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Socioeconomic Inequality in Brazil and South Africa

Socioeconomic Inequality in Brazil and South Africa



An exploration of the key factors perpetuating extreme socioeconomic inequality in Brazil and South Africa today and the social policies designed to combat it, using Celso Furtado's understanding of ...

An exploration of the key factors perpetuating extreme socioeconomic inequality in Brazil and South Africa today and the social policies designed to combat it, using Celso Furtado's understanding of Dependency and development as an analytical guide.



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    Socioeconomic Inequality in Brazil and South Africa Socioeconomic Inequality in Brazil and South Africa Document Transcript

    • 1 Socioeconomic Inequality in Brazil and South Africa: An exploration of the key factors perpetuating extreme socioeconomic inequality in Brazil and South Africa today and the social policies designed to combat it, using Celso Furtado's understanding of Dependency and development as an analytical guide. - Ashleigh Kate Slingsby July 2013 Thesis submitted to Jawaharlal Nehru University for award of the degree of Masters in International Politics with Specialization in International Relations School of International Studies (SIS), Center for Political and International Studies (CPIS), Jawaharlal Nehru University, New Delhi 110067
    • 2 Declaration I declare that the thesis entitled “Socioeconomic Inequality in Brazil and South Africa” submitted by me for the award of the degree of Masters of International Politics (specialisation in International Relations) of Jawaharlal Nehru University is my own work. The thesis has not been submitted for any other degree of this University or any other university. NAME OF CANDIDATE: Ashleigh Kate Slingsby _____________________ CERTIFICATE: Masters of International Politics (specialisation in International Relations) NAME OF SUPERVISOR: Professor Priti Singh _____________________ DATE: 07/07/2013
    • 3 Index 1. Introduction 4. Literature Review 6. Methodology 8. Dependency Theory and Furtado's Approach to Development 8. A Brief History of Dependency and Development 11. Furtado and Development 18. Furtado's Relevance Today 22. The Case for Socioeconomic Inequality in Brazil 22. A Brief History of the Brazilian Economy 31. The Brazilian Economy Today 34. Factors Contributing to Socioeconomic Inequality in Brazil Today 34. Poverty 36. Education and Unemployment 37. The Rural-Urban Divide 38. The Tax System and Public Expenditure 40. Unequal Land Ownership 42. Social Protection Policies 46. Social Protection Policies in Brazil
    • 4 50. The Case for Socioeconomic Inequality in South Africa 50. A brief History of the South African Economy. 54. The South African Economy Today 60. Factors Contributing to Socioeconomic Inequality in South Africa Today 60. Poverty 64. Education and Unemployment 73. The Rural-Urban Divide 75. The Tax System and Public Expenditure 78. Unequal Land Ownership 81. Social Protection Policies in South Africa 84. Conclusion 88. Bibliography
    • 5 Abstract Socioeconomic inequality is a condition which defines our time. Socioeconomic inequality recognises social and political factors, beyond purely economic factors, contributing to inequality. Brazil and South Africa are two of the most socioeconomically unequal counties in the world. In this paper, using Brazilian Dependency theorist, Celso Furtado's understanding of dependency and development, I will explore how in both states, rigid and divided domestic socioeconomic structures have resulted in the persistence of underdevelopment for a major portion of the population. This is performed by designating the key factors perpetuating socioeconomic inequality in Brazil and South Africa today, which correspond to Furtado's understanding of a structurally divided society. These factors are poverty, poor education and unemployment, the rural-urban divide, shortcomings in the tax system and public expenditure, and unequal land ownership. An investigation of the social protection policies employed to combat socioeconomic inequality in both states is also included. This exposes where the central challenges lie for South Africa in tackling socioeconomic inequality, as well as potential policy recommendations. With Brazil being substantially developmentally advanced relative to South Africa, its future prospects appear more positive than South Africa in this regard. The legacy of Apartheid, as well as current political instability and corruption, are recognised as major challenges for South Africa. Additionally, the increased role of multinational corporations in today's globalized world, is seen to undermine the capacity of the state to transform the structures which perpetuate uneven development.
    • 6 Index Introduction Literature Review Dependency Theory and Furtado's Approach to Development A Brief History of Dependency and Development Furtado and Development Furtado's Relevance Today The Case for Socioeconomic Inequality in Brazil A brief History of the Brazilian Economy The Brazilian Economy Today Factors Contributing to Socioeconomic Inequality in Brazil Today Poverty Education and Unemployment The Rural-Urban Divide The Tax System and Public Expenditure Unequal Land Ownership Social Protection Policies Social Protection in Brazil The Case for Socioeconomic Inequality in South Africa A brief History of the South African Economy.
    • 7 The South African Economy Today Factors Contributing to Socioeconomic Inequality in South Africa Today Poverty Education and Unemployment The Rural-Urban Divide The Tax System and Public Expenditure Unequal Land Ownership Social Protection in South Africa Conclusion Bibliography Introduction Socioeconomic inequality is a condition which defines our time. The divide between the haves and have not's is of pressing concern in international relations academic and policy debate, being
    • 8 of global and urgent significance. We are currently immersed in a worldwide wave of social unrest confronting the inequality existing between the 1 percent socioeconomically privileged elite versus the 99 percent alienated from development. Over the past decade the West and East has endured repeated economic crisis, including the 2008 global economic recession, along with moments of considerable economic growth. This saw an ever increasing divide between rich and poor, with a global surge in unemployment and poverty, accompanied by an increase in multimillionaires per capita. Socioeconomic inequality recognises social and political factors, beyond purely economic factors, contributing to inequality. It recognises ones occupation and education, among other factors, as highly influential factors determining ones economic status. Thus it is most acutely represented in statistics addressing concentration of household income in a country. Brazil and South Africa are two of the most socioeconomically unequal counties in the world. In this paper I will explore how in both states, colonialism and an economy based on dependent international trade, resulted in the establishment of internal socioeconomic structures causing the persistence of underdevelopment for the majority of the population. Following an exploration of famed Brazilian Dependency theorist, Celso Furtado's understanding of the domestic consequences of dependent international trade for peripheral states, I designate the key factors perpetuating socioeconomic inequality in Brazil and South Africa today. These are poverty, poor education and unemployment, the rural-urban divide, unequal land ownership and shortcomings in the tax system and public expenditure. This investigation is not intended as a comparative analysis per se, but a case study of structural socioeconomic shortcomings which perpetuate conditions resulting in extreme socioeconomic inequality. With Brazil being significantly developmentally advanced relative to South Africa, and having made considerable progress in addressing extreme socioeconomic inequality in recent years through innovative social protection policies, I aim to extract where the central challenges lie for South Africa, as well as potential policy recommendations. The legacy of Apartheid, as well as current political instability and corruption, are seen as major factors jeopardising the successful formulation and implementation of policies aimed at tackling socioeconomic inequality. This does not bode well for the future of the majority of South Africans who are deprived of basic
    • 9 public services and the potential of upward socioeconomic mobility. Brazil's future prospects appear more positive, however it too is experiencing widespread dissatisfaction among the majority who bear the heavy burden of high inflation, some of the world's highest taxes and poor service delivery. In this paper I will employ Dependency theory as the central theoretical approach. Dependency theory is a school of thought that emerged in Latin America in the 50' and 60's among scholars grappling with the influence of colonialism on the continent's trajectory of development. In the field of international relations, 'dependency' is a theoretical concept referring to a state's internal conditions being determined by, and consequently structured to, external forces. It implies a degree of reliance on, or subordination to these external forces. Thus it recognises how colonialism, as an external force, had consequences for the internal development of Latin American States. Dependency theorist, Celso Furtado's understanding of persistent underdevelopment pays specific attention to the internal structural consequences dependency has on development. His approach thus provides great utility when examining the domestic conditions of a highly unequal, post colonial state. Furtado's theoretical understandings were extracted predominantly during the 50's and 60's in Brazil. I believe they still have continued applicability today and give further credence to his recognition of the rigidity of the internal structure of a state whose development was informed by the confrontation of an already industrialised 'centre' state with a preindustrial 'peripheral' state. This relationship continues to exist in the post-colonial era due to the influence of multinational corporations (MNCs). These extremely powerful corporations extract resources and cheap labour from developing peripheral states, channelling capital toward developed industrialised centre states, which serve as manufacturing and export hubs. Their decisive participation in the economies of developing states, has the capacity to influence government interests in a manner that precludes homogenous development from occurring in many emerging economies of the South, today. Although the histories of Brazil and South Africa differ, the conclusions drawn by Furtado in the case of Brazil bare striking resemblance to the current state of South Africa's underdevelopment.
    • 10 Thus using Furtado's theoretical understanding of dependency and development I will expose how dependency and socioeconomic inequality are linked. This involves the majority of the population being alienated from development while a wealthy minority, connected to external markets, benefits from global economic integration and the yields of growth. The Gini Index of Brazil is 0,54 indicating great inequality. One percent of the country receives 13 percent of all household income.1 South Africa has a Gini Index of 0,7. This indicates a situation of severe social stratification. Brazil has experienced a minor reduction in socioeconomic inequality over the past decade due to the successful implementation of various social protection policies, resulting in a significant reduction in extreme poverty. Brazil's experience thus serves as a potential source of useful policy prescriptions for South Africa for combating socioeconomic inequality. Various multi-national forums and organisations have emerged in recent years recognising this exact dynamic. BRICS (Brazil-Russia-India-China-South Africa) and IBSA (India-Brazil- South Africa Dialogue Forum) feature prominently in this regard. Above: The GINI Index measures and graphs inequality in the distribution of household income in a country.2 This graph illustrates the Gini Index in Brazil, 1976-2009.3 I will commence this paper with an outline of Furtado's dependency theory. This will serve as the analytical guide in unpacking the key factors contributing to socioeconomic inequality in Brazil and South Africa today. Therefore this will be followed by an investigation of the case of socioeconomic inequality in Brazil today. By designating the key factors contributing to socioeconomic inequality in Brazil today, I will extract the dynamics at play that result in the 1 World Fact Book. (2012). "Brazil: Economy". Accessed (October 2012): https://www.cia.gov/library/publications/the-world-factbook/geos/br.html 2 Central Intelligence Agency, The World Fact Book. "Distribution of Family Income: Gini Index". Accessed Online (February 2013): https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html 3 IPEA (Instituto de Pesquisa Economica Aplicada). (2011). "Statistics on the GINI coefficient in Brazil". Accessed Online (October 2012): http://www.ipeadata.gov.br
    • 11 persistence of unequal development. These findings will then fuel the investigation into socioeconomic inequality in South Africa today, which is where the focus of this paper lies. This will in turn expose how the central contributing factors to socioeconomic inequality are the same in Brazil and South Africa, thus accounting for the strong influence of the rigid structure of dependent development. For both states I will explore the various social protection policies that have been put in place to tackle socioeconomic inequality. This will provide insight into the government's response to inequality, its capacity to implement policies and its degree of success. This will ultimately facilitate a comprehensive appraisal of the roots, responses and avenues for redress for socioeconomic inequality South Africa today. In Brazil and South Africa, reforms have been made and policies engineered aimed at addressing the pronounced social stratification. However it is clear that more needs to be done to create widespread change. It can be said that globalisation, which has increased the role of MNCs, and undermined the role of the state in political economic relations, is the defining obstacle in combating socioeconomic inequality in developing states around the world today. Furtado did not account for this specifically, relying solely on the government to induce change. Even so, with socioeconomic inequality being a common feature of postcolonial, dependant states, Furtado's insight's prove useful by exposing the structural components that induce persistent underdevelopment among the majority of the population. He prescribes comprehensive transformation of the social and economic structures of society for development to be homogenised. Therefore policies aimed at addressing the symptoms of inequality are not enough to create substantial change. As long as the overarching interests of the state and MNCs are informed by private gain for a minority, inequality will persist. A shift in consciousness needs to be induced, for MNCs and government to take the interests of all human beings seriously. Literature Review Carlos Mallorquín supplies a brilliantly insightful outline of Furtado's understanding of development and underdevelopment in "Celso Furtado and Development: An Outline"4 . I refer to this work numerous times throughout my study as it sheds light not only on the substantive 4 Mallorquín, C. (2007). "Celso Furtado and Development: An Outline" Development in Practice, Vol. 17, No. 6. Published by: Taylor & Francis, Ltd. on behalf of Oxfam
    • 12 details of his understanding, but also the life experiences he endured which informed his understanding of the forces of development. This thus offered a dual insight by also supplying information on Brazil, where Furtado extracted most of his observations. 'Celso Furtado and the Resumption of Construction in Brazil: Structuralism as an Alternative to Neoliberalism' by Qeisa Maria Rocha, contributes insight into the case of Brazil under the Lula administration (2003-2011) in assessing the degree of relevance and accuracy of Furatdo's socioeconomic policy recommendations for Brazil.5 This thus serves as a primary body of evidence in demonstrating the contemporary applicability of Furatdo's theories, whilst assessing their predictive capacity. This work introduces Brazil at a time when it was facing massive debt following the rule of Cardoso, who followed the conventional liberal model of development. Under Lula's new model of development, which can be seen to be comparable to Furatdo's structuralist conception of development, it is determined whether there are greater prospects for development and growth in Brazil in the future.6 The United Nations Development Programme (UNDP) Brasilia website served as a useful source by providing up-to-date information regarding poverty and social protection policies in Brazil today. "IBSA/IBAS Poverty in Focus: What can IBSA offer to the Global Community?"7 as well as "Social protection and the role of cash transfers"8 from the International Policy Centre for Inclusive Growth (IPC-IG, commissioned by the UNDP) offered compelling insights into the most successful approach to tackling poverty in an effort to reduce socioeconomic inequality. These sources expose how a multidimensional approach to poverty reduction is essential for long term, sustainable, homogenous development to be achieved. 5 Rocha, GM. (2007), " Celso Furtado and the Resumption of Construction in Brazil: Structuralism as an Alternativeto Neoliberalism", Latin American Perspectives, Vol. 34, No. 5, Brazil under Cardoso (Sep., 2007), pp. 132-159. Published by: Sage Publications, at p. 132. 6 Ibid. 7 The International Policy Centre for Inclusive Growth (IPC-IG. (2010). "IBSA/IBAS Poverty in Focus: What can IBSA offer to the Global Community?" International Policy Centre for Inclusive Growth Poverty Practice, Bureau for Development Policy, UNDP. Accessed Online (May 2013): http://www.ipc-undp.org/pub/IPCPovertyInFocus21.pdf 8 United Nations Development Programme. (2006). "Social protection and the role of cash transfers". International Poverty Centre: United Nations Development Programme. Accessed Online (May 2013): http://www.ipc- undp.org/pub/IPCPovertyInFocus8.pdf
    • 13 In Michael Aliber's, "Chronic Poverty in South Africa: Incidence, Causes and Policies"9 Aliber distinguishes persistent poverty from transitory poverty in South Africa. This analysis is performed in order to arrive at policy recommendations that can alleviate chronic poverty in South Africa. Consequently, issues relating to unemployment and land reform are emphasised. Aliber's study is useful to my investigation by providing relevant historical insight into the current state of underdevelopment in South Africa. More so, with special attention being paid to persistent poverty, many correlations can be drawn to the persistence of underdevelopment. Thus unemployment can be understood in terms of growth catering to an elite minority while the urgent need for land reform is accounted for in terms of the "pre-existing institutional matrix which determined the repatriation of wealth"10 . The South African National Planning Commission's11 diagnostic analysis of South Africa's socioeconomic progress since the end of apartheid served as a foundational source of quantitative and qualitative data. The Commission was mandated by President Jacob Zuma in 2010 to perform an analysis that would determine South Africa's future developmental agenda in an effort to improve the quality of life of all its citizens. It provides a thorough investigation of factors essential to my analysis of socioeconomic inequality in South Africa today, including unemployment, education, public expenditure and poverty. M. Leibbrandt, I. Woolard, A. Finn and J. Argent's 2010, "Trends in South African Income Distribution and Poverty since the Fall of Apartheid"12 provides analysis of census data concerning poverty and income distribution in post apartheid South Africa. It proved useful when examining poverty in South Africa today, the key contributor to extreme socioeconomic inequality. It assimilates statistical analysis in a manner that is concise and accessible to provide a coherent logic to poverty and policies in the post apartheid era. 9 Aliber, M. (2003). "Chronic Poverty in South Africa: Incidence, Causes and Policies" Human Sciences Research Council, Pretoria, South Africa. Elsevier Science Ltd. 10 Cavalcanti, at p. 7. 11 Department of the Presidency of South Africa. (2012). "The National Planning Commission". Accessed Online (June 2013): http://www.info.gov.za/view/DownloadFileAction?id=147192 12 Leibbrandt, M. Woolard, I. Finn, A. and Argent, J. (2010). "Trends in South African Income Distribution and Poverty since the Fall of Apartheid". University of Cape Town. Accessed Online (June 2013): http://www.oecd- ilibrary.org/docserver/download/5kmms0t7p1ms.pdf?expires=1371636736&id= id&accname=guest&checksum=62E178ED5D3132522243885-B0891608D
    • 14 Dependency Theory and Furtado's Approach to Development A Brief History of Dependency and Development Brazilian, Celso Furtado is recognized as one of the most important contributors to the Dependency school of thought. As Director of Planning for the Brazilian government in the 1950's, he was forced to confront the conventional thought of the time, which explained
    • 15 underdevelopment in terms of lack of capital and poor domestic productivity.13 He was in charge of finding developmental solutions for the most underdeveloped areas of Brazil. The Cold War era had dawned and the world was structured around the antagonistic forces of two nuclear equipped Superpowers. The world was also witnessing a wave of decolonization. These newly independent states were fighting for recognition of the Third World and a stake in global governance.14 The increasing prominence of the Third World in world affairs prompted the United States to initiate numerous international institutions to govern international relations, which soon inspired the same in Latin America, despite opposition from the US.15 This manifested in the creation of the Economic Commission for Latin America and the Caribbean (ECLAC) or CEPAL as it was referred to in Latin America.16 ECLAC is today credited with evolving a structuralist approach to understanding persistent underdevelopment by designating a centre-periphery arrangement of the global economy, understood in historical perspective.17 Furtado published work up until 2002 however his main body of work was written from the 1950's to the 1980's. His understanding of persistent underdevelopment was produced at a time when prominent Latin American thinkers were trying to decipher why their continent was failing to develop and why the liberal theories of the day failed to explain its relative underdevelopment. For Furtado, ECLAC's explanations fell short by ignoring the social and political components contributing to development. However ECLAC's intellectual tradition was still highly influential for Furtado. The contribution of founding dependency school intellectuals like Raul Prebisch, were crucial to his understanding of the world economy.18 Furtado was also initially influenced by a Keynesian understanding of economics to explain Latin America's economic situation. This placed planning and demand management as the solution to the cyclical upswings and downswings in the global economy. Thus the government 13 Blomstrom, M and Hettne, B. (1984). "Development Theory in Transition". The Dependency Debate and Beyond: Third World Responses, London: Zed Books, at p. 56. 14 Mallorquín, at p. 807. 15 Ibid. at p. 808. 16 Ibid. 17 Rocha, at p. 133. 18 Mallorquín, at p. 808.
