolute poverty line fell from 20% to 10% from the early sixties to the early seventies. In Brazil in this period Fields estimated the decline as from 37% to 35.5%. In the 1990s, absolute poverty declined in both countries (World Development Report, 1990, 2000), but it is apparently rising again in Brazil. In 2000, 25.4% of the population of Brazil lived on less than $2 per day, compared with about 23.3% in Costa Rica. Brazil also suffers from a very high incidence of child labour for its income level, as a December 2001 World Bank study and reports by the International Labour Office have underlined. As many as seven million children still work in Brazil, despite the country having officially made the eradication of child labour a priority. The problem is not unknown in Costa Rica, where the minimum working age is lower than that of compulsory education, an anomaly that may be interpreted as a wink and a nod at the problem. But the scope of the problem is comparatively modest. What lies behind these very different outcomes? Costa Rica’s background. Costa Rica’s modern development history begins with its 1948 revolution, and the broad-based development policies that emerged in its wake. The country has retained its democratic system since then, a rare exception in a region in which most countries have experienced extended periods of military rule in the postwar period. This democratic system should not be overly glamorized-the president holds substantial personal power; the legislative branch has tended to be inefficient and politically weak; central government power has expanded at the expense of local jurisdictions; and citizen participation is modest at best. The tax system in Costa Rica is quite regressive, like most countries in Latin America. The country experienced a 1980s armed right-wing movement associated with the contrast. U.S. military and economic aid has been significant, but two-edged. A 1980s scandal involved allegations that American aid funded a “parallel state”-one that drew part of its budget from high central bank interest payments on undisbursed USAID fundsâ€”and whose activities were directed at undermining Costa Rica’s government-directed development policies.
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