The Local Economy and the Vibrant Municipality
The fiscal structures of the Brazilian state in both empire and republic produced a closed loop between local economic conditions, local revenues, the ability to borrow, and the capacity to spend that reinforced both prosperity and poverty at the municipal level. This loop reproduced and reinforced inequalities between municipalities over time. The chapter compares per capita investments in human development—health, education, and infrastructure to support the local economy—and finds great disparities between the seven case study municipalities that were rooted in the fiscal structure. Broadly speaking, investment in human development was low during the empire and expanded in the republic, but the feedback loop produced vast differences in investments per capita between municipalities in the same region of Brazil experiencing the same commodity boom. The relative wealth of this region makes these cases the upper bound for investment in the public good. Municipalities in other regions almost certainly had worse outcomes. This chapter concludes that municipalities did invest in socioeconomic development, but the capacity to invest was constrained by the fiscal structure of the Brazilian state. Absent an exogenous shock that provided new vibrancy to the local economy, their ability to invest in the public good was limited.
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