    • 16 was required to actively intervene with fiscal policies to help manage interest rates and budget deficits to ensure employment opportunities and an appropriate level of income.19 This was aimed to overcome the downward cyclical swings in market forces to ultimately ensure economic growth. However these Keynesian ideas were designed to cater to industrialised states with developed economies. Furtado become aware of the absence in economic intellectualism of the day, to explain the economic conditions in developing states that had experienced very limited economic development. Therefore the culmination of these influences resulted in a new understanding of history and the world economy for Furtado.20 Thus the term 'underdeveloped economies' emerged. This described states whose economies were founded on the production of raw materials and had experienced limited industrialisation.21 This term was groundbreaking as it gave intellectual recognition to an until then, actively ignored component of international economic political understanding. ECLAC was keen to engage with this new concept and consequently pioneered development of the understanding of underdeveloped economies. This is what accounts for ECLAC representing and promoting so many of the founding intellectuals of the Dependency school of thought, like Prebisch and Furtado. Prebisch, an Argentine economist, had also been unable to explain his country's economic development when employing conventional liberal economic understandings of the time. He most crucially recognised that underdeveloped economies could not mimic the process of industrialisation and development of developed states in order to reach the same stage of development. He stated that the very reason developed states were developed was on account of the underdevelopment of underdeveloped states. They were thus part of a common process, not separate trajectories at different stages of development. Therefore Furtado emphasised how underdeveloped, peripheral states producing raw materials facilitated the development of the developed, centre states producing manufactured goods. Within this structured international division of labour, no adaptation could be made to overcome underdevelopment in the periphery. 19 Ibid. 20 Blomstrom, at p. 56. 21 Mallorquín, at p. 809.
    • 17 Prebisch also recognised the concept of 'deterioration of terms of trade' as a major obstacle to overcoming underdevelopment.22 In the case of Argentina, Britain had a monopsonistic hold over Argentinean beef exports, which constituted its primary export. Britain therefore had a hold over Argentina's commodity production and pricing. The two states had signed a pact in 1933 that fixed tariffs in favour of Britain, meaning that it dictated the terms of trade. This resulted in declining terms of trade as prices of agriculture products fell rapidly during the Great Depression. Demand for agriculture goods was inelastic, with Britain serving as Argentina's only buyer. Furthermore, Argentina was still importing manufactured goods at the time. This demanded an increase in exports to compensate for the lower prices of their beef exports, and consequent lower profits. This in turn resulted in increased production costs, therefore requiring a reduction in wages. This ultimately hampered industrial development, limited economic diversification and forced Argentinean labourers to work for extremely low wages.23 This culminated in widespread underdevelopment, which intern lowered investment and the capacity to use or attract foreign capital whilst encouraging local saving.24 The economy of the periphery was thus dictated by the economy of demand of the centre. The periphery was thus extremely vulnerable to external forces and this showed in its inability to pursue consistent development or develop at all. For Prebisch, the answer to deteriorating terms of trade was internal, independent industrialisation of the periphery. A more industrialised and diversified economy would provide employment opportunities at better wages and substitute many of the imports it was reliant on while extending the market to the export of manufactured goods, thus encouraging technological development.25 Prebisch also called for regional integration of Latin American economies.26 However industrialisation and regional economic integration was and continues to be unforeseeable as long as economic development is dictated to the periphery in the interest of the centre. This understanding of Prebisch is what inspired the development centred mentality of Brazilian socioeconomic policy in the mid 1990s demonstrating the consistent influence Dependency theory has had on states grappling with uneven development. 22 Mallorquín, at p. 809. 23 Ibid. 24 Mallorquín, at p. 809. 25 Ibid. 26 Ibid, at p. 810.
    • 18 Furtado and Development Furtado's structuralist socioeconomic perspective includes foundational concepts of the Dependency school of thought by understanding capitalist development in terms of an international centre and periphery dynamic.27 He drew attention to the fact that historical forces, namely colonialism, have a major impact on the trajectories of development between centre and peripheral states. 28 Therefore, although originally coming from purely economistic roots, he soon arrived at what can be seen as a Keynesian-Marxist understanding of the world economic system.29 Furtado recognised how the confrontation of an already industrialised centre, with a periphery that had not experienced industrialisation, had major consequences for the internal structure of the periphery.30 He specifically referred to the colonial confrontation occurring after the First Industrial Revolution in Western Europe during the mid 18th Century.31 Traders from the centre had no interest in investing in industrial development in the periphery. Instead, they channelled capital back towards the centre, circumventing growth or technological progress taking place in the periphery.32 The structure of production in the periphery was essentially subsistence meaning it did not generate profit like the structure of production emanating from the centre, which was solely geared towards capital accumulation.33 This was attributed to entrepreneurs from the centre incorporating the value of their labour with the value of the good itself into the total value of the good to be sold to the consumer in the centre.34 As long as the goods were competitively priced in the market of the centre, the entrepreneur could accumulate profit. This provided an incentive for advancing production techniques to cut costs of manufacturing which took place in the centre. Thus technological development was encouraged, facilitated by the capital already 27 Blomstrom, at p. 57. 28 Ibid. 29 Ibid, at p. 58. 30 Furtado, C. (1964). "Desenvolvimento e Subdesenvolvimento: Translated by Aguiar and Drysdale". University of California Press, at p. 116. 31 Szmrecsa´nyi, T. (2005). "The contributions of Celso Furtado (1920 – 2004) to Development Economics". Euro. J. History of Economic Thought. Routledge, at p. 692. 32 Furtado, at p. 117. 33 Ibid. 34 Ibid.
    • 19 accumulated by the entrepreneurs.35 This accounted for science and technology being of such high concern in the industrialised centres. Furtado referred to this as this mechanised sector.36 He considered its emergence to be the first stage of development as it usurped the previous modes of production that were largely performed by hand and did not demand industrialisation. Therefore development in the centre only stimulated further demand for consumer goods, which provided further incentive for the entrepreneurs to seek out potential exploitable materials in the periphery. Thus the confrontation between the industrialised centre and the periphery persisted, with the interests of the centre dictating the terms of trade. What makes Furtado such a decisive contributor to the school of Dependency is that he focused his investigation on the internal consequences this relationship had for the periphery. The intervention of an already capitalist industrialised centre with a preindustrial periphery had dramatic consequences for the internal structure of the periphery. This recognition represents one of the most compelling insights of Furtado. He recognised the formation of a 'hybrid structure' in the periphery.37 This dual economy involved a modern industrial capitalist economy existing alongside a preindustrial economy maintaining its traditional agrarian mode of production. The industrialised component of the dual economy catered to the domestic elites connected to the external markets of the centre. For Furtado, it was this internal structure, created through dependent international trade, that was responsible for persistent underdevelopment among the majority of the population. Thus Furtado drew attention to the way in which internalities of the periphery were as important as externalities of the centre in conditioning underdevelopment. The external influence of colonialism had resulted in an extremely rigid internal structure in the periphery, which severely hampered widespread, homogenous growth. A highly heterogeneous dual economy manifested and persisted into the 20th century. The institutional patterns and socio economic matrixes established through colonialism created an internal structure that precluded development beyond a minority of elites, resulting in persistent underdevelopment and widespread socioeconomic inequality for the masses. 35 Ibid. 36 Ibid, at p. 119. 37 Furtado, at p. 142.
    • 20 Furtado thus concluded that to initiate development, transformation needed to take place in a far more comprehensive manner than economic reforms alone. Social and economic transformation needed to take place to replace the institutions and socioeconomic matrixes which reinforced and perpetuated the structure of underdevelopment in the periphery. It is this notion which is central in assessing Brazil and South Africa's current state of development and the persistent presence of socioeconomic inequality.38 This also accounts for socioeconomic as opposed to purely economic inequality being investigated. The social, political and historical factors contributing to the vast economic divide that persists in both Brazil and South Africa, must be understood if one is to tackle inequality in a manner that can induce widespread development. By recognising underdevelopment as a historical, autonomous process and not a stage to pass through in order to arrive at the stage of being development, one if forced to address the historical contingencies that determined the condition of underdevelopment.39 A centre-periphery structural arrangement was created between, for the most part, Europe and Latin America, Africa and Asia. By functioning in a dependent relationship of modern versus traditional societies, capitalist versus non capitalist economic systems, and agricultural versus industrial modes of production, the centre and periphery experienced independent, autonomous trajectories of development. This rendered the modern capitalist industrial states of the centre, receptive to change and able to adapt to new conditions and demands on account of advanced industry and access to new technology. With an economy designed for profit maximisation they could invest in growth domestically and invest in production abroad, thus reaping further surplus. This market orientated, capitalist development provided mass employment opportunities and consequently widespread development. Conversely the traditional, feudal economies of the periphery, which centred on the production and export of raw materials, were industrially stagnant, with dependant markets based on subsistence infrastructure. With output dictated by land and manual labour there was little opportunity or capital for technological or industrial development meaning low wage jobs and therefore exceptionally limited development. What development did occur in the periphery was geographically isolated, garnering benefits to an elite portion of the population who had 38 Szmrecsa´nyi, at p. 193. 39 Szmrecsa´nyi, at p. 193.
    • 21 economic interests abroad and desired replicating the consumer culture of industrialised nations abroad for themselves. By investigating the case of dependency in Brazil, Furtado demonstrated how the rigid structure of this peripheral state, precluded from change or adaptation, resulted in an internal structure that perpetuated the state of underdevelopment already entrenched by externalities. He designated three sectors in this internal structure of the periphery. The first encompassed half of the dual economy, referred to as the agrarian or traditional sector. The agrarian sector maintained all preindustrial heritage despite industrialisation having occurred in the other half of the dual economy. It maintained traditional values such as ascriptive religious practices along with wide spread parochialism in terms of group alignment. These ascriptive attitudes undermined the role of emotion in society and enhanced religious and military influences in the political realm. This was seen to account for the decades of military rule in Brazil as well as the strict devotion to Catholicism, especially in the rural areas. The agrarian economy produced mainly for export and only enjoyed a subsistence level of income. These insular communities worked on massive plantations inherited by colonial structures, receiving a minimal return for their labour. The remaining two sectors comprised the industrial or modern half of the dual economy. This half was far more structured. It enjoyed far more universal values as it attempted to maintain a neutral, professional, achievement orientated approach to society. This half could be divided into two sectors. The first, represented the comprador or agent bourgeoisie. They comprised of the elites of the periphery however they were still subservient to external markets of the centre. Their focus was on export promotion and capitalism geared to the externalities. Thus demand and modernisation of this sector was determined by external markets. This sector enjoyed a portion of profits much higher than that of the agrarian half of the economy however still not comparable to elites of the centre where most profits were channelled. The second sector, also existing in the industrial half of the economy, represented the salaried classes and industrial workers of the periphery. This middle sector or national bourgeoisie catered to the domestic demand for industrial or modern goods. Thus it expanded and contracted in size relative to demand resulting at times, in a surplus of unused labour. Depending on the
    • 22 level of demand, there could be incorporation of this sector into the comprador bourgeoisie as savings and investments increased, meaning a more equitable distribution of income among the industrialised economy. However the agrarian class, which lacked the capital and socio-cultural know how to save and invest, was barred from attainting a more equitable distribution of income. They thus remained landless. Furthermore, the elites of the industrial sector ensured the structure of the economy was resistant to change in order to maintain the majority share of income. The agrarian sector simply functioned to satisfy the demands of the elites. Their wages were kept at an absolute minimum as they failed to unionise to motivate for structural economic changes that would ensure a fair distribution of income. The national bourgeoisie was far more likely to organise itself as it was not dependant to the same extent as the agrarian sector on the comprador bourgeoisie whilst having the capacity to mobilise itself. Therefore, the internal structural rigidities of the peripheral economy left the agrarian sector at the mercy of the national elites. The elites also held positions of power in the state. They proved highly influential in both their economic capacity, by being in charge of industrial capitalist production and in their political capacity, by inhabiting decisive positions in government. Furthermore, the industrial capitalists had extensive lobbying power as a minority which dictated the economy of the majority with links to external markets. The agrarian traditional sector of the economy did not have the political influence or financial capacity to incite change, rendering the structure of the economy in the periphery exceptionally rigid. The elites also faced external pressure from the centre to maintain the structure of the economy in the periphery in a manner that ensured raw materials were produced and sold to the centre at exceptionally low costs. If the periphery failed to maintain these low costs it would lose its external markets that its entire economy was geared towards. This was also said to account for the presence of military dictatorships in Brazil, which were supported by states comprising its external markets. It ensured the maintenance of economic structures providing wealth to the centre. It was in the interest of the elites to keep the masses subservient to achieve high profits for themselves and the external market. Military dictatorships prevented unionisation and political mobilisation in the agrarian sector whilst technological heterogeneity prevented accumulation of profit among these traditional masses in the periphery. This further entrenched a
    • 23 highly unequal distribution of wealth in the periphery as no capital flow took place among the majority of the population on account of a minority of elites dictating the structure of the economy in the interest of private profiteering and external markets. Furtado placed great emphasis on the way in which this brand of dependent international capitalism precluded the periphery from technological progress whilst simultaneously provoking the accumulation of debt.40 Furtado had grown pessimistic about the role of foreign capital in developing states during his tenure as Planning Minister where he witnessed the negative impact of US capital and economic intervention on industrialisation in Brazil.41 This intervention saw import substitution industrialisation (ISI) and an increase in labour demand as the formula for development. However, Furtado critically recognized than in order for an underdeveloped state to independently produce what would otherwise be imported goods, it needed to import further goods and technology in order to facilitate production.42 Furthermore, ISI stimulated a demand for labour of a more skilled nature which did not cater to the majority of the population seeking work. The same applied to domestic economies of scale, as widespread underdevelopment meant few opportunities for local economies to engage with and benefit from a more technologically advanced mode of production. Additionally this advanced mode of production demanded savings and perpetual investment to stay at pace with international advances in technology. The economy of the periphery did not have these savings or capital to sustain industrial production. Furtado applied these insights to the case of Brazil to explain its persistent underdevelopment. This exposed how the capitalist approach to modernisation only incurred benefits for a minority of local elites in the periphery whilst having a destructive economic impact on the majority, thus provoking vast socioeconomic inequality. He concluded that to avoid exploitation of the periphery, state intervention was required to regulate market tendencies which were otherwise dictated by the interests of multinational corporations (MNCs) emanating mainly from the US and Europe.43 This is where he is said to fall short, by underestimating the influence of MNC's on 40 Mallorquín, at p. 811. 41 Mallorquín, at p. 811. 42 Ibid. 43 Ibid.
    • 24 states. This is especially relevant in today's globalised economy where the dividing line between state and corporates has become increasingly blurred. Furtado's study of Brazil exposed the concept of deteriorating terms of trade and thus provided a coherent logic to the emerging understandings of underdevelopment. This thus uprooted all conventional thinking in the realm of Keynesian informed economic thought of the time. Furtado realised that a comprehensive structural approach was necessary to understand the Brazilian case, which demanded attention being drawn to social, political and historical forces. 'Underdevelopment' was not a phase or temporary condition on the path to development but a component of a global historical process which rendered one part of the world developed at the expense of another part of the world remaining underdeveloped. Furtado spent the 1960's developing his theory of underdevelopment while working for the Northeast of Brazil as Minister of Planning. This culminated in him publishing the 'The Economic Formation of Brazil' in 1959 which gave cohesion to his structural analysis.44 In 1961 he published 'Development and Underdevelopment' where he emphasised land reforms, increased wages and the equitable distribution of resources as essential to confronting the obstacles of underdevelopment and socioeconomic inequality. He saw economic development from a comprehensive perspective that demanded transformation of all aspects of state functioning, thus solutions were not confined to solving the symptoms of poverty and inequality.45 His studies were in this sense not limited to the field of economics, or touted as politically neutral or impartial, as was the traditional approach to issues of development. He incorporated Marxist influences with the recognition of classes and the state as decisive to development. Such aspects of Furtado's approach make his insights of such relevant import in guiding the analysis of socioeconomic inequality in South Africa. Although his insights into persistent underdevelopment and socioeconomic inequality in post colonial dependent states were extracted predominantly in the 50's and 60's, I understand them to have poignant applicability to developing states like South Africa. Furthermore, the central obstacles to development which he designated undoubtedly have continued relevance. Thus his insights serve as a useful tool when deciphering the origins of and solutions to socioeconomic inequality. 44 Mallorquín, at p. 810. 45 Ibid. at p. 811.
    • 25 Furtado's Relevance Today Today dependency theorists like Furtado are hugely disenfranchised by the hegemony of neo liberal thought in the realm of political-economics.46 Yet socioeconomic equality has not been achieved through the imposition of liberal policies, demonstrated in the striking cases of underdevelopment in states across Latin America, Africa and Asia. Liberal policies have ultimately failed to achieve the egalitarian societies they envisioned. Furtado recognized how mechanisms of power were central to the structure of the world market which resulted in development being far from equal. With today's world economy facing financial crises amongst the most developed states, it is clear that the neo liberal logic of our time needs to be called into question. Despite Furtado's insights being decades old, it seems his specific attention to the persistence of underdevelopment and its inseparability from the economies of the most developed states, is of striking relevance today. Furthermore his mission was to arrive at economic strategies which reversed and avoided such stark inequalities.47 The Bretton Woods Institutions, that is the World Bank (WB) and International Monetary Fund (IMF), represented the embodiment of the liberal approach to economics at the time of Furtado's writing. We can now see the negative impact Structural Adjustment policies and various other liberal driven polices, promoted by developed nations, have had on the economies of developing nations. Furtado's insights draw direct comparisons with today's perpetual reference to and critiques of the forces of globalisation.48 For decades globalisation as a concept has justified and motivated capitalist expansion. However the impetus behind this movement is now being called into question, as few people beyond a minority of economically elite have been able to benefit from economic growth and integration. Furtado's understanding of persistent underdevelopment is able to expose the reason development is not something universally experienced as is envisioned by the invisible hand of the market posed by liberal capitalists. He was able to supply concrete evidence that drew parallels with experiences of peripheral underdeveloped states across the world. This is what has prompted application of his understandings, which were arrived at 46 Ibid. at p. 807 47 Mallorquín, at p. 807 48 Ibid. at p. 811.
