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Brazil: Big Government Is Big Problem

Brazil: Big Government Is Big Problem

(p.135) Chapter Six Brazil: Big Government Is Big Problem
The Power of Productivity
William W. Lewis
University of Chicago Press

This chapter presents an analysis of the Brazilian economy. Brazil is one of the richest of the low-income countries, yet so much poorer than the advanced countries. This is evidenced by the vast settlements (favelas) of cardboard, paper, cloth, and canvas shelters on the outskirts of the big Brazilian cities, and especially São Paulo and Rio. The favelas suggest that the people living in them have a different kind of economic life. They are living outside the legal framework of their country. They are unregistered as workers, they pay no taxes, the enterprises in which they work don't look like anything seen anymore in the rich countries, and their productivity is on average about 15 percent of the average productivity in the United States. The chapter argues that Brazil ought to be doing better economically than it is. The country suffers a huge legacy from bad economic policy. Brazil has protected its domestic industries, protected foreign direct investment, merrily indulged in hyperinflation, let the government own and run a large part of its economy, and kept a fixed exchange rate too long.

Keywords:   Brazilian economy, settlements, productivity, low-income countries, economy policy

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