Understanding Brazilian Agriculture
through Dissipative Inclusion
Bernardo Mueller – University of Brasilia
 Brazil
has an uncanny knack to not do
what we expect it to do.
Outline of the talk:
Three ‘amazing’ examples from Brazilian
agriculture.
 Is it some kind of exceptionalism?
 Or is something missing from our
understanding of the Brazilian development
process.
 Dissipative Inclusion.

Example 1 – Agricultural production

Situation in the 1980s - early 1990s:







Low productivity
Inefficiencies, technological backwardness
Excessive concentration
Conflicts
Poor infrastructure
Dysfunctional government policies
Proposed solutions:




Land reform
More credit, more policies
Infrastructure
etc.
Em Discussão: Revista de Audiências do Senado, Ano 2 No. 9, dez. 2009
Where did this come from?
Obvious in retrospect?
 Brazilian exceptionalism?
 Or maybe something is missing from our
understanding.

Example 2 – Land Reform

Land Reform was tried in:




1946 Constitution;
Early1960s;
Authoritarian period 1964-1985;
Redemocratization 1985 - after…

and systematically failed.

Explanation: Political economy – Landowners too
powerful. Bancada ruralista, UDR, Judiciary, Congress.
And despite all this redistribution …
Not really land reform.
 Not related to the productivity revolution.
 Sales and abandonment.
 High cost.
 Environmental trade-off.

Where did this come from?
Can this process and these outcomes be
understood by the standard political economy
model?
 Does the rise of the MST explain everything?
 Or maybe something is missing from our
understanding.

The Political Economy of Land Reform in Brazil
160
140
120
100
80
60
40
20
Occupations
Popularity
Land Reform Policy in Brazil: The Informational Role of the Landless Peasants' Movement
Lee J. Alston and Bernardo Mueller (2012)
Jul-07
Jan-07
Jul-06
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Jul-05
Jan-05
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Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
Jul-99
Jan-99
Jul-98
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Jul-97
Jan-97
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Example 3 – Deforestation
http://www.shepherdsofgaia.com/2011_09_01_archive.html
Example 3 – Deforestation
Example 3 – Deforestation
From Eco-Catastrophe to Zero Clearing: why is
deforestation in the Neotropics declining?

Susanna Hecht – London School of Economics – Oct. 17,
2013:
“No one would have bet ... I would not have bet in the
year 2000 that the deforestation rate would decline
after 2004 by 84%.”
Once again there seems to be something
missing from our understanding ...
transparency
environmentalism
free press
NGOs
markets
independent
public prosecutors
international
organizations
competitive
elections
federalism
Beliefs, Leadership, and Critical
Transitions: Brazil 1964-2014
Lee J. Alston
University of Colorado and NBER
Marcus Melo
Federal University of Pernambuco
Bernardo Mueller
University of Brasilia
Carlos Pereira
FGV – Rio de Janeiro
Brazil: Beliefs, Leadership and Development
1960-2014
Developmentism
Beliefs
Social Inclusion
Aversion to Inflation
Events
Military
Coup
Timeline
1960 1964
President
Redemo- New
crati- Constitution
zation
Start
Opening
1974
Castelo
Medici
Branco
Jango
Costa
E Silva
Geisel
1985
Franchise
Real
Plan
Fiscal
responability
1994
2003
FHC
Tancredo/ Collor
Sarney
Itamar
Figueiredo
Lula
1050.6%
60.7%
Inf lation
24.6%
98.3%
10.1%
8.89%
4.03%
2.81%
Political
Ou tcome
Pressure
For Change
Populism
-
Authoritarian Rule
+
-
-
Democracy
Without Checks
& Balances
+
-
 GD P
3.12%
4.81%
Rule-of-Law
+
+
5.72%
Belief:
Sustainable Social Inclusion
Changes in the Social Contract in Brazil
17
16
2009
Federal Social Spending (% GDP)
15
2007
2006
2008
14
2005
2001
2002
2004
13
2000
2003
1998
1999
12
1997
1990
1995
11
1996
10
1980
9
1985
8
7
0.53
0.54
0.55
0.56
0.57
0.58
0.59
0.6
0.61
0.62
Gini Coefficient
Fonte: Federal social spending data for 1995 to 2009 from Ipea (2011). Data for 1980, 1985 and 1990 calculated using estimates of total
(federal, state and municipal social spending) and estimates of % federal in Ipea (2009: 42-44). Using the estimates in Ipea (2009) to
calculate the spending for 1995 and 2005 matches closely the data in Ipea (2011) so the numbers for 1980-1990 seem to be reasonably
comparable. Gini data from Ipeadata http://www.ipeadata.gov.br/.
Changes in Social Class Structure in Brazil
Fonte: Neri (2012) using data from PNAD/IBGE. The definition of each class relates to people in a family with per capita
monthly income equal to (in Reais of July 2011) : Class E – 0 to 1085; Class D – 1085 to 1734; Class C - 1734 to 7475;
Class B – 7475 to 9745; Class A – 9745 and above.
Evolution of the Minimum Wage
Dissipative Inclusion