    • 26 through analysis of Brazil and Latin America, to the South African case. He recognized the impending all prevailing power of the United States (US) and MNCs in the global economy, which continues today to be its defining component.49 Furtado was not calling for isolation of the national economy but autonomous entry into the global market as opposed to inclusion based on dependency and exploitation. Without an active commitment to independent and indigenous developmental policies, the states designated as the periphery relative to the centre, would have this role perpetuated and thus continue to endure persistent underdevelopment.50 This sentiment is what has inspired the promotion of South -South relations in contemporary international relations. This entails developing states cooperating in a manner that democratises developmental benefits and diverts exploitation. With so many emerging economies emanating from the developing South, this has enhanced the capacity of peripheral states to determine the trajectory of their development independently. Admittedly, the persistent applicability of Furtado's understandings may be called into question. Many developments have taken place since the 60's that have changed the way in which the economy works. Information and communication technology has drastically increased the speed and intensity of economic engagement, meaning capital and assets can be transferred virtually effortlessly. The firm establishment of the World Trade Organisation (WTO) along with the deregulation of various preferential trade agreements has rendered the liberal free market economic approach the status quo. Private, MNCs dominate the global economic landscape to a staggering extent and have heavily undermined the role of the state, which is seen of critical utility in dismantling the structures of persistent underdevelopment for Furtado.51 Even so, his theory and policy for economic development still holds striking resemblances and relevance to today's realities. His structural theory designates key dynamics and processes which influence development. He recognised the historical forces contributing to development whilst providing solutions to reform the resultant structures which perpetuate underdevelopment. Crucially, he focused his analysis on the internal consequences of external dependency. His emphasis on the resultant socioeconomic inequality between a minority of industrial capitalist elites versus a 49 Ibid. at p. 813. 50 Rocha, at p. 132. 51 Cavalcanti, at p. 12.
    • 27 majority in the traditional agrarian sector makes his approach an exceptionally useful tool in guiding the analysis of socioeconomic inequality in Brazil and South Africa today. The Case for Socioeconomic Inequality in Brazil Many developments have taken place in Brazil in terms of socioeconomic inequality since the time of Furtado's writings. My investigation pertains to contemporary Brazil. Thus, reference will be made to developments of the past where necessary. The scope and depth of this investigation is potentially unlimited. Thus I will be paying specific attention to the factors directly accounting for socioeconomic inequality in Brazil today with emphasis on the structural influences of colonisation, globalisation and minority development. This will provide the greatest utility in using Furtado's contemporary understanding of Brazilian socioeconomic inequality to guide the analysis of socioeconomic inequality in South Africa. My investigation into the primary factors contributing to contemporary socioeconomic inequality in Brazil, will conclude with a review of the programs and policies that have successfully reduced poverty and contributed to the reduction of inequality. A brief History of the Brazilian Economy Brazil is the quintessential case for demonstrating both the emergence and application of theories of dependency and development. It was the first study which departed from the conventional wisdom which presented underdeveloped states as simply backward in the developmental process.52 In this vain, it served as Furtado's primary source in developing his theory of underdevelopment.53 The following insight into Brazil's economic history and its contemporary development is thus provided in order to illustrate the context out of which these understandings emerged as well as demonstrate the relative degree of application to the South African case. 52 Mallorquín, at p. 810. 53 Ibid.
    • 28 Attention will be limited to the political economic aspects of the Brazilian case pertaining to post 1950's as my concern is limited to unpacking dynamics of contemporary development and socioeconomic inequality. The 1950's saw the dawn of a new era in Brazil following the end of decades of dictatorship and military rule. President Getulio Vargas was determined to achieve industrialisation and development and had support from various governmental institutions to do so.54 Subsequent President, Juscelino Kubitscheck, the National Bank of Economic Development and ECLAC were key components of this initiative.55 The Joint American and Brazilian Commission, dedicated to fostering industrialisation, was also established, with Furtado at the helm.56 This prompted the 'Brazilian Miracle', record growth rates from 1968 to 1973.57 However with the first Oil Crisis, the economy took a turn for the worse, ushering in two decades of dismal growth, high inflation, volatile growth and disequilibrium.58 It wasn't until the Real plan in 1994 that Brazil began its recovery. Furtado demonstrated how in the case of Brazil, the 'Brazilian Miracle' growth rates under Vargas of 10 to 12 percent, concentrated an increase in wealth for a minority of the population.59 Consequently, for this growth to be sustained, production of consumer goods for this minority had to increase. The state facilitated this consumption pattern by lowering interest rates to support the elite minority. However, by the 1980's this created massive foreign debt. Brazil was mirroring the policies of an industrialised state but was not accumulating the same savings. This was due to only a minority of its population having the capacity to save combined with a huge demand for imports to sustain its existing industries and consumption patterns. 54 Mallorquín, at p. 809. 55 Ibid. 56 Ibid. 57 Ferreira, F H. G & Paes de Barros, R. (1999). "The Slippery Slope: Explaining the Increase in Extreme Poverty in Urban Brazil, 1976-1996". Accessed Online (February 2013): http://books.google.co.in/books? hl=en&lr=&id=aWwjpx6Ydp0C&oi=fnd&pg=PA2&dq=brazil+reducing+poverty&ots=T9XTCL_JkU&sig=42SihDwqtTh pkLjEP1sQNOQeg4o#v=onepage&q=brazil%20reducing%20poverty&f=false, at p. 2. 58 Ibid. 59 Mallorquín, at p. 812.
    • 29 This is what spurred Furtado's observations of the cultural ramifications localised development had in an otherwise underdeveloped state. A dual economy, with one component representing the majority of the population and the other a minority of elites, was able to coexist resulting in the illusion of development on account of high growth rates.60 This meant that a minority could mimic the modern lifestyles of the industrialised centre which in reality did not correspond to the experience of the majority of people living in the periphery. The yields of capitalist industrialisation were far from universal. The Brazilian government failed to intervene with socioeconomic reform policies or pursue the creation of state-owned enterprises.61 With a minority of elite dictating the consumer patterns and national policies of Brazil, development did not occur in the interest of the nation as a whole.62 Therefore unless income was redistributed and domestic saving occurred, development would not be evident amongst the majority. With a neoliberal agenda dictating world trade, underdevelopment persisted in Latin America. In the 1980's a democratic movement began to emerge in Brazil. Furtado advised the Party of the Brazilian Democratic Movement (PMDB) in economic matters. He was prolific in his writing during this period and his works reflected his attitudes towards development, justice and culture, resulting in a cementation of his theories.63 He promoted the role of government in overcoming the failed approach to development endured under military rule and encouraged internal development originating from internal sources. This was designed to confront the extreme inequalities in the distribution of wealth in terms of both the demographic and regional distribution of resources. Brazil had accumulated massive debt during its industrialisation in the 1970's, as it demanded massive capital investment.64 The Brazilian economy became pegged to the dollar whilst the local currency decreased in value. Brazilian industries found themselves in debt despite expanding to create foreign earnings. Inflationary pressures on wages and the state combined with devaluation, increased the debt which had fuelled the misleading impression of 60 Mallorquín, at p. 812. 61 Ibid. 62 Rocha, at p. 135. 63 Mallorquín, at p. 813. 64 Ibid.
    • 30 development. Brazil was forced to renegotiate its debt and considered shutting down industries.65 Brazil needed to reform its economy. Productivity needed to be increased to cater to the majority of the population. Furtado recommended that export centred industrialisation should only include industries with favourable conditions for Brazil, meaning a high propensity for adaptation. Most essentially, a domestic economic strategy needed to be adopted ensuring equitable distribution of resources along with fair wages and curbed inflation.66 Furtado recommended that inflation, provoked by private sector greed and excessive spending in the public sector, be offset by monitoring prices, refusing to subsidise exports and only permitting public spending in line with actual resources and the private sectors capacity to produce. Free flowing capital had given the impression of growth and concealed the stark imbalances in trade. The free market touted by neoliberals had a severely negative impact on the economy of Brazil. Furtado urged for a change in policies. This entailed being far more discerning in terms of what international markets to engage with and basing choices on sheer competitiveness.67 This was contrary to IMF recommendations which called for opening up of all economic sectors to foreign direct investment and removal of the state from economic enterprises.68 Furtado, in his continued work for the poorest region of Brazil, the Northeast, recommended cooperation between civil society and government as well as land reform to achieve a self administered model of development. However the Northeast failed to experience any change. Brazil was facing a recession and could not satisfy the demand for imports to support industrial production resulting in further price inflation.69 Furtado called for pragmatic engagement with the region whose underdevelopment could not be understood in isolation from the rest of the country. Having a region of the country facing extreme underdevelopment was having a negative 65 Ibid. at p. 814. 66 Mallorquín, at p. 814. 67 Ibid. at p. 815. 68 Ibid. 69 Ibid.
    • 31 impact on the whole country. However the region itself needed to push for engagement of the state in its issues and overturn policies aimed at serving only an elite minority.70 Furtado continued to fight for such social change until his death. He stated that to overcome the embedded structural inequalities in Brazil, massive reforms would need to take place. He proposed income redistribution, agricultural land reform and the reclaiming of independence in decision making capacity of the national economy.71 For Brazil, the neoliberal hegemony in development agendas, as prescribed by the West during military dictatorship, had only perpetuated inequality and reinforced the economic status of a minority of elites.72 The lost decade of the 1980's, which saw ISI lead to a debt crisis, meant that Brazil was forced to implement a structural adjustment program initiated by the IMF, World Bank and US Treasury.73 The Washington Consensus prescribed free-market reforms, meaning liberalization of the economy, enhancing private enterprise and deregulating the market.74 This fiscal orthodoxy was designed to combat stagnant growth and unemployment.75 Therefore the 1980's, extending into the 1990's, was characterized by hyperinflation, unbalanced trade and government development policies that did not benefit the poor.76 The Washington consensus remained firmly intact meaning full liberalization of Brazil's economy. Yet poverty and socioeconomic inequality rose over the proceeding decades.77 This demanded a move towards more socially orientated policies by the mid 1990's, in line with Furatdo's comprehensive approach to homogenising development. Social security and targeted financial redistribution policies, both conditional and non conditional, were proposed.78 As prescribed by Furtado, redistribution was employed as a central method of targeting the poor but only achieved modest poverty reduction since the 1980's.79 Thus the majority of poverty reduction began post 70 Ibid. at p. 816. 71 Rocha, at p. 134. 72 Ibid. at p. 135. 73 Ibid. 74 Ibid. 75 Ibid. at p. 136. 76 Ravallion, M. (2009.) "A Comparative Perspective on Poverty Reduction in Brazil, China and India". The World Bank Development Research Group: Policy Research Working Paper 5080, at p. 14. 77 Ferreira, at p. 2. 78 Ravallion, at p. 14. 79 Ibid. at p. 15.
    • 32 1994. This prompted a new phase of growth occurring among the underdeveloped agrarian portion of the population, which now enjoyed easier entry into the economy, most prominently in the service sector.80 The economic reforms that were made in the 1980's failed to achieve significant development for the majority of Brazil, demonstrated in continued high levels of inequality. This was especially pronounced in terms of unequal school passing rates, which determined to a great extent, participation in and benefit from, economic growth.81 Brazil's contemporary socioeconomic policies aim at increasing the pass rates of children from poor families and are thus in line with Furtado's comprehensive approach to development combined with a move to purposefully target those who do not benefit from economic growth. Before these reforms took place, Brazil's high inequality was only being perpetuated, with economic growth only being enjoyed by a minority. By insuring macroeconomic stability through curbing high inflation, reducing debt and instituting pro-poor social policies, Brazil began a path toward reducing socioeconomic inequality.82 The Fernando Henrique Cardoso government era (1995-2002) saw limitations on the independence of national government as well as cultural heterogeny.83 Cardoso let international markets dictate stability in Brazil meaning denationalization of public enterprises to compensate for increasing foreign debt. Thus decision making power was allocated abroad.84 Furtado recognised how industrialisation demanded technological innovation and this in turn demanded integration into the global market where capitalist advanced technologies were traded.85 This compromised the decision making capacity of the periphery, which did not produce advanced technology for industries and therefore had to purchase it from the centre. Furthermore, once these technologies were imported they only benefit a minority in the periphery whilst the majority were deprived of access to or benefit from industrialization. This provoked massive inequality as in Brazil, which was only further exacerbated by the sheer vastness of the state.86 80 Ravallion, at p. 15. 81 Ibid. 82 Ibid. at p. 23. 83 Rocha, at p. 137. 84 Ibid. 85 Ibid. at p. 136. 86 Rocha, at p. 137.
    • 33 By creating a highly heterogeneous society, cultural homogeneity was inevitably compromised as a minority gained access to products representing the cultural imperatives of the centre. Consumption patterns in Brazil were thus informed by the centre leading to cultural disintegration.87 High levels of violent crime and social unrest are often attributed to such cultural disintegration due to an awareness of relative deprivation. Furtado disapproved of the policies of the Lula government (2003-2012) as he failed to alter government policies in line with achieving homogenous development, allowing policies to be dictated by the interests of private sector business ambitions. Furtado objected to the perpetuation of policy that concentrated income amongst a minority of elites as opposed to ensuring multidimensional, socioeconomic development for all.88 Lula's policies prioritised the export of goods produced by private enterprises and entrepreneurs to stimulate the domestic economy. This private export investment was preferred to compensate for Brazil's accumulated debt. Furtado would have recommended prioritisation of domestic public services to encourage widespread development in order to facilitate the emergence of a more economically competitive majority. The balance of payments crisis saw economic policies dedicated to satisfying the needs of foreign creditors, not the needs of the domestic population. President Lula continued to lead Brazil after Furatdo's death in 2004. Lula was a leader of the Worker's party of Brazil and campaigned for change by focusing on employment, income redistribution and poverty reduction.89 However he only reinforced the neoliberal policies of the Cardoso administration which entailed IMF governed fiscal policy and World bank prescribed legal reforms.90 Lulu promised a more engaged role of the state to ensure social inclusion combined with economic growth however he did not pursue the attainment of this goal.91 The macroeconomic policy of Lula was dictated by the Finance Ministry and Central Bank of Brazil which prescribed the reduction of public debt through government savings, targeting inflation and a floating exchange rate.92 By prioritising the financial market and directing 87 Ibid. 88 Ibid. at p. 138. 89 Ibid. 90 Ibid. at p. 139. 91 Ibid. 92 Rocha, at p. 139.
    • 34 government expenditure towards debt repayment, major cuts were made to public investments. This embodied the exact counter recommendation of Furtado, as it failed to achieve benefits for the portion of the population who needed it most, precluding them from partaking effectively in the economy and achieving economic growth. Furthermore, both Lula and Cardoso accompanied this fiscal policy with substantial tax increases. With tax payers money being channelled towards repayment of debt in the financial sector, the economic divide of Brazil was further exacerbated. Public debt remained high and interest rates increased. The financial market continued to be prioritized as Brazil further liberalized to attract foreign investment whilst keeping its external debt in check to afford confidence to investors.93 Lula's approach was soon called into question. Argentina was attracting greater investors by presenting a more secure economy for long term investment by prioritising autonomous, national development as opposed to private creditors.94 Argentina's debt restructuring was thus a major departure from Brazil's IMF and World Bank, institution centred approach to development. Soon the World Bank itself began advocating social macroeconomic policies. The goal was to confront the causes of poverty that had a long term impact on the economy, deterring investment and slowing growth. Thus Lula pursued the Bolsa Familia (Family Welfare) programme as well as Cardoso's social programmes based on cash transfers.95 The Bolsa Familia programme continues to exist today, targeting over 11 million families living below the poverty line with direct cash transfers.96 The programme has been credited with moving over 30 million people out of poverty. Despite the success of this program, Lula is still criticized for allocating a mere 0,3 percent s of Brazil's GDP in 2005 to the program whilst transferring over 8 percent to the state's creditors.97 This indicates a vast prioritisation of the private sector and external markets. Even so, Lula received much public support for coming to the immediate aid of the impoverished. However the failure to institute long term, structural changes to Brazil's social policies meant that socioeconomic inequality persisted, despite the success of programmes like Bolsa Familia, giving credence to Furtado's call for more far reaching structural changes. Such structural change 93 Ibid. at p. 140. 94 Ibid. at p. 142. 95 Ibid. at p. 143. 96 Ibid. 97 Rocha, at p. 143.
    • 35 would demand public investments in infrastructure for multidimensional poverty alleviation in order to homogenise development and transfer people from the informal sector, living on the minimum wage, to the employed formal sector. On this count, Lula's policy began to move closer toward targeted social policies, a departure from his Workers' Party's promotion of universal social policies. The aim was to promote self sustained domestic growth in Brazil and reduce socioeconomic inequality and poverty.98 Lula focused on export led growth and ensuring a flexible exchange rate, aimed at securing the economy from the vulnerabilities of the liberal international market. Cardoso's failure to protect the economy against external markets had landed Brazil in billions of dollars of foreign debt.99 With Brazil's economy based on the production of primary products, natural resources and low skilled labour, demanding little technological advancement, the economy was extremely vulnerable to external markets.100 Lula's move to enhancing Brazil's productive capacity facilitated an increase in exports, which saw a steady reduction in debt. This saw foreign investors returning with greater confidence in Brazil, having almost defaulted on its debt in 2002. The IMF accredited Brazil with the creation of a sound macroeconomic and institutional framework, which strengthened the pursuit of further reforms. Brazil vigorously pursued the reduction of external debts. Thus capital from the trade surplus was channelled externally meaning a failure to adequately invest in poverty reduction. Land reform would have had a major impact on socioeconomic inequality in Brazil, yet Lula prioritised the interests of the IMF over the impoverished.101 The emphasis on liberalization only deepened Brazil's vulnerability to externalities, such as increased interest rates on account of uncertainty in the US economy in 2006. Brazil's Central Bank, although in a stronger position, could not withstand economic crisis. This demanded total focus on debt repayment, seeing a quadrupling of resource transfers to external markets in the 2000's.102 98 Ibid. at p. 145. 99 Ibid. 100 Ibid. 101 Rocha, at p. 146. 102 Ibid.
    • 36 Thus, as Furtado predicted, a neoliberal informed developmental model saw the prioritisation of external markets above the interests of the majority of the domestic population. This resulted in massive unemployment, stagnant income and limited economic growth.103 Lower growth stemming from low domestic economic investment was a feature of many emerging economies who chose to adopt a fundamentalist liberal approach to global economic integration. Underdeveloped states could not mirror the liberal approach of already industrialised states in the pursuit of development. Like Furtado foresaw, a deliberate focus on domestic economic stability was required for fruitful integration into the global economy. Lula received great criticism, including from his own Worker's Party, as wages and consumption fell during his tenure. A call for a developmental approach not wholly dependent on external demand was spurred. The division of the economy between a majority agrarian sector and a minority of industrial elites meant a middle class failed to flourish. A flourishing middle class sustains domestic consumption in a developing country while giving way to potential investments beyond domestic production driven by external markets. Therefore despite an increase in trade surplus, current-account surplus and the payment of external debt, Brazil failed to extend such progress to the majority of the population. Furthermore, the sustainability of the growth that had been enjoyed was called into question. Although poverty and unemployment did reduce to a minor extent under Lula, it should be recognised that this occurred following the "lost half decade" (1997-2002) of stagnant growth and that Brazilian socioeconomic inequality remained one of the highest in the world.104 According to the government in 2005, 1 percent of the population enjoyed almost 13 percent of the national income while 50 percent of the population lived on 14 percent of the national income.105 Furtado warned Lula that "To grow without development produces income concentration.".106 He further warned that the phenomena of such stark socioeconomic inequality has major consequences for society as a whole. The Brazilian Economy Today 103 Ibid, at p. 147. 104 Ibid, at p. 150. 105 Rocha, at p, 150. 106 Ibid.
    • 37 Brazil has the 6th largest nominal GDP in the world and one of the fastest growing economies. The service sector (banking and telecommunications) contributes 67% of its GDP and also caters to approximately 66% of its labour force.107 5,5% of its GDP is incurred from the agricultural sector which represents 20% of its labour force with industry (automobiles, petrochemicals, minerals and steel) accounting for the remaining percentage of GDP and labour.108 It has the strongest economy in South America. It has reduced its debt greatly since 2003 however it was unable to remain immune to the global financial recession in 2008, as demand for its exports plummeted.109 It has since made a recovery and achieved its highest growth rate in 25 years of 7,5% in 2010.110 However this resulted in massive inflation leading the government to intervene, reducing growth to 2,7% in 2011.111 Brazil's largest trading partners reside in Latin America and the EU. It is favoured by foreign investors and has seen large capital investment. This has not boded well for domestic manufacturing and has prompted government intervention. Furtado emphasised the need for government to intervene to allow for competitiveness of national markets and this has been performed by raising taxes on foreign capital.112 Cattle and soybean represent two of the biggest agriculture products of Brazil. Brazil also produces 25% of the global share in cane sugar exports and 80% of the world's orange juice.113 However it continues to import much of its technology for industrial production, mainly from the US. Brazil is heavily dependent on petrol as its primary energy source. It is now self-sufficient in oil production, a major departure from relying on 70% imports up until 2006.114 Today 35% of Brazil's exports are agricultural (soybeans and meat representing 50%) and it caters to 45% of the world's poultry exports.115 By achieving a more balanced export/import ratio, Brazil has seen 107 Central Intelligence Agency, The World Fact Book. "Brazil: Economy". Accessed Online (February 2013): https://www.cia.gov/library/publications/the-world-factbook/geos/br.html 108 Ibid. 109 Ibid. 110 Ibid. 111 Ibid. 112 Ibid. 113 Ozorio de Almeida, A. (2009). "Exports, Energy, Food:The Multiple Functions of Brazilian Agriculture", LASA Congress Rio de Janeiro, at p. 14. 114 Ibid. at p. 15. 115 Ibid. at p. 17.
    • 38 a great reduction in its foreign debt and overall financial wellbeing. Tax has been reduced on manufactured goods and investments in transport and technology to aid domestic manufacturing. The emergence of Brazilian firms has also been on the rise amounting to over $115 billion in mergers and acquisitions.116 Despite these staggering statistics, which positions Brazil as a major player in the international market economy, Latin America has experienced its highest levels of unemployment in history at over 9 percent and increased poverty meaning an exceedingly high degree of socioeconomic inequality.117 The Gini Index measures the degree of inequality in the distribution of household income in a country.118 Cumulative household income is plotted on a curve from poorest to richest demonstrating the proportion of poor to rich families in a country. The more unequal the higher the index. The most equal countries have an index ranging between 0,25 and 0,34 (the majority located in Europe). Brazil's Index as of March 2012 was estimated between 0,50 and 0,54 indicating a steady increase over the past decade.119 With only six countries with an index above 0,60, Brazil represents a highly unequal society.120 I will proceed to explore how dependency and uneven development has resulted in this extreme social stratification. 116 Thomson Financial, Institute of Mergers, Acquisitions and Alliances (IMAA) analysis. (2012). "Announced Merger and Acquisitions: Brazil 1993-2011". Accessed Online (February 2013): http://www.imaa- institute.org/docs/announced%20mergers%20&%20acquisitions%20(brazil).pdf? PHPSESSID=15885ad3311a3919fe92601b6138248b (Accessed September 2012) 117 Rocha, at p. 136. 118 Central Intelligence Agency, The World Fact Book. "Distribution of Family Income: Gini Index". Accessed Online (February 2013) : https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html 119 Ibid. 120 Central Intelligence Agency.
    • 39 Factors Contributing to Socioeconomic Inequality in Brazil Today Poverty Brazil has been credited with making substantial progress in reducing hunger and poverty since the mid 1990's. It's social protection programmes and Constitutionally enshrined guarantees against poverty have made Brazil a popular case study in poverty reduction.121 This is what has inspired extracting the lessons learned from the Brazilian case, to the case of socioeconomic inequality in South Africa. Yet emerging economies like Brazil and South Africa, are still plagued with high socioeconomic inequality and poverty despite achieving substantial economic 121 The Economist. (2009). "Fighting poverty in emerging markets: The gloves go on". Accessed Online (May 2013): http://www.economist.com/node/14979330
    • 40 growth. Emerging economies, Brazil, India and China account for more than half the world's poorest people.122 Yet they also account for transferring the greatest number of people out of poverty in recent years.123 Relative to Brazil's per unit growth over the past two decades, it has managed to reduced its proportional poverty rate five times more than other emerging economies.124 This is largely attributed to Brazil managing to reduce socioeconomic inequality while these other emerging economies have seen a sharp rise. This is attributed to growth providing benefits to those who can access it, meaning those who are employed in urban areas. This explains the case for China and India's persistent poverty. Brazil experienced a clear increase in poverty following its "Miracle Growth" period which meant a glaring increase in income inequality and this legacy persists in Brazil despite the progress it's made today.125 Furtado predicted this increasing divide between rich and poor in both the domestic and international economic structure. This is today's reality in developing and developed nations across the world; the rich are getting richer and the poor are getting poorer. 20 percent of Brazilians live in absolute poverty rendering a significant portion of the population completely disenfranchised by and alienated from the market.126 The Indian economist, Amartya Sen, emphasised how economic powerlessness is tantamount to a denial of basic human freedoms which can only be afforded if development is a homogenous experience.127 Poverty in Brazil is heavily exacerbated during economic hardships like today's global economic recession. Brazil has also failed to enjoy any significant reduction in poverty during periods of growth on the economy. This corresponds to the central tenant of Furtado's theory of underdevelopment, where the benefits of economic growth are allocated amongst a minority of elites. This is what the worldwide "Occupy" movements are targeting; the 1% economically privileged elites versus the 99% economically disenfranchised masses. Global economic growth has been accompanied by a global increase in poverty combined with extensive environmental destruction.128 The fact that significant structural changes specifically geared towards combating 122 Ibid. 123 Ibid. 124 Ibid. 125 Cavalcanti, at p. 12. 126 Cavalcanti, at p. 12. 127 Ibid. at p. 13. 128 Ibid.
    • 41 the persistence of underdevelopment and inequality have not been instituted globally is testament to the unrelenting prioritisation of profit over human welfare in today's global economy. Furtado condemned this approach as it would lead to the majority of people being subjected to persistent underdevelopment. Furthermore, the non economic factors designated by Furtado, such as education and law, are of increasing relevance in discussions and policy prescriptions for development. A multidimensional approach to poverty, which acknowledges the need to give the poor power and influence in state and market policy, beyond the provision of basic human necessities, is deemed essential in combating poverty. Unfortunately, the global market of today does not exhibit this multidimensional approach. Its overarching objective is profit maximisation with a complete disregard for social and environmental consequences. With the current structure of the neoliberal global economic system, it is no surprise that the rich are getting richer and the poor are getting poorer. Economic inequality is a structural imperative of the world economy, and Brazil, resulting in the persistence and exacerbation of underdevelopment.129 Thus despite impressive economic growth in states of the developing world, including Brazil, overall economic wellbeing has not been enhanced, rendering socioeconomic inequality on the rise. Attempts at poverty reduction like the Real Plan initiated in 1994, which managed to control inflation to an extent, did have a limited impact. Asset and income redistribution policies as well as price control policies, targeted to reduce poverty, have also been credited with the 90's ushering in reduced poverty rates despite slower economic growth.130 Education and Unemployment Lack of access to education is a major problem in Brazil that severely affects income mobility and consequently socioeconomic inequality. Children born into poverty are unlikely to escape it as they fail to achieve the requisite level of education to do so. Ten percent of Brazil is illiterate and this is largely attributed to the isolation of rural communities and the poor quality of 129 Cavalcanti, at p. 13. 130 Brazil Factoid. "Poverty Reduction in Brazil". Accessed Online (May 2013):http://www.brazil- factoid.com/poverty-reduction-program-in-brazil.html
    • 42 education that exists in these areas. It can also be said, however that the rigid structure of the Brazilian economy would not be able to cater to an influx of educated people in terms of jobs as the economy is structured around this large, uneducated agricultural population.131 The Brazilian Constitution requires the Federal government to allocate 18% of its resources on education while State and local governments must allocate 25% of their funds.132 A National Fund for Basic Education (FUNDEF) has been established to ensure allocations are well spent.133 Overall, the entire basic and secondary education system has been revamped in recent years in both funding, curriculum content, assessment methods and salaries.134 There has been a recent improvement in enrolment however dropout rates are still high. Brazilian public universities experience massive organizational inefficiency on account of having zero institutional independence from the central government. They are not entitled to manage their assets and are bureaucratically inflexible, which precludes them from adapting to unique needs or function efficiently.135 Strikes are common place among staff at Brazilian universities demonstrating the discontent towards government fund allocations in education. It should be recognised that even though opening up the economy in the early 1990's encouraged demand for more knowledge based, skilled employment, employment in Brazil is still majority located in the traditional agrarian sector. This is an indication of the continuation of the old mode of production in Brazil, resulting in resistance to transforming into newer modes of production despite integration into the global economy. This is testament to Brazil's persistent underdevelopment. Lack of education, the desire of employers to circumvent benefits accruing to permanent employees as well as a bloated bureaucracy have forced many people into self employment. The Cardoso government attempted to remedy this situation but reforms were timid.136 Ultimately, in terms of market incentives, it is not the priority of the state to improve access to education or employment for the majority of its citizens. 131 Schwartzman, S. (2003). "Globalization, poverty, and social inequity in Brazil". Instituto de Estudos do Trabalho e Sociedade (IETS), Rio de Janeiro. Accessed (October 2012): http://www.schwartzman.org.br/simon/pdf/globalization.pdf, at p. 13. 132 Ibid. at p. 23. 133 Ibid. 134 Ibid. at p. 15. 135 Schwartzman, at p. 17. 136 Ibid. at p. 20.
    • 43 The Rural-Urban Divide Furtado drew our attention to the concept of a hybrid economy with a dual structure. In Brazil, the vast rural areas are inhabited by the agrarian sector of the economy. Brazil's major cities display large scale development comparable to the most advanced countries in the world. However huge disparities exist in the rural areas. People living in rural areas struggle to gain access to health, education and employment opportunities. The construction of Brazil's capital city, Brasilia in the rural western areas of Brazil, was a purposeful attempt to bring development to this disenfranchised area. However Brasilia represents a minute capitalist industrial enclave amidst vast expanses of agricultural land. Thus despite Brazil being the economic powerhouse of Latin America, its poverty levels and human development index are no exception to the region.137 The population in rural areas is essentially socially excluded, resulting in major socioeconomic inequality, as they are isolated from development in both physical and socioeconomic terms. Over half the rural population, which represents approximately 20 percent of the total population, lives in poverty accounting for the majority of poor people in the country.138 The North East of Brazil is the poorest and most underdeveloped region of Brazil. The vast majority of the rural population works in agriculture. Attempts at supplementing income through alternative means is still not enough to gain access to services in the developed areas. The state does not invest in infrastructure, education or basic public services in these areas leaving these populations heavily disadvantaged. Furtado understood this as a result of elites in business and government prioritizing public investment in the industrial centers leaving the rural areas completely neglected. Men in rural families are often forced to find work in the urban developed areas leaving their families in a highly compromised position. Single parent households and child labour are common place in rural Brazil. Today, the government has made attempts to facilitate access to education and provide technological development in rural 137 IFAD. (2010). "Rural Poverty in Brazil" Accessed Online (October 2012): http://www.ruralpovertyportal.org/country/home/tags/brazil 138 Ibid.
    • 44 communities. This initiative by Brazilian government may account for the minor reduction in income inequality over the past decade. The Tax System and Public Expenditure Brazilians pay some of the highest taxes in the world accompanied by extremely high inflation. Furthermore, the tax system is highly disadvantageous towards those in lower income brackets, massively exacerbating socioeconomic inequality. The higher income brackets account for 26 percent of the tax load while those with an income less than twice the minimum wage account for almost 50 percent of the tax load.139 This has provoked nationwide protests that has even lead to violence.Tax is included in the price of products in the form of federal sales tax, welfare financing and state tax on goods and services, greatly contributing to inequality.140 Necessity products and services that cater mainly to the poorer population are heavily taxed. This includes beans and rice which are the staple source of food in rural areas.141 Conversely, there has been progressive taxing on personal income tax and property tax which caters to the rich or elites of society. Tax could serve as a crucial instrument to ensure a fairer society and function as a redistributive mechanism however it is currently only exacerbating the state of the poor. Taxes for the wealthy, land owning elites should be higher and expanded upon. Tax payment should also be effectively enforced to counteract social and economic inequality. The average Brazilian has to spend almost half their year's income on tax which contributes to almost 37% of Brazil's GDP, the highest in Latin America.142 This is much higher than advanced economies in Europe and the United States, yet with far lower standards of service. Tax evasion is extremely high amongst the economic elites in Brazil whilst the poor are unaware of the extent to which the products they consume are taxed. The tax system needs to be consolidated for a fairer system that does not exacerbate inequality. 139 Pires, C. (2010). "Brazilian tax burden leads to more inequality nationwide: Regressive tax system increases the costs of basic necessities". Infosurhoy. Accessed (October 2012): http://infosurhoy.com/cocoon/saii/xhtml/en_GB/features/saii/features/economy/2010/02/23/feature-04 140 Ibid. 141 Ibid. 142 Ibid.
    • 45 Public health expenditure is also highly unequal despite constitutional initiatives at universalizing and decentralizing public health care.143 The government budget unequally favours the middle class civil servants, who enjoy extensive benefits, whilst leaving the lower class wholly neglected, exacerbating inequality. The government has been ineffective in reforming these policies as the middle class, corresponding to Furtado's national bourgeoisie of the modern sector, are highly unionized and vocal thus ensuring their interests are met instead of the majority's.144 Unequal Land Ownership In Brazil, unequal land ownership is recognised as the primary explanation for economic inequality at large and income inequality in particular. Agricultural production in Brazil constitutes one of its primary exports and is thus a wholly export driven sector. MNCs and big agribusiness own the majority of land in Brazil, which caters to external demands. They have monopolized the industry, disenfranchising small scale and family owned farming. Land reforms of agricultural land have been initiated, expanding the family owned agricultural farming sector, which accounts for three quarters of agricultural employment. The Brazilian Institute of Geography and Statistics confirmed that farm land ownership in Brazil has a Gini Index of 0,87 (0, representing perfect equality and 1, representing total inequality), indicating extreme concentration in land ownership.145 The state census also indicated that land ownership concentration has only increased over the years accompanied by the expansion of crop sizes, demonstrating the all prevailing monopolistic hold of agribusiness in Brazil. Sugarcane, soybeans and maize have been key monoculture crops, produced for export by these agribusiness monopolies.146 Thus landownership is becoming increasingly more concentrated despite initiatives by government and political movements representing the interests of the landless and small scale 143 Schwartzman, at p. 18, 144 Ibid. 145 Frayssinet, F. (2009). "Brazil: Agribusiness Driving Land Concentration" Inter Press Service News Agency. Accessed Online (October 2012): http://www.ipsnews.net/2009/10/brazil-agribusiness-driving-land- concentration/ 146 Ibid.
    • 46 farmers. A national census indicated that properties larger than 1,000 hectares represent 46 percent of Brazil’s farmland, while properties smaller than 10 hectares occupy a mere 2.7 percent.147 Therefore despite positive initiatives by the state, such as 519 000 families being given land by the Lula government and US$1,3 billion being distributed as land reform benefits, vast inequality continues to exist in terms of land ownership and income.148 The Brazilian government is happy to compensate families but is not willing to put policies in place that reform the structure of the economy that is perpetuating socioeconomic inequality and underdevelopment. Small scale farmers, although better able to mobilize themselves today than in the past, do not have the political or economic clout to oppose agribusinesses which has the backing, not only of the Brazilian government, but of international agribusiness abroad. This is where the criticism of Furtado's approach is exposed. He recommended internal structural reforms by the government to ensure the interests of the traditional agrarian sector. Today, MNC's have the ability to heavily undermine and even trump the power of the state and its people. This accounts for MNC agribusiness dictating the internal structure of Brazilian agricultural production, resulting in extreme socioeconomic inequality. Unless laws are put in place as well as policy reforms, inequality in income and land ownership will only increase as profits serve as the driving force in the agricultural sector. Policies need to provide financial and technical assistance to small scale farmers, prioritise family owned production and environmentalism, as well as ensure education for families in rural areas.149 147 Ibid. 148 Ibid. 149 Frayssinet.