Dissipative Inclusion: Characteristics
of development under the belief in
fiscally sustainable social inclusion.

What emerges from Dissipative
Inclusion?


Inclusion
Distortions, inefficiencies, rent dissipation
Examples of Dissipative Inclusion

Example

Inclusion

Dissipation

Land Reform

900 thousand
families
received land.
87 million
hectares
redistributed.
Credit.
Education.

18 thousand
rural conflicts.
1,200 deaths.
Insecurity of
property rights.
No rental
market.
Deforestation.
Human strife.








Examples of Dissipative Inclusion

Example

Inclusion

Dissipation

Biased labor
legislation.

Protects
workers from
exploitation.
Gives workers
greater
bargaining
power.

Reduces hiring.
Makes labor
markets
inflexible.
Promotes
informality.
Reduces
investment.




Examples of Dissipative Inclusion

Example

Inclusion

Dissipation

Affirmative
action in
universities

Access to
education.
Social ladder.

Impacts on
educational
quality.
Undermine
merit.
Resentment.



Examples of Dissipative Inclusion

Example

Inclusion

Dissipation

Participatory
institutions:
councils
(education,
environment,
water basins,
etc),
participatory
budget, etc

Gives
stakeholders a
voice in
matters that
affect their
lives.
Reveals
preferences.

Gridlock and
indecisiveness.
Transaction
costs.
Capture.



What are the consequences of Dissipative Inclusion?
Dissipation – Loud, messy and conspicuous.
Brazilian GDP per capita Growth Relative to the Rest of the World
1985
10
5
2006
2001
1996
1991
1986
1981
1976
1971
1966
1961
1956
0
1951
Growth Rate of Real GDP per capita (%)

-5
-10
lowest 20%
avgerage
top 20%
Brazil above avg.
Brazil below avg.
Source: Data for 1950-2007 from Heston, Summers and Aten (2009), constant 2005 prices (RGRGDPCH). Data for
2008-2010 from IMF (2010).
What are the consequences of Dissipative Inclusion?

Inclusion – Silent, bears fruit in the long term.

But who says that inclusion is the key to
development and economic growth?
Who says inclusion is the key to
development?

North, Wallis and Weingast (2009);
Acemoglu and Robinson (2012, 2006);
Lindert (2011); Bénabou (2002); Akerlof
(2013); Landes (1998); Easterly and Rebelo
(1993); Sala-i-Martin (1996); Saint Paul and
Verdier (1996); Aghion and Bolton (1997);
Perotti (1995); Galor (2011); Galor et al.
(2009); Engerman and Sokoloff (2000);
Alesina (1994); Bouginon (2004); Clarke
(1995); among many others.
But does this inclusion and
development narrative apply to
Brazil?