    • 47 Social Protection Policies Furtado saw social policies as a key component of the state combating the influence of external markets, which perpetuate socioeconomic inequality and poverty. Social protection policies are aimed at the most vulnerable. They are designed to reduce and prevent poverty. In highly unequal, developing states, such policies are consequently a crucial component of reducing socioeconomic inequality. A key component determining social protection policies today, is deciding whether they should be targeted or universal. A universal policy entitles the entire population to benefits while targeted policies demand applicants pass a means-tested assessment.150 Today in both developed and developing countries, a trend exists toward targeted social protection policies, indicating a move away from welfare policies.151 This trend has been informed by factors influencing budget allocation, resource constraints and various externalities. It is ultimately a value judgement about what the state feels its responsibility to its citizens is. Neoliberal ideology in the 1980's and 1990's preferred economic efficiency to socioeconomic equality.152 In turn, in times of economic crisis, targeted social policies have been promoted. Thus a reduction in public spending has usually been preferred to a change in tax policies for example. In developing countries, a move away from aid dependence has also encouraged targeted social policies. Ensuring aid gets to its intended recipients, is also a component spurring targeted social policies. Effective economic management has become a top priority in public spending. In more developed countries, access to public funds is more universalised yet the imperative for managing the "trickle down" effect of funds remains imperative. 150 United Nations Development Programme (UNDP). (2006). "Social protection and the role of cash transfers". International Poverty Centre: United Nations Development Programme. Accessed Online (May 2013): http://www.ipc-undp.org/pub/IPCPovertyInFocus8.pdf, at p. 3. 151 Ibid. 152 Ibid. at p. 4.
    • 48 Historically, universal social policies have been more effective in combating poverty. In fact it has been found that the more social benefits are targeted toward the poor, the less likely long term, sustainable poverty alleviation is to be achieved.153 The politics of social spending is thus a major component in targeted policies being chosen. In the case of aid distribution, the tendency is for NGO's and government to focus on who should receive the aid, not whether the aid received is sustainable and efficient. Furthermore, there has been a recent shift towards social policies centred on development as opposed to poverty reduction.154 This has marginalised social policies catering to the poor which do not conform to macroeconomic developmental objectives. This has reinforced the notion that universal policies are something only appropriate for developed states despite such policies being the most effective in combating poverty. Social policies have long had a multiplicity of diverse objectives. Ultimately, states need to take into account the costs of failing to provide effective social policies. The challenge lies in the capacity of a state to enforce social policies effectively. Targeted and universal policies alike demand administrative excellence. Simply designating who should be targeted, never mind ensuring those entitled to a benefit receive it, is a mammoth task. Blunt targeting tests often result in under coverage.155 Community based targeting has been employed however the state needs to take into account social factors that may jeopardize access for some. Discrimination of women is a frequent feature of targeted policies in impoverished communities. Policies that recognise gender discrimination as a central component determining asset distribution and inequality, are essential for comprehensive impact to be made. In this regard, the discretion of bureaucrats as well as policies based on self-selection, have the potential to interfere with meeting the intended target. It is also important for social policy programs to be conducted in a manner that appeals to the targeted constituency. Considerations involving issues of stigma and dignity are most often ignored in developing countries. The notion of justice is a compelling yet often undermined component in social policies. In many post colonial states, justice is a highly contentious issue in 153 UNDP, at p. 4. 154 Ibid. 155 Ibid. at p. 5.
    • 49 the realm of social policies. It is hampered by accusations of breading dependency and a consciousness of entitlement among the historically disadvantaged. Thus engineering social policies that incentivise benefits through the adoption of social responsibilities, is another popular trend in targeted social policies. Exacerbating poverty by incentivising remaining eligible for benefits is a condition that plagues welfare states. Conversely, access to benefits needs to be taken into account when engineering social policies for vulnerable populations. Risk is calculated on whether the intended benefits will actually be received. The aim is to avoid the poor falling into poverty traps either by virtue of vulnerability, lack of access or incentives to remaining poor. Thus, whether targeted or universal, it is clear that there are many nuanced components that need to be taken into account to ensure efficient and sustainable social protection. The state, resources and the particularities of the source of demand for social protection all need to be taken into account. The various constraints and objectives at play are all influenced by politics. There is a multitude of experiential evidence in the realm of social spending, much of which demonstrates incidences of wastefulness and failed objectives. On the other hand, there is evidence of social policy successes. Much can be learnt from successful social policies if one takes into account the particularity of the circumstances which facilitated success. This is what has motivated the analysis of the experience of socioeconomic inequality in the cases of Brazil and South Africa. Furtado's analytical approach guides the investigation on account of it emphasising the structural causes of socioeconomic inequality and the role of the state in ensuring social policies that address such inequality in an effort to transform the structural contingencies which perpetuate it. Reducing poverty and socioeconomic inequality is an objective enshrined in the Millennium Development Goals, making it a priority in the developmental agenda of developing nations. The goal is to reduce the proportion of people with incomes below US$ 1 per day by a half by 2015, amounting to over one billion people.156 The primacy of this goal is testament to the persistent and rigid nature of poverty. Furtado recognised the persistence of underdevelopment as a condition of the internal structures of dependency. It has consequently been recognised that 156 UNDP, at p. 5.
    • 50 although social protection policies are an essential part of combating poverty, they are not enough alone. It has even been submitted that social protection policies should only cater to short terms crisis situations, while chronic poverty demands a far more comprehensive response. A multidimensional approach to poverty, that promotes livelihood as opposed to the more limited notion of simply protecting it, is called for.157 Thus in this paper I have designated the overarching factors that perpetuate socioeconomic inequality, such as the rural-urban divide, which are not necessarily tackled by social protection policies. In developing countries, the state only has the capacity to do so much. In this vain, social policies are seen to cater to the most urgent points of need, thus exposing the central dynamics contributing to poverty. Admittedly, the urgent points of need are largely determined by external agencies like the World Bank, testament to the range of political influences informing social protection policies.158 This has contributed to social protection becoming associated with social policies of the developing world. Social protection involves tackling the causes, not just the symptoms of poverty, in an effort to prevent further people falling into poverty. A multidimensional approach to poverty recognises that a multiplicity of diverse factors contribute to poverty, many of which are context specific. I have submitted that the factors contributing to poverty in Brazil and South Africa stem from similar roots. Social protection aims to empower the poor in order to facilitate their inclusion in the developmental process. It may be limited to more short term factors that require an urgent response or long term factors such as culture. The entities participating in social protection are to understand their response as an investment, not as a cost.159 Of course this is a challenge when the source of poverty stems from poor state capacity. Furthermore, poverty exists in differing degrees demanding different responses and investments. For example, transitory poverty demands investment in education. The challenge lies in the fluidity and uncertainty related to poverty, making strict categorical imperatives on needs and responses impractical and unattainable. Yet social protection policies demand categories in order for people to qualify for 157 UNDP, at p. 5. 158 Ibid. at p. 6. 159 Ibid. at p. 7.
    • 51 benefits, meaning the policies will on the offset, fail to cater to the multidimensional sources of need.160 Thus the aim is to target the central causes of risk and stress that perpetuate poverty, while providing safety nets for potential hazards that trap people in poverty.161 This approach allows developing states to tackle poverty within the constraints of limited resources and capacity, to ultimately reduce socioeconomic inequality. Social Protection Policies in Brazil In Brazil, conditional cash transfers (CCTs) are a popular approach to social protection, involving direct cash grants to targeted poor households on the condition that they participate in human capital investment.162 The objective is poverty reduction in terms of preventing people succumbing to poverty hazards in the short term and breaking cycles of poverty in the long term.163 This approach is popular in many countries, both developed and developing. Brazil started it in 2002 with Bolsa Escola, which was later incorporated into its primary and acclaimed cash transfer program, the 2003 Bolsa Familia programme. Bolsa Familia, has been credited reducing poverty and inequality. It helps over 11 million families stay out of poverty and substantially undercuts extreme poverty. It has received much popular attention despite so many people eligible for its coverage remaining deprived of it. This cash transfer programs relies on calculating income to determine who is an eligible beneficiary. The ministry of federal government charged with Social Development, processes potential beneficiaries through a computerised single registry called the Cadastro Único (CadÚnico).164 Applicants are identified by municipal government through self-declaration or observation. Those who meet the criteria are registered and their benefit is calculated. Their information is verified by the municipality, with failure to corroborate information resulting in cancelling of the benefit. This is where a problem arises as the vast majority of applicants receive their income 160 UNDP, at p. 7. 161 Ibid. 162 Ibid. at p. 15. 163 Ibid. 164 The International Policy Centre for Inclusive Growth (IPC-IG). (2010). "IBSA/IBAS Poverty in Focus: What can IBSA offer to the Global Community?" International Policy Centre for Inclusive Growth Poverty Practice, Bureau for Development Policy, UNDP. Accessed Online (May 2013): http://www.ipc-undp.org/pub/IPCPovertyInFocus21.pdf
    • 52 from the informal sector making it impossible to verify. Beneficiaries are reassessed every two years owing to the targeted nature of the policy. Available resources for the program are calculated annually, informed by census statistics on poverty. This determines the programme's targets however the statistics these targets are based on are often outdated and flawed.165 Due to budgetary and administrative restrictions, the programme has been delayed in meeting its targets. Even so, success has been achieved with those under extreme poverty experiencing a 40 percent increase in their income.166 This is what has accounted for Brazil's overall fall in socioeconomic inequality. Bolsa Familia has been criticized for failing to regularly recalibrate those eligible for benefits in line with new statistics on poverty and inequality. An extra 2,5 million people have registered for benefits, over and above the original target of 11 million, but are not yet receiving their benefit entitlement.167 This has been attributed to a failure to effectively reassess current beneficiaries eligibility and flawed entitlement criteria. The way in which household income is calculated is said to underestimate the true prevalence of poverty. Social protection policies not founded on conditional cash transfers also exist in Brazil, targeting the various central contributing factors to socioeconomic inequality. Rural social security programmes represent the lion's share of targeted social policies in Brazil.168 The Rural Social Security System involves retired heads of households receiving half the minimum wage from the government each month. This insurance and subsidy based program was established by the military in 1964 and has evolved since then. It is aimed at ensuring rural families are able to sustain farm life, ownership and production. Over 6 million people in Brazil benefit from the system. The government has taken various initiatives at addressing lack of education and employment. A fund utilised by the National Development Bank has been created from taxes levied on Brazilian firms to offer job training.169 This "Fundo de Amparo ao Trabalhador” (FAT) has the involvement of trade unions and the Ministry of Labour, however it is yet to be seen if it will 165 IPC-IG. 166 Ibid. 167 Ibid. 168 Brazil Factoid. 169 Schwartzman, at p. 13.
    • 53 achieve any tangible results in integrating the disenfranchised, uneducated population of Brazil into the work force.170 The "Bolsa Escola" programme provides cash incentives to families who send their young children to school.171 It grants monthly cash transfers to poor households on condition they ensure that their children between the ages of 6-15, attend school. While such cash transfer programmes have been successful in increasing school attendance and nutrition, it has not been ascertained whether they reduce poverty.172 Access and quality of social protection policies are crucial determinants in this regard. For example, only access to quality education will have an impact on high school pass rates and the integration of those who would otherwise be excluded, into the economy. In this vain, social protection through cash transfers is designed to provide mechanisms of escaping poverty in the long term, and through this impacting on broader socioeconomic inequality. Thus the Brazilian government views Bolsa Escola equally as a mechanism of combating violent crime by encouraging children to stay in school and seek formal employment. The Lula government initiated Fome Zero, a programme to eradicate hunger in Brazil however it has been highly criticized for being ineffectual and lacking coordination.173 A programme has also been instituted to target the aged and disabled. This began in the 1970's, as the Renda Mensal Vitalicia (RMV) program, granting social assistance to those lacking the adequate means to subsist.174 Such programs aim to achieve a multidimensional approach in combating poverty. The government has begun an active land reform process for indigenous people in the Amazon, which endures highly unequal land ownership due to the dominant presence of agricultural, cosmetic and pharmaceutical industries.175 For agricultural land in particular, the Brazilian government has initiated Pronaf, (Programa Nacional de Fortalecimento da Agricultura Familiar) guaranteeing financing for equipment and new technology, as well as access to research for family owned agricultural production.176 This program is also designed to encourage entrepreneurship in an effort to enhance domestic production. This should reduce reliance on 170 Schwartzman, at p. 13. 171 Ibid. 172 UNDP, at p. 16. 173 Ibid. at p. 19. 174 Brazil Factoid. 175 Ibid. 176 Ozorio de Almeida, A. (2009). "Exports, Energy, Food: The Multiple Functions of Brazilian Agriculture", LASA Congress Rio de Janeiro, at p. 7.
    • 54 imports to cater to Brazil's massive population. Brazil's population has almost quadrupled since the 1950's to over 200 million people.177 The Brazilian government has also instituted a land reform program aimed at sustainable development in terms of living standards and employment opportunities. This was a central recommendation of Furtado. It has been recognised that land reform, in terms of not only land allocation but development of land infrastructure, is essential if Brazil is to make a real impact on socioeconomic inequality. The media in Brazil has played a crucial role in disseminating information and popularizing social protection programmes which has in turn enhanced participation. Municipalities have also been issued with far reaching powers in executing programmes. Even so, there is still under coverage and exclusion. For example, for targeted cash transfer programmes like Bolsa Familia, if you don't qualify as a household, you are not eligible for its benefits. Cash transfer programmes have received much international visibility, which has spurred their popularity accompanied by the granting of external loans to facilitate their implementation by governments. Support from international organisations does sway government's approach to social protection policies. Even so, government's need to go beyond social protection and adopt comprehensive macroeconomic policies that transform the structures which perpetuate poverty and inequality. A pro-poor orientation towards achieving growth is essential.178 As submitted by Furtado, the state needs to put policies in place that include all sectors of the population in the developmental process. Land redistribution, enhancing access to capital and employment opportunities, and investment in the provision of basic public services and infrastructure has been undertaken in Brazil.179 Thus the process has begun of tackling obstacles which limit the participation of a large proportion of its population in the economy. The Case for Socioeconomic Inequality 177 Central Intelligence Agency. 178 UNDP, at p. 18. 179 UNDP, at p. 19.
    • 55 in South Africa A brief History of the South African Economy. South Africa's experience of colonisation is an infamous one, culminating in the comprehensive, institutionalised division of society between black and white. The white minority were placed as legally privileged and geographically divided relative to the majority black population. This period of gross human rights violations, between 1948 and 1994, established white supremacy in legal and political terms, referred to as Apartheid. The path from colonisation, to Apartheid, to post Apartheid must be understood in order to understand South Africa's current underdevelopment and extreme socioeconomic inequality. By purposefully alienating the majority of the country from development, and actively seeking their entrenched underdevelopment, South Africa continues to deal with the effects of its Apartheid legacy, despite dismantling its legal institutions. South Africa, today can still be understood in terms of its historical geographical divisions, thus historically white allocated land continues to be more developed, while black townships have only expanded. Thus Furtado's theoretical approach, which designates 3 separate sectors of development, corresponds to the majority underdeveloped, the emerging middle class and a minority of economic elites existing in South Africa today. Drawing comparisons with Brazil, is similarly inspired by structural commonalities. Poverty, unemployment, poor education, a prejudicial tax system, shortcomings in public expenditure, unequal land ownership and the rural-urban divide are also the primary contributing factors to socioeconomic inequality in South Africa today. Brazil did not experience Apartheid however it did experience brutal colonisation and was the epicentre of the slave trade for hundreds of years, which had an indelible impact on its subsequent development. Brazil also experienced military dictatorship between 1964 to 1985. Thus both states share a chequered path to achieving democracy. Brazil's earlier entry into democracy may account for it being further along the path to development. Therefore, South Africa's Apartheid legacy is a central contributor to the persistence of underdevelopment and extreme inequality today.
    • 56 This historical origins of apartheid lie in the 17th Century arrival of the Dutch and French Huguenot settlers in the Cape of Good Hope. South African territory expanded north over the century, with the arrival of the British in 1815.180 This colonial expansion saw African farmers being increasingly dispossessed of their land, which had until then been dedicated to seasonal nomadic migration. Thus competition began between white, colonial farmers and black, African farmers for land. The colonial powers imposed laws that gave them land ownership rights. This in turn demanded the establishment of new agricultural patterns among the historically nomadic tribes of Southern Africa. They were deprived of access to their ancestral grazing pastures meaning deprivation of their traditional practices and way of life. Competition for land placed the colonisers in opposition to the local people. Aggressive dominance saw the colonial powers establish rule and exploitation of South Africa. The end of the 19th century saw the discovery of diamonds and gold, which initiated the demand for miners. The white, colonial minority, having dispossessed the local population of their land, now resorted to this deprived black population for labour.181 This was accompanied by the introduction of laws and policies specifically designed to ensure a steady supply of cheap labour. In many respects, the demand for cheap labour can be designated as the origin of Apartheid.182 The Natives Land Act of 1913 institutionalised and formalised the deprivation of the black population of its basic civil and political rights.183 It meant black people were no longer entitled to own or acquire land. A population that was historically reliant on subsistence farming was now forced to resort to working in white owned mines to survive. The movement of black people was also governed in an effort to regulate the influx of labour into white owned land.184 This is what provoked the development of townships for black and coloured (the term used to refer to the historically racially mixed population native to the Cape) people on the periphery of white areas, formalized in the Urban Areas Act of 1923, another core contribution to the Apartheid legal institution.185 180 Aliber, at p. 2. 181 Ibid. 182 Ibid. 183 Ibid. 184 Ibid. 185 Aliber, at p. 2.
    • 57 The insidious growth of racially discriminate laws, policies and institutions thus became firmly established, motivated by the desire to capitalize on South Africa's land and rich natural resources. The origins of the development of the economy were thus rooted in a structured division of labour and allocation of resources, resulting in conspicuous uneven development. The Urban Labour Preference Policy of 1950, championed by Prime Minister H.F. Verwoerd, further entrenched the racially discriminate labour and movement laws.186 He would later become leader of the National Party (NP). White rule faced black opposition from inception, however more advanced military capabilities, horrifically oppressive policies and the active deprivation of black people of resources, allowed this white minority to maintain power. The reserves, which black people were permitted to occupy in the rural areas, were inhabited by women and children whilst men worked in the mining areas. The reserves received little government attention beyond police regulation rendering them over populated and hugely underdeveloped. In the 1970's they were declared self-governing homelands, and acquired many state attributes.187 However extremely limited land, no tax base and meagre transference of resources from the Apartheid government, rendered the reserves rife in poverty and lacking basic infrastructure. Poor health care along with the imposition of the "Bantu education" system further exacerbated the relative underdevelopment of black areas. Contrastingly, the white areas were under populated and received capital investment in infrastructure and imports and thus experienced development. This corresponds very boldly to Furtado's theory of dependency and underdevelopment. A limited, localised, enclave of development emerged in the interest of a minority of elites at the expense of the majority of the country's population remaining underdeveloped. Black people were forced to seek work in white areas however, being deprived of education they were only made eligible for low level employment. At the turn of Apartheid, 61% of the black population and only 1% of the white population were living in poverty.188 Furthermore 72% of those living in poverty resided in the rural areas previously allocated as homelands, 186 Ibid. at p. 3. 187 Ibid. 188 Aliber, at p. 4.
    • 58 encompassing highly populated KwaZulu-Natal, the Limpopo Province, and the Eastern Cape.189 This heritage of massively skewed development remains clearly visible in contemporary South Africa. South Africa transitioned from Apartheid in 1994, ushering in democracy championed by the African National Congress (ANC) and President Nelson Mandela. A development agenda was created to tackle the vast socioeconomic inequality and underdevelopment that had left the majority of the country impoverished and landless. The Reconstruction and Development Programme (RDP) aimed at addressing the injustices of the past, demanding major investment in public expenditure and infrastructure. RDP was replaced in 1996 with the Growth, Employment and Redistribution framework (GEAR), following debate of the RDPs economic policy.190 GEAR focused on macroeconomic policy that would achieve growth. The policy was welcomed by the private sector as it controlled inflation and interest rates whilst encouraging foreign investment. This neoliberal informed policy approach to development thus prioritised growth and the private sector as opposed to tackling socioeconomic inequality and poverty. Like Brazil, the South African government was focused on reducing its external debt instead of investing in public expenditure. Failure to invest in social protection and public services was exacerbated by employment failing to rise with economic growth. Jobless growth has only accelerated and is a major issue in South Africa today. Furthermore, capital outflow has exceeded foreign direct investment rendering GEARs economic growth strategy a failure.191 Some progress has been made in terms of infrastructure development and service provision, with greater access to water, sanitation, housing and electricity being achieved. The South African Economy Today South Africa has the largest economy in Africa, accounting for 24% of the continent's Gross Domestic Product (GDP), rendering it one of only four middle income countries in Africa.192 189 Ibid. 190 Ibid. 191 Ibid. at p. 5. 192 The World Bank. (2013). "South Africa". Accessed Online (June 2013): http://data.worldbank.org/country/south- africa
    • 59 However unemployment is estimated to be between 25 and 40 percent, rendering almost half the country below the poverty line.193 These statistics only account for adults actively looking for jobs. If you take into account those who have given up seeking employment, only as much as 40% of South Africa's adults enjoy either formal or informal employment.194 This indicates a massive surge in unemployment since the end of Apartheid. In Brazil, over 60% of the population enjoys either formal or informal employment. Social grants, which will be assessed in greater detail later, are said to be partly responsible for incentivising unemployment in South Africa. However, social grants are also said to account for a five percent reduction in poverty since 1994.195 At the end of Apartheid, the majority of unemployed people had never seen paid labour, formal or informal. This persists to today, rendering unemployment a major contributor to socioeconomic inequality and widespread social unrest. South Africa's Gini Index is 0,7 making it one of the most unequal societies in the world.196 This indicates a significant increase in inequality since the end of apartheid, with income being increasingly concentrated among a minority of South Africans.197 Interestingly, although poverty in rural areas is far higher than in urban areas, with a Gini Index of 0,59, poverty is decreasing in rural areas and increasing in urban areas today.198 Apartheid entrenched inequality in income distribution on account of white people being a minority population (representing approximately 10% of the population) and holding a monopoly over the formal economy. Since the end of Apartheid, the white population has declined. The black middle class has simultaneously substantially increased and is now the same size as the white middle class.199 Even so, white people receive an income that is on average six times higher than their black counterparts.200 Furthermore white people represent less than 5% of the impoverished population while black people represent over 60% of the population living below the poverty line.201 Therefore greater 193 Ibid. 194 Centre for Development and Enterprise. (2011). "A Fresh Look At Unemployment". Accessed Online (June 2013): http://www.cde.org.za/index.php?option=com_content&view=article&id=405&Itemid=543 195 Department of the Presidency of South Africa. (2012). "The National Planning Commission". Accessed Online (June 2013): http://www.info.gov.za/view/DownloadFileAction?id=147192, at p. 6. 196 The World Bank. 197 Leibbrandt, at p. 9. 198 Ibid. 199 Sky News. (2012). "South Africa Poverty Survey Shows Slow Progress". Accessed Online (June 2013): http://news.sky.com/story/1026884/south-africa-poverty-survey-shows-slow-progress 200 Ibid. 201 The World Bank.
    • 60 racial equality has been achieved in legal terms however it continues to persist in terms of socioeconomic inequality. According to the UNDP, South Africa's Human Development Index (HDI) is 0.6, ranking it 123 out of 187 countries in the world. 65% of the South African economy centres on agriculture and mining, being the biggest producer of platinum in the world. Vehicle production, clothing and textiles, telecommunication, financial services, tourism, real estate and retail are also major contributors to the economy.202 Services and industry are by far the biggest sectors of the South African economy. The various sectors have experienced substantial growth since the end of Apartheid. The legacy of extreme socioeconomic inequality has provoked high incidences of crime. This has been seen to deter foreign investment and undermine growth. This meant the South African economy took a major hit during the 2008 global economic recession, unlike other emerging economies. Domestic growth in consumption and private investment has contributed the most to economic recovery, thus future projections of growth are estimated at 3,5%. Growth has improved in the past decade compared to the decade following the transition from Apartheid however it remains mediocre. 2012's GDP growth stood at 2,6% and 43% of GDP serviced public debt.203 China, the US, Germany and Japan are South Africa's biggest trading partners. Diamonds and gold were discovered in the late 19th Century in South Africa, and have long propelled its economy. Today it remains a leader in mining, representing 60% of its exports and 6% of GDP. Unfortunately there has been a substantial decline in the contribution of mining and minerals to the South African GDP. The sector is occupied by both private and state owned mines. Agriculture provides 10% of formal employment and as much as 3% informal employment.204 Most of South African land is arid and not suitable for agricultural production. Maize represents the primary agricultural product, accounting for 36% of crops while grapefruit, pears and nuts are major exports. South Africa's agricultural trade balance is positive however it 202 Media Club South Africa "South Africa's Economy: Key Sectors". Accessed Online (June 2013): http://www.mediaclubsouthafrica.com/index.php? option=com_content&view=article&catid=37:economy_bg&id=111:sa-economy-key-sectors 203 Central Intelligence Agency: World Fact Book. (2013). "South Africa". Accessed Online (June 2013): https://www.cia.gov/library/publications/the-world-factbook/geos/sf.html 204 Central Intelligence Agency: "South Africa".
    • 61 does import a significant amount of agricultural products including meat and tea. South Africa faces great competition from China and India in its agricultural exports. Manufacturing only accounts for 13,3% of formal employment and 15% of GDP, indicating the limited industrialisation that has taken place.205 Labour is understood to be better paid in the manufacturing industry compared to other emerging economies like Brazil and India however the cost of living is much higher. The sector has experienced decent growth in recent years however due to limited industrialisation, which undermines quality, export to the developing world is meagre. The service industry is substantial and advanced. In telecommunication, Telkom has a monopoly. Call centres represent an emerging service, especially in the Western Cape, which is home to many English speakers. Tourism generates as much as 3% annual GDP with South Africa being a popular tourist destination. Well established and well regulated financial institutions have encouraged bilateral agreements, like the Overseas Private Investment Corporation (OPIC), which assists US businesses investing in the South African market. Attracting FDI has been a challenge for South Africa post Apartheid. Apartheid provoked the international community to place sanctions on all ties with South Africa, destroying both its economy and reputation. Thus the post Apartheid era has demanded not only physical economic recovery, but also recovering credibility in the international market. Thus the investment climate has improved considerably over the past decade. The role of government versus private enterprise in South Africa's economy is a frequent source of debate. South Africa requires investment and technology from private enterprises, most often MNC's, to capitalise on its resource extraction. However there has been a call for greater state involvement in order to facilitate the accumulation of public funds. However the government is accused of being incompetent and corrupt in this respect. This issue has most often concerned the mining industry. Manufacturing is an area which has seen a massive decline in employment. Therefore stimulating industry is essential to counteract unemployment rendering key areas of production, like mining, of immense concern. 205 Ibid.
    • 62 Another key factor undermining industry in South Africa is the "brain drain". This is human capital flight, meaning the emigration of skilled, professional individuals to other, often more developed, parts of the world. Well over 1 million people in this category have left South Africa since the end of Apartheid. Crime, political and economic uncertainty, as well as affirmative action policies put in place by the government, have been the key causes of emigration, especially among skilled white South Africans. Another compromising factor for South Africa's economy today, is the large influx of refugees from African states. This has provoked extreme xenophobia, as illegal immigrants occupy the few available sources of informal employment. Thus the government has put in place more restrictive immigration policies. In terms of infrastructure, South Africa experiences a lack of capacity in energy production and provision, with state-owned Eskom, serving as the primary energy supplier. Failure on the part of the government to plan ahead and invest in infrastructure, as well as increasing demand due to a rising population, has resulted in low capacity. Rolling blackouts are a frequent part of life in South Africa, which highly undermines economic productivity. Water is also an in demand resource, with a low capacity for delivery. Infrastructure and public service provision is highly compromised due to an extremely low ratio of income tax payers. Three times more South Africans live off social benefits and are therefore exempt from paying income tax compared to the taxpaying population. Social grants are provided to the elderly, children, disabled and carers among others, based on income, funded by general tax revenue. The National Planning commission, championed by South Africa's current president, Jacob Zuma, will determine South Africa's developmental agenda until 2030.206 It has identified the areas demanding the government's urgent focus and attention. The end of Apartheid did herald progress in terms of achieving a democratic, constitutional state that enshrined extensive and equal social and economic rights to all citizens. Unfortunately, the realisation of these rights has not been achieved. The impact of Apartheid, which rendered South Africa a highly unequal and impoverished society, remains. Education and unemployment represent the most urgent points of need in order to address this legacy. Although access to primary, secondary and tertiary education has improved, it has to be acknowledged that this is from a starting point which 206 Department of the Presidency of South Africa, at p. 4.
    • 63 effectively deprived the majority of the country of the right to education. The same applies to the granting of healthcare and housing where conditions may have improved but these issue areas remain. Economic growth has improved after decades of stagnation. The public finance system has been restructured resulting in debt reduction, while the tax system and central bank is now credible and functional. Racial equality has improved with black people occupying more than two thirds of the top 20 percent of income earners.207 The previously designated homelands are now integrated as provinces into the state structure. Although various state institutions may face challenges in capacity and implementation, they function equitably and democratically for the most part and are accountable to the constitution. Thus success is defined in relative terms for the most part and shouldn't be undermined. However, vast inequalities persist. These inequalities find their origin in the racial divides of Apartheid but their persistence cannot be wholly attributed to race. Apartheid created structural imperatives which alienated the majority of the population from development. Townships built in rural areas or on the outskirts of cities continue to be deprived of basic services like water and sanitation. By not affording a basic standard of living, people are not able to participate in the formal economy and benefit from economic growth. Furthermore, job creation and improving education fails to make an impact on poverty and inequality unless people have the physical capacity in terms of health and resources to participate. Therefore Apartheid may have ended, but the entrenched socioeconomic inequality it created remains firmly intact. A political revolution is not necessarily accompanied by socioeconomic progress for all. As Furtado submitted, unless the state purposefully confronts and transforms the structures perpetuating underdevelopment and inequality, the majority of the country can remain alienated from development, despite the state as a whole achieving economic growth, giving the illusion of progress. In fact, most post colonial states in Africa have been confronted with the harsh reality of rigid internal structures which prevent change on account of a minority, often the newly elected political elite, having interests that do not pertain to the majority of the country. Corruption, failed state institutions, poor economic administration, 'brain drain', cronyism, short 207 Department of the Presidency of South Africa, at p. 6.
    • 64 sightedness and poor service delivery have plagued many states having achieved independence and democracy. These factors can jeopardize peace and stability in post colonial states and even exacerbate the already dire conditions inherited by colonial leaders. Therefore South Africa today is positioned as a competitive yet compromised emerging market of the developing world. An efficient financial market, easily accessible capital and functional transport system have attracted investment and integration into the global economy. However high labour costs, a volatile currency, poor education, a small consumer population, inadequate technology, poor infrastructure, poverty and inequality compromise its position in world affairs. Factors Contributing to Socioeconomic Inequality in South Africa Today Poverty With 48 percent of South African's living below the poverty line, poverty contributes considerably to the high Gini Index, corresponding to the country's extreme inequality.208 Thus 208 The National Planning Commission, at p. 9.
    • 65 the origins of poverty are of utmost concern in analysing socioeconomic inequality in South Africa today. Despite 20 years having passed since the end of Apartheid, socioeconomic inequality persists along racial lines. Thus the legacy of Apartheid is the foremost contributor to the persistence of poverty in South Africa today. Furtado submitted the concept of rigid internal structures which perpetuate underdevelopment for the majority of the population. It can be said that the structures put in place by Apartheid, which deliberately precluded the majority black population of South Africa from development, though overturned in legal and constitutional terms, have not been transformed to the extent that development has been truly democratised. Thus one is forced to call into question the socioeconomic policies of the post-Apartheid government and the state of the South African economy itself. This will expose to what extent race is still a contributing factor to poverty, as opposed to structural challenges and shortcomings in policy. The structural imperative of Apartheid was premised on inequality. Furtado extracted his structural understanding of unequal development among sectors of society by looking into the developmental trajectory of Brazil. South Africa's experience of Apartheid is distinct from Brazil's socioeconomic heritage. However, Furtado's findings still have relevant applicability by recognising how true structural transformation demands commitment on the part of government to overturn the inherited conditions which perpetuate underdevelopment among those assigned to the traditional sector of society. Without actively pursuing policies which allow the oppressed and disenfranchised to find a space to contend with, or at minimum, function alongside major corporations and the elite of society, poverty will persist. Furtado's traditional sector can be understood to correspond with the black population of South Africa which was actively alienated from having a stake in development. The persistence of poverty in South Africa today, indicates that although some progress has been made, with many black people being moved into the middle class, comparable to Furtado's fluctuating national bourgeoisie, not enough has been done to transform the structures which perpetuate the vast socioeconomic inequality. Race is no longer the primary determinant factor of socioeconomic inequality in South Africa today. However with only ten percent of the country being white and historically advantaged, this category continues to occupy a more privileged socioeconomic position. Thus
    • 66 socioeconomic inequality in terms of race persists in post Apartheid South Africa, on account of historical, not present policies. Extreme socioeconomic inequality persists in South Africa on racial lines despite the abolition of discriminatory racial policies, indicating the massively destructive impact Apartheid had on the majority of the population. Incomes have been rising among all racial groups since the end of Apartheid, including those of the poorest, black South Africans.209 However most are trapped in cycles of poverty. In a sense, Furtado's sectoral divisions in society are represented to the most extreme extent in the case of Apartheid South Africa. His prescription for the active involvement of the state through social policies that target inequality directly, are of immense concern in present day South Africa. Devising policies that transform the structures which perpetuate inequality, within the limited capacity and resources of the state, while taking into account the interests of various MNCs and states, constitutes the central task in combating poverty in South Africa, today. South Africa has a historical legacy of extreme inequality. The Gini Index averaged at 0,68 between 1975 and 1994.210 Today it has only increased to 0,7 representing one of the most unequal societies in the world. Furthermore, the Gini Index indicates extreme inequality among the black population, compared to relative equality among the white population, accounting for black people representing the majority of the impoverished population.211 The combination of black people representing 80 percent of the total population, combined with being historically disadvantaged, further explains this fact.212 However the black population has experienced an increase in the mean share of income resulting in an overall shift towards the distribution of income at the top end of earning. Unfortunately this has been accompanied by a corresponding shift in the lower end too, implying a decrease in earning among the poorest, accounting for South Africa's increasing poverty and worsening inequality. Thus rising inequality has been experienced by all races, with a narrowing of inequality between races. This is why deciphering inequality demands specific attention being paid to poverty. 209 Leibbrandt, at p. 12. 210 Ibid. 211 Leibbrandt, at p. 13. 212 Ibid.
    • 67 With an increase in social grants in 2000 catering to the impoverished, there was significant poverty alleviation among those in extreme poverty. However, such grants were not enough to alleviate South Africa's massive population living in poverty, resulting in an overall increase in poverty since the end of apartheid. As it has been established that race is not the determinant variable in this respect, one is forced to confront the state's policies it has put in place to combat poverty, the success of its social grants, and the overall transformation of the South African economy at large. The social safety nets that have been put in place are clearly indispensible, making the greatest impact on South Africa's poorest. The old age pension fund and child support grant have had a major impact on the majority of South African's who were historically excluded from such benefits. Furthermore, improved access to housing, water and electricity has had a major impact on inequality, albeit not in purely fiscal terms. Data indicates that where improvements in public service delivery have been made, it has catered to the poor. There are also indications that the poor have been able to increasingly accumulate assets. Thus the developmental agenda of post-apartheid South Africa, is arguably pro-poor. When the effectiveness of the South African government is called into question regarding poverty reduction, one is often reminded that only 20 years has passed since the end of apartheid and that more time is needed for a comprehensive and tangible transformation of society to be realised. However the fact that the transformation was explicitly geared towards overhauling the legacy of socioeconomic inequality, only begs one to question why the situation has not only persisted, but worsened. The data demonstrates how race is no longer the key variable driving inequality, with inequality among the black population being comparable to the overall inequality index, and the proportion of wealthy black and white people being equal. Furthermore black people represent over 80% of society meaning, as submitted by Furtado, that the state needs to pursue comprehensive policies, as opposed to ones limited to tackling the aspect of racial inequality alone. In this vain, policies need to target the structural hindrances that resulted from Apartheid's legacy, which persist independent of legalistic racial equality. Admittedly, inter-race inequality does exist but no longer persists as the key factor perpetuating inequality. Instead, white people, who were historically advantaged, exist today as socioeconomically advantaged on account of being part of the historically elite, industrialised
    • 68 sector of society, not on account of being benefited by contemporary white-centric policies. If anything, South Africa's contemporary socioeconomic policies place white people at a distinct disadvantage. However the rigid internal structures of the economy are able to perpetuate their privilege. Like cycles of poverty, cycles of privileged exist. This highlights the need for comprehensive, multidimensional policies as opposed to purely racial policies being put in place in order to facilitate the achievement of real socioeconomic equality. Policies that are able to overcome the structures that allow an elite minority to dictate the terms of the economy and reinforce their privileged, need to be devised. This entails empowerment of the traditional sector of society so that they are able to determine their access to services, resources and opportunities on their own terms, thus facilitating the expansion of the middle class. This notion was promoted by Furtado and is what may account for South Africa's major emphasis on trade unions, in supporting the rise of the traditional sector of the economy. The Congress of South African Trade Unions (COSATU) has become a major political force by affording the traditional sector agency and political will. It will be assessed in greater detail under the topic of 'Employment'. Ultimately, the vast majority of South Africa's population is black, and it represents the majority of those living in poverty, which in-turn corresponds to the majority of those who are unemployed and deprived of access to education and basic services. Therefore the vast majority of South African's, independent of being black South African's, urgently demand the attention of the state in addressing poverty and the factors contributing to increasing socioeconomic inequality. Education and Unemployment During Apartheid, job reservations precluded non-whites from seeking certain job opportunities, confining them to lower income, informal jobs requiring low skills. This prompted a massive widening in socioeconomic inequality during Apartheid. Post-Apartheid, this legacy remains, as non-whites have been entrenched in low wage labour and alienated from development. Furtado's sectoral divisions of society were largely based on the source of income. His traditional sector performed low wage, unskilled labour, rendering it alienated from development in terms of income, geographical location and education. This kind of alienation has an indelible effect on
    • 69 society as it entrenches multidimensional poverty, making it difficult to transform without undertaking a comprehensive transformation of society. Furthermore, demand for this labour is conditioned by externalities. The interests of these externalities often persist, despite internal transformation, on account of being external and therefore immune to domestic government policies. The South African economy was structured in a dependant manner during Apartheid, relying on external sources of demand for its raw natural resources, which were extracted by low wage labour. The South African economy was in ruin at the fall of Apartheid. Economic recovery has been pursued based on previous modes of production, consequently perpetuating the demand for low wage labour, thus reinforcing the underdevelopment of a large portion of the population. Transformation of the economy, legalising the formal and equal inclusion of a previously excluded population, was not accompanied by transformation of the sources of supply and demand that the South African economy was historically based on. Thus unemployment and poverty has only been exacerbated post Apartheid, as the majority of the population continues to be excluded from development in what is now a highly competitive and compromised economic landscape. There has been poverty alleviation when economic growth has been accompanied by an increase in employment opportunities, increased remuneration and the accumulation of fiscal resources by the state for social grants.213 When exploring the relationship between employment and inequality, it is essential to distinguish between the various sources of income and how they correspond to socioeconomic inequality. We can designate four predominant sources of income, namely wage/self-employment, social assistance grants, capital and remittances. Wage income contributes around 70% of income in South Africa and almost all household income, thus corresponding to South Africa's high inequality. That is, inequality in wage earning corresponds to inequality at large on account of so many households receiving zero wages.214 This also renders state social assistance grants of limited impact in combating inequality, although they are indeed meeting their intended target. These statistics in turn expose how unemployment, 213 Liebbrandt, at p. 13. 214 Ibid. at p. 16.
    • 70 rendering a zero wage, is a key factor perpetuating socioeconomic inequality. Therefore access to employment opportunities is of key concern in South Africa today. The official unemployment rate stands at 25% of the labour market, an exceptionally high rate by international standards.215 Even so, it in fact understates the true extent of the employment crisis in South Africa today as this statistic only caters to those actively looking for work. This is what accounts for the actual figure being estimated closer to 40 percent. South Africa needs to create almost 7 million jobs if it wants to achieve the global norm in job provision, which would demand a 7% growth rate for the next 15 years.216 However, South Africa has failed to accompany economic growth, with employment growth. This has been attributed to employers preferring to employ as few workers as possible on account of regulatory disincentives, resulting in an emphasis on skilled as opposed to labour intensive work. Another factor is the rapidly increasing population. The demand for increasing exports has also been recognised as a major source undermining employment. South Africa has a small domestic consumer market, therefore the economy needs to find stimulation and growth from external markets. A move towards more labour intensive production, as opposed to the current emphasis on high end skills and technology, is essential in this regard. Currently, external markets are dissuaded from intensive engagement with South African markets on account of the high cost of labour and transport, and a volatile exchange rate. To this extent, South Africa's move to fostering a more self reliant economy in the post Apartheid period, has undermined the export of its high value resources, which have the greatest capacity to generate unskilled job opportunities. Such production would encourage the emergence of economies of scale, however this is once again disincentivised by employment regulations that encourage South African firms to remain small. This indicates the complex relationship between domestic and international markets, in today's excessively competitive globalized economic arena, a factor that Furtado did not account for. A firm hires workers based on the cost of their productivity. Labour costs include the cost of dismissing a worker. South Africa's labour costs are among the highest of developing countries 215 The Centre for Development and Enterprise, at p. 2. 216 Ibid.
    • 71 around the world. Thus high worker productivity is imperative, which thus encourages the hiring of skilled workers. South African trade unions, like COSATU, have played a major role in affording workers greater rights and job security, which has thus increased their labour cost. These regulations extend to all businesses operating in South Africa, meaning higher costs of productivity. High costs in time and money for dismissing a worker has heavily dissuaded firms and individuals from hiring workers. Furtado promoted such policies. He recognised how the traditional sector of the economy failed to unionise and was therefore exploited. Unionisation has been a major component of post-Apartheid socioeconomic transformation among the traditional sector of the economy. However this transformation, due to the complexities and competition of the domestic and international market, has failed to achieve the desired result of improving economic conditions for this sector. The traditional sector is composed of unskilled workers, which firms have been deterred from hiring in order to optimize productivity. South African labour laws preclude such unskilled workers being paid low wages, which they might have resorted to otherwise. COSATU has become so powerful that it has adopted somewhat of an adversarial relationship with firms and even the government in South Africa. Therefore there have been calls for reforming the labour market to boost employment. Reducing labour costs would encourage firms to hire and the engagement of foreign markets. However some say that such a policy move would in fact jeopardize millions of peoples secure and well paid employment, while failing to produce as many jobs as are indeed required. Others dispute this claim stating that skilled, high productivity labour is well established and would not be compromised. Therefore labour demand is a disputed source of policy debate among firms, trade unions, South African government and individuals alike. This begs one to turn one's attention to the supply of labour. Social protection policies put in place by the government since the end of Apartheid have gone a long way in reducing extreme poverty, improving the life of the elderly and ensuring education for the majority of South Africans. However it has been suggested that social grants have created a culture of dependency and entitlement, dissuading people from seeking employment.217 South Africa subsides those with income below a certain level with extensive grants including housing subsidies and tax exemption. This also means that people are 217 The Centre for Development and Enterprise, at p. 3.
    • 72 more likely only willing to work in jobs that pay a certain amount, avoiding low paid unskilled labour. Unemployment is often attributed to poor skills on account of poor education. This is indeed a major factor however lack of work experience also constitutes a major factor. Most unemployed people have never been employed and therefore have never acquired basic skills. South Africa lacks high skilled workers too, which only further depresses the overall job market. It can be said that the current approach to economic growth, which emphasises production based on high end skills and technology, is precluding the incorporation of the majority of job seekers into the economy. The labour market needs to be renegotiated to enhance low skilled, low wage job opportunities and encourage firms to hire more people. It has been demonstrated that allowing people to work for lower wages, stimulates the economy, providing greater job opportunities and socioeconomic upward mobility in the long run.218 Unlike Brazil, South Africa's firms are far less powerful and its overall integration into the global economy far less. South Africa is thus not a wholly dependent country. Yet it is a country with vast socioeconomic divisions. South Africa has the opportunity to determine development on its own terms and avoid integrating into the global economy in a dependant manner, by observing the lessons learned from states like Brazil. South Africa lags decades behind in socioeconomic development to Brazil, however the structural origins of their economy's have a lot in common. Therefore, South Africa cannot resist all aspects of development in fear that it may have a negative impact. South Africa needs to move beyond the destructive experiences of its past, which indeed showed how dominant external factors can have a negative impact on the majority of its citizens. South Africa has made the constitutional and legal advances to enjoy democratised development in the interests of all. It also has the resources and willing business entities to determines development on their own terms. Well established trade unions can allow the process of development to occur in an equitable manner that benefits all. For this to occur, South Africa needs to foster a more business friendly environment, both domestically and internationally. This will enhance investment and firm productivity to allow for greater 218 Ibid. at p. 4.
    • 73 employment opportunities for the low skilled, whilst encouraging the involvement of the high skilled, resisting the brain drain. In many ways, South Africa has abided by Furtado's prescriptions for achieving socioeconomic transformation. The traditional sector has been vastly empowered, whilst the power of the elites has been tempered. The middle class is expanding. Furtado did not account for the complex and competitive influence of globalization. South Africa needs to view development as a positive thing and avoid consistently approaching opportunities on the defensive. This will allow for South Africa to achieve meaningful growth that extends opportunities to all thus reducing socioeconomic inequality. This notion is prescribed for in Greg Mills and Jeferrey Herbst's, "Africa's Third Liberation"219 . This acknowledges how post colonial African states like South Africa have transited the journey from colonialism to independence and how a new era of transformation has dawned, which begs for the willing and productive entry of African states into the global economy. Furtado's emphasis on the government's responsibility in spearheading this productive integration and internal transformation remains essential in this regard. South Africa's political instability and corruption presents a major factor compromising this pursuit. An employment-intensive growth path is thus achievable but remains aspirational. A huge demand for productivity and labour, occupying the middle range between the informal and high skilled sector, is essential. Currently South African labour laws have rendered labour costs higher than those of many developing countries, thus depriving it of a competitive edge.220 The mining sector represents South Africa's primary export and source of production. It has experienced remarkable growth over the past decade, quadrupling capital on account of price surges. Even so, production is low considering the extent of available natural resources and the relative productive output of countries with far less available mineral resources.221 Many of these countries have opted for nationalising mining production to increase output thus increasing job opportunities. However, opponents to nationalisation say it would dissuade investors, rendering a potentially fatal blow to the South African economy. They prefer emphasis on education for job 219 Mills, G. and Herbst, J. (2012). "Africa's Third Liberation The New Search for Prosperity and Jobs". London: Penguin. 220 Centre for Development and Enterprise, at p. 36. 221 Hofmeyr, J. (2011). "Transformation Audit". Institute for Justice and Reconciliation. Accessed Online (June 2013): http://transformationaudit.org/blog/wp-content/uploads/2012/02/TA%202011%20web.pdf., at p. 13.
    • 74 creation. However, if one acknowledges the historical contingencies, which have resulted in extreme socioeconomic inequality and widespread underdevelopment, a move towards enabling the democratisation of benefits of South Africa's primary source of wealth may be the best move. Nationalisation of mines would encourage industrialisation, a major recommendation of Furtado, as opposed to relying on the technology and infrastructure of external MNCs. It can be said that the strong resistance to the nationalisation of South Africa's mining sector is championed by these external interests. With such a major stake in the South African economy, they have the power to lobby against the intrusion of the state on their mining monopoly. This monopoly essentially allows the persistence of exploitative practices in the mining sector. The 2012 Marikana Massacre, which saw the death of 44 miners, shot by South African police while protesting for higher wages, horrifically demonstrated the oppression and expendability of low wage mining workers in South Africa today. They were calling for capital investment by the private mining companies in the communities in which they extract minerals. Miners work in some of the most appalling conditions and are in every way alienated from development. Ultimately, reducing socioeconomic inequality demands the state itself having a stake in its development , as it is the vehicle determining its development. Furtado emphasised the decisive role of the state in transforming the state into a more equitable society through purposeful state intervention. The current approach, Black Economic Empowerment (BEE), involves affirmative action policies being put in place among both public and private enterprises. However, BEE fails to target the heart of inequality, which sees 48 percent of South African's living below the poverty line, having received a poor education and therefore unable to pursue jobs that would make such affirmative action policies of benefit. BEE in essence only benefits the black elite, thus perpetuating underdevelopment among the poor and entrenching deep socioeconomic divisions in society. Many countries have enjoyed the benefit of nationalisation of key sources of production. It is time the South African government takes greater responsibility for its developmental path and truly transforms the economy. Accusations of political instability and corruption heavily undermine this pursuit. The same white, external powers continue to benefit from exploiting South Africa's resources. A major component compromising employment and South Africa's
    • 75 economic potential at large, is that its growth is wholly dependent on such resource intensive production.222 This is a key component of Furtado's understanding of unequal, dependent economies. South Africa's colonial past established an economy based on natural resource extraction and exploitation at the benefit of external markets. Little capital was reinvest into the domestic economy resulting in development only occurring in the interest of South Africa's elite consumer population. Furthermore, consumption was geared towards the demands of this elite population rendering the majority of the country unable to participate in the economy. South Africa's rich mineral wealth prompted initial expansion of the economy to cater to the newly established, capitalist industrialised sector of the population. Thus the initial growth and structure of the economy was based on dependent engagement with external markets. This structure persists to today despite colonialism and Apartheid having ended thus resulting in vast socioeconomic inequality and alienation of the majority of the country from the capitalist industrialised economy, and consequently, development. South Africa's growth, like that of Brazil, has been at the mercy of external sources of demand and price cycles of boom and bust.223 Brazil has experienced intensifying protests in the build up to the 2014 Football World Cup on account of the massive tax expenditure it has demanded and sky rocketing inflation that has accompanied the intervention of external entities like FIFA. It can be said that MNCs today play the same role as external state powers of the colonial era, accounting for the persistence of disadvantageous relationships for peripheral states. South Africa relies on MNCs with the requisite advanced machinery and technology to extract its minerals, massively curtailing economic benefits accruing to the domestic market. Mineral extraction demands intense energy and infrastructure investment. Therefore South Africa is in many ways only compromised by the structure of its economy as opposed to stimulated by it. South Africa has limited renewable resources with only 3 percent of its land being of high agricultural potential and extreme water constraints. South Africa needs to seek an economic growth path that places less strain on its natural resources and reduces dependency on external markets. Food security and climate change make this all the more urgent. Investing in alternative sources of energy can stimulate job growth while developing agricultural production can provide low skill employment and enhance food security. Therefore, reducing dependency and 222 Department of the Presidency of South Africa, at p. 17. 223 Department of the Presidency of South Africa, at p. 17.
    • 76 transforming the rigid sectoral divides of South Africa's economy can be achieved through shifting the primary productive focus from mining to more knowledge and labour based sources of growth. In order for the Apartheid legacy of rigid socioeconomic sectoral divides to be transformed, quality education needs to be provided to the historically disadvantaged to stimulate the economy and create job opportunities. Numerous reforms of the education system have been achieved, allowing for almost universal provision of education, with 98% of students enrolling for primary education and 85% for high school education.224 12 million students are provided with publicly funded education at government schools, while 2 million students receive private education.225 Therefore most students drop out in high school with education only being mandatory to age 15. The increased provision of education has substantially improved literacy which is essential in combating socioeconomic inequality. Increased public spending catering to black children has allowed for the provision of school materials, more teachers and smaller classes. However many schools remain deprived of basic equipment and infrastructure including electricity, desks and toilets. In this vain, the South African government has received much criticism for failing to provide quality education to all, as the standard remains poor. South Africa spends 6% of its GDP on education and pays its teachers well by international standards. However, historically white schools continue to achieve the highest national grades, accounting for less than 70% of students achieving the minimum 40% pass rate in the final year of high school. It has been established that parental literacy, nutrition and pre-school mental stimulation play a major role in educational performance among children. Thus despite government attempts to improve education, with almost half the country living below the poverty line, many children are placed at a distinct disadvantage before commencing their formal education. Early childhood education has been expanded, with the majority receiving preschool education. This has had a positive effect on primary school enrolment. School feeding programmes have also been put in place to target poor nutrition. However, such efforts remain underfunded and of poor quality. South African students from poor families perform worse than 224 Leibbrandt, at p. 13. 225 Ibid.
    • 77 students from similar backgrounds in other African countries.226 This has been attributed to inefficient bureaucracy, the curriculum facing frequent reforms, and teachers and principals being provided little support in this regard. Therefore the central challenge lies in teacher performance to achieve the provision of quality education. There are high rates of teacher absenteeism and poor provision of basic school materials. Children from poor communities often experience or are at least exposed to physical abuse. Alcoholism is a major problem in South Africa's poor communities. Yet most public schools have no councillors, nurses or parent-teacher engagement. Available staff rarely face disciplining or firing for misconduct. The socioeconomic environment of students has a major impact on their school performance and that of their teachers. Strikes and are a frequent feature of all public services in South Africa and has a major impact on the provision of education. Therefore the culmination of poor social, economic, environmental and material factors for the majority of South African students, means that only 35 percent complete high school and only 15 percent enrol in tertiary education.227 Black students who do enrol at universities are twice as likely to fail or drop out compared to white students and only a fifth complete their degree in the prescribed time.228 This renders a minority of South African students eligible for higher end formal employment, demonstrating how Apartheid's legacy continues to have a major impact on future generations of South Africans. Without an efficient skills base intact, with students achieving the potential of higher social mobility, the sectoral structures of Apartheid will remain intact and socioeconomic inequality perpetuated. The provision of quality education is an essential component of combating such inequality. The Rural-Urban Divide Poverty in rural areas is much higher than in urban areas.229 Apartheid was based upon geographical division of people by race. It allocated 13 percent of South Africa's most undesirable, rural land to non whites, precluding it in both legal and geographical terms, from 226 Leibbrandt, at p. 14. 227 Leibbrandt, at p. 14. 228 Ibid. at p. 15. 229 Department of the Presidency of South Africa.
    • 78 access to development. This geographical legacy of Apartheid has rendered the rural- urban divide of persistent relevance in the post-Apartheid era. Transformation demands far more effort than legal reforms, on account of reform not necessarily being accompanied by physical transformation. The Bantustans, assigned to black people, were devoid of basic services and wholly alienated from development. They were also deliberately placed in geographically undesirable locations in terms of access to resources and urban centres of development. By purposefully placing the majority of the population in inaccessible rural areas, the post-Apartheid government has been faced with major challenges in terms of basic service delivery to these areas. This may account for the increase in poverty in urban areas on account of mass rural to urban migration by the impoverished rural population. The provision of some services to these areas, which were previously completely deprived, as well as rural to urban migration, can thus account for declining poverty in rural areas. The poorest of the poor continue to occupy rural areas. The situation has in many ways only been exacerbated post-Apartheid, as redistributed land is poorly geographically situated. Therefore, informal settlements have expanded in rural areas, remotely located from access to employment opportunities and public services. A major component of the government's current developmental mandate is to improve infrastructure in these areas and basic service delivery for inclusive development. Lack of coordination between the municipal, provincial and national tears of government is largely responsible for poor service delivery between rural and urban areas. Provincial government is tasked with the provision of houses, schools and clinics, and tends to prioritise demands in urban areas as opposed to those stemming from rural settlements. Thus there has been a move towards tasking municipal government with housing delivery.230 However poor municipal capacity to deliver services is likely to hugely undermine this objective without the active engagement of national government to ensure service provision for all. Planning is essential in this regard. The current challenge lies in determining what the best route is to truly democratising service delivery for all as this is essential to achieve a more equal society. Resettling people closer to urban centres of development has been considered but is unlikely. Improving transport between 230 National planning, at p. 19.
    • 79 urban and rural areas is of urgent need. However the feasibility of establishing transport links between sparsely populated rural settlements, distantly located from urban centres, also seems unlikely. Therefore the urban-rural divide is a major challenge in tackling socio-economic inequality. Brazil constructed its capital Brasilia in the rural western area of the country in order to bring urban development inland. South Africa needs to provide infrastructure and services to rural areas in order for them to achieve internal development. How this is going to be achieved is the challenge. There is much rural-rural migration occurring which has resulted in the emergence of settlements along these transportation routes. If service delivery was to be focused on these areas and consolidated, the potential for economic growth and job creation could be spurred. Enhancing agricultural production in rural areas has also been designated as a major possibility in facilitating growth in rural areas. The Tax System and Public Expenditure The tax system in South Africa has been successfully instituted and is sourced from income tax, value added tax, corporation tax and fuel duties. Tax collection amounts to approximately R700 billion231 annually. South Africa has a progressive income tax system, placing greater taxes on the wealthy to be redistributed to the poor. Therefore people earning less than R63 556 are exempt from paying tax while those earning over R617 000 pay 40 percent income tax. Furthermore those earning less than R120 000 per year are not required to declare their income. There are approximately 3,5 million tax payers out of a population of 49 million people, mainly sourced from wage salary income. Thus South Africa's limited tax base highly compromises public expenditure. Furtado promoted redistributive taxation policies. By placing less of a financial burden on the poor and redistributing collected tax, the South African government aims to facilitate the upward mobility of its population into the middle class, tax-paying sector. This would then enhance public service delivery at large, thus accounting for economic growth being a top priority of the South African government. South Africa's public services illustrate the massive inequalities that exist in terms of access to and quality of basic services. Despite the implementation of a Constitution that recognises 231 R=Rand, the South Africa Currency. There are approximately R9 to US$1.
    • 80 socioeconomic rights for all its citizens, along with laws designed to protect such rights, a massive disjuncture exists between these rights and the ground reality for the majority of South Africans. A complex political landscape, ineffective administration, a massive skills deficit and zero accountability mechanisms have rendered basic services like health care, a privilege of few. Providing basic services to all South African citizens is essential for widespread participation in the developmental process. Poor service delivery has provoked widespread protests, dissatisfaction and disillusionment. The democratisation of services that was hoped for in the post-Apartheid era has by no means been achieved. The poor and women suffer the most in this regard. Thus ensuring efficient and well allocated public expenditure is of immense concern in combating socioeconomic inequality. R83 billion was allocated toward public expenditure in 2012.232 The key priorities for the South African government are creating inclusive growth to spur infrastructure development, supporting the emergence of enterprises and job creation as well as enhancing public service delivery. Thus the Department of Trade and Industry via the Economic Competitiveness and Support Package receives the largest share of funding, with job creation and upgrading of human settlements being the next top priorities.233 South Africa's poor public health system is a major factor perpetuating socioeconomic inequality. South Africa has the highest incidence of HIV/AIDS in the world, being home to 17 percent of the world's infected population. South African witnessed its overall death toll double between 1998 to 2008.234 Low life expectancy and high infant mortality are testament to the urgency for widespread, quality health care delivery. Injury, infection and diseases place a massive burden on the majority of the population. Tuberculosis and malnutrition place those infected with HIV in an extremely vulnerable position. Violence and road accidents persist at nearly twice the world average.235 Foetal alcohol syndrome rates are some of the highest in the world, reflecting poor education and prenatal care. The overwhelming disease burden in South Africa has resulted in a collapsed health care system. Apartheid deprived black people of basic health care. Today, with an exponential increase in 232 South African Government Treasury. (2012). "Estimates of National Expenditure 2012". Accessed Online (June 2013): http://www.treasury.gov.za/documents/national%20budget/2012/ene/FullENE.pdf 233 Ibid. 234 Department of the Presidency of South Africa, at p. 20. 235 Ibid.
    • 81 demand for health care combined with lack of institutional capacity, black people continue to be deprived of access to quality healthcare. The government has mismanaged resources and failed to effectively implement policies. The economically elite portion of society rely on private healthcare. The standard of training and management of public health employees is so poor, that those who can afford to avoid it, do. South Africa is acclaimed for training world class doctors and surgeons at its top universities. The first heart transplant was famously performed in South Africa, by South African surgeon, Christiaan Barnard. However the brain drain has resulted in the highly skilled health professionals seeking greater work opportunities in more developed countries. South Africa experiences a massive shortage in skilled healthcare workers resulting in a crisis of the healthcare system. The government is currently wholly dependent on the private sector for quality health care provision with 17 percent of South Africans reliant on private health insurance and a quarter seeking private healthcare periodically.236 This accounts for an astounding 5 percent of South Africa's GDP expenditure while public health expenditure is 3,5 percent. Private healthcare is extremely expensive and of a much higher quality and thus encourages health practitioners to seek private sector employment. The private sector argues that it contributes to ensuring quality training and discouraging brain drain.700 clinics have been built since the end of apartheid and are designed to take the burden off public hospitals by providing preventative healthcare.237 However the service at clinics is poor and they run extremely short in material capacity, therefore the primary burden of healthcare provision still lies on hospitals. The current policy focus is to introduce national health insurance and improve the quality of healthcare. South Africa needs to increase public expenditure on healthcare if it wants to effectively tackle its massive disease burden. This requires greater resources and a potential amendment of its public financing policies. Medical insurance currently places the wealthier, insured portion of the population at a major advantage relative to those wholly dependent on the public health system. A closer working relationship between the public and private healthcare institutions would likely contribute to narrowing the gap in quality of healthcare provided. 236 Department of the Presidency of South Africa, at p. 20. 237 Ibid. at p. 21.
    • 82 Therefore taxation and public expenditure are crucial components in facilitating the upward socioeconomic mobility of South Africa's citizens. Unequal Land Ownership The enactment of the Natives Land Act in 1913 precluded the vast majority of South Africans from the right to buy or occupy land outside of assigned "scheduled native areas".238 This meant that access into non-scheduled areas was only permitted for either agrarian or mining labour. 100 years later, South Africa has transformed the laws which entrenched unequal land ownership, however the legacy persists. Land ownership remains deeply unequal. Land reform exists in three approaches; land redistribution, land restitution and improving land tenure security.239 The government has committed to speedy state land reform that is just and equitable. The Restitution of Land Rights Act will be amended allowing for further claims to be made beyond the previous 31 December 1998 deadline, whilst also accommodating claims from Khoi and San indigenous people and incentivizing the sale of smallholdings farms from commercial farmers.240 Since 1994, 4813 farms have been transferred to the benefit of 230 886 black people.241 The state has invested R12,9 billion on land redistribution, recapitalizing 696 farms, providing employment for 4982 workers.242 The state has settled 77 148 land restitution claims amounting to R10 billion, as well as R6 billion in financial compensation.243 Most claims have preferred financial compensation to land restitution. 238 Lodres, K. (2013). "Land, Labour, and South Africa’s Tumultuous Agrarian Landscape". Think Africa Press. Accessed Online (July 2013): http://thinkafricapress.com/south-africa/land-labour-and-south-africa-tumultuous- agrarian-landscape 239 Ibid. 240 South Africa News. (2013). "South Africa to speed up land reform". Accessed Online (June 2013): http://www.southafrica.info/about/social/land-250213b.htm#.Ucvzm_kwdH8 241 Ibid. 242 Ibid. 243 Ibid.
    • 83 Unequal land ownership draws one's attention to the vast inequality that exists in the agrarian sector of the South African economy. Violence and exploitation is endemic on account of poor services and food insecurity. This has aggravated strikes and protests, resulting in a raising of the minimum wage for farm workers by over 50%. The murder of white farm owners by their employees as well as incidences of Zimbabwe style land grabbing has provoked major racial tension. Reputable statistics on the exact distribution of land between black and white people is not available however estimates indicate the vast majority of South African land is in private ownership of a majority white owners. Much of this land is commercial agrarian land. There is a focus on increasing ownership of smallholdings, which are labour intensive. This would contribute to reducing unemployment in rural areas whilst transferring land from black to white people, thereby combating socioeconomic inequality. Furthermore, more smallholding farms increase the bargaining power of rural workers in economic policy concerning wages and benefits such as housing. Many rural farm workers and their families are dependent on their employer for housing and therefore avoid demanding better wages in fear of being rendered homeless. The 1997 Extension of Security of Tenure Act (ESTA), was designed to protect farmer's housing by limiting circumstances for eviction and imposing legal processes demanding notice and obtaining a court order for eviction.244 However illegal evictions have persisted due to poor police capacity in rural areas and the inclination of small farm owners in particular to ignore the law. Furthermore, small farms are exempt from abiding by certain laws. Thus many policies have had unintended consequences. The same has been demonstrated in cases of land restitution where commercial land has been transferred to smallholding farmers, who have then engaged in contracts with commercial farmers at the same low wages. This has been attributed to newly assigned land owners not knowing how to run their farms and therefore being vulnerable to commercial exploitation. Therefore for living conditions to improve, more than land transfer needs to take place. The influx of migrants into South Africa supplies a steady supply of people willing to work below the minimum wage. The potential for a family to sustain itself off a plot of land is of indispensible 244 Lodres.
    • 84 significance in South Africa that has almost half its population living below the poverty line, many of whom live in rural areas. Unequal land distribution is an inherited issue of the past, contributing significantly to overall socioeconomic inequality, however its significance extends beyond issues of justice and reconciliation, it includes future food security and the dependence of South Africa on external markets. Social Protection Policies in South Africa Since the end of Apartheid, social protection policies have expanded significantly in South Africa and now cover 14 million people.245 South Africa allocates more than double of its annual GDP to social protection, accounting for 3,5 percent.246 This amounts to over half its public expenditure. The state old-age pension, the disability grant and the child support grant represent the central policies and are delivered as means tested, unconditional cash transfers. The vast majority is allocated to child support grants for children up to the age of 14. The global economic recession has placed a major strain on the South African economy and its people. Consequently, the state is under a greater burden than ever to deliver social protection. It is an essential component of responding to poverty and ultimately socioeconomic inequality. Thus enhancing growth of the economy is essential for people to be transferred out of poverty and for social protection to be delivered. An unemployment insurance fund exists to support people temporarily who have lost their job due to extenuating circumstances. Precise requirements have to be fulfilled for eligibility for claiming, thus approximately 200 000 people seek this mode of unemployment support, a stark contrast to the millions of unemployed. Therefore it is not aimed at impacting poverty, rather providing short term relief to people seeking further employment in the future. The Public Work Programme also exists to provide support to those who have lost their job by providing unskilled manual work with short term employment in public services.247 This provides relief to households facing financial crisis in the face of unemployment, however it covers a limited population. Thus an expanded programme exists offering labour intensive employment 245 IPC-IG, at p. 11. 246 Ibid. 247 Ibid.
    • 85 opportunities from various government endeavours aimed at infrastructure development in particular. The aim is to provide labour to unskilled workers and in the process provide training and skills enhancement. Thus, considering the extent of South Africa's unemployment crisis, many people do not receive social protection when facing unemployment. The state needs to significantly expand its current programmes if it is to make a meaningful impact on combating unemployment, thus reducing socioeconomic inequality. The majority of South African households receive a cash transfer grant rendering it a major component in tackling poverty. Those representing lowest 20 percent of income earners in South Africa, receive two-thirds of their income from social assistance grants.248 This is mainly sourced from the child support, care dependency and foster care grant. The vast majority of black people accessing disability and pension grants live below the poverty line. As income increases, so the reliance on social assistance grants decreases, indicating the urgency of poverty and unemployment reduction. Social protection policies play a major role in the lives of South Africa's poor. They provide the potential to invest in human capital development such as health and education, despite being unconditional cash transfers, however they also provide the potential to create cycles of dependency. There is evidence that cash transfers disincentivise finding work in South Africa. The current social protection system definitely needs to be reformed to include the most vulnerable under its protection, whilst providing incentives to participating in the overall developmental process. It can be said that South Africa can learn from the Brazilian experience of conditional cash transfers. Conditional cash transfers would enhance human capital investment whilst ensuring the limited available public funds are well spent. The end of Apartheid saw a massive expansion of social protection policies. These policies need to be consolidated and redesigned to cater to the new economic landscape, which has seen poor growth and high competitiveness. South Africa's social protection policies have to avoid creating cycles of dependency and entitlement, rather encouraging the integration of all sectors of society into the economy. Furtado viewed this as his central recommendation; creating inclusive growth by providing social protection that eliminates societal divides, thus transforming the economy as a whole, not just for the poor. The South African government is no doubt compromised by limited funds and capacity for implementation. 248 IPC-IG, at p. 12.
    • 86 Furtado recognised the state as the central contributor to socioeconomic reform. Therefore it is essential to not only look to society, but to the government itself in achieving real transformation. It can be said that political instability and corruption in South Africa has heavily undermined the achievement of such transformation, thus accounting for the vast socioeconomic inequality that persists to today. South Africa's policies are well intended as is demonstrated in over one third of social expenditure being allocated toward education. However their appears to be a disconnect between government policies and funding, and the impact on the ground. South Africa is still paying off the foreign debt it inherited from the Apartheid regime, which places a huge strain on available resources whilst discouraging foreign investment. However, South Africa's prudent fiscal management does send a positive message to investors. Social protection policies contribute massively to the welfare of South Africa's unemployed, however it is not sufficient to bring households headed by unemployed people, out of poverty.249 This observation has prompted the recommendation of a national basic income grant and the expansion of various grants already in place. Naturally, this is all dependent on the financial capacity of the state, however there is no doubt that expansion would have a significant impact on poverty reduction. Studies indicate that the government currently does not have the capacity for such expansion, rendering the need for overall economic growth all the more pressing.250 249 Standing, G & Samson, M. (2006). "International Poverty Centre: Poverty In Focus: A basic income grant for South Africa". Cape Town, UCT Press.. Accessed Online (June 2013): http://www.ipc- undp.org/pub/IPCPovertyInFocus21.pdf 250 Ibid. at p, 11.
    • 87 Conclusion Furtado correctly foresaw how development that only caters to a minority of elites can achieve growth rates but fail to help the situation of the poor. He also recognised non economic factors such as the environment and education are essential to confront when finding solutions to underdevelopment. Furtado correctly foresaw how development that only caters to a minority of elites can achieve growth rates but fail to help the situation of those essentially alienated from the market. His recognition of a structural imperative to leave a portion of the population underdeveloped accounts for the rich getting richer and the poor getting poorer. Therefore a multidimensional approach to reducing poverty and inequality is central to Furtado's understanding of development, as it was seen to provide a comprehensive response to the influence of external markets on the government whilst transforming the structural rigidity of a post colonial dependent state. He was not calling for isolationism, but integration into the international market following the implementation of a developmental approach centred on creating long term, sustainable, equitable growth. This would demand autonomous integration into the international economy, to allow for an independent, as opposed to dependent, trajectory of development. Thus the central tenant of Furtado's theory continues to have indisputable relevance. So much so that it holds explanatory power beyond the Latin American context of underdevelopment, resonating with similar cases of postcolonial, emerging economies like South Africa. His recognition of centre-periphery asymmetries and the consequent domestic repercussions this dependent relationship has is of crucial significance today. In the era of globalization we are able to see more than ever how the state itself is the primary determinant of its own trajectory of development. Unless it purposefully pursues fostering internal economic strength through investment in infrastructure, technology and society, it will be unable to compete in the international market, resulting in relationships of dependency where trade it determined by external entities.
    • 88 Neoliberal hegemony has rendered emerging developing economies of today extremely vulnerable to externalities. It has seen the prioritisation of the international finance system above domestic interests like the combating of socioeconomic inequality. This approach has left countries like Brazil and South Africa at the mercy of massive external debt. Today we see a call for a more nationalistic and socially informed developmental approach.251 Social protection policies, not only improve the lives of the majority, they enhance the productive capacity of the state at large and consequently improve the investment climate, arriving at an all round more stable economy. Thus domestic public investment eventually garners foreign investment, making it profitable for all thus reducing socioeconomic inequality instead of reinforcing it. Social policies cannot be relegated as an appendage of national development policy, but must spearhead it. Whether a state should adopt universal or targeted social policies then comes under consideration; demonstrating varying degrees of success in practice. Brazil's Bolsa Familia has been credited with reducing poverty and inequality. It can be said that on the international front, the promotion of South-South cooperation allows for developing economies to determine development on their own terms. Brazil and South Africa are both regional powers and emerging economies. This factor was a crucial motivation for conducting a corresponding investigation into the persistent prevalence of socioeconomic inequality in these states that have enjoyed considerable growth in recent years. Cultivating a more prosperous domestic economic climate will serve both countries in great stead for their mutual economic cooperation and investment. The deliberate intervention by government, to transform structures which perpetuate dependency and underdevelopment, to avoid being dictated to by external markets is the crux of Furtado's approach to development. For Furtado, this would allow states like Brazil and South Africa to tackle poverty and inequality in a manner that facilitates development and enhances prospects of prosperous integration into the global economy. I have attributed socioeconomic inequality in Brazil to poverty, poor education and unemployment, the rural-urban divide, unfair government policies most notably in the tax system and inequality in land ownership. All these factors are interrelated and hark back to the core 251 Rocha, at p. 151
    • 89 internal structure of the state which has been determined by historical economic dependency on external forces. This has precluded change and adaptation which would grant the majority of the population accessing the benefits of and participating in development. Neoliberal informed economic growth does not accrue equal benefits to all, accounting for the persistence of socioeconomic inequality in Brazil despite its considerable growth. The government should recognise that having the majority of the country alienated from the market is disadvantageous to the economy in the long run and also to the state's politically stability. The case of South Africa demonstrates how low economic growth has jeopardised the potential for widespread participation in development, whilst undermining the capacity of the government to deliver basic services. South Africa managed to peacefully transition into the post-Apartheid era, yet many South African's remain pessimistic about the future of their country. Almost half the country lives in poverty and over 25% of job seekers are unemployed. The poor and vulnerable are becoming increasingly dependent on social protection from an already highly compromised state. For Furtado, it is the duty of the state to transform society to achieve a more equitable distribution of resources. The challenge for South Africa is that resources are only part of the problem. Political instability and rampant corruption mean that the leadership are the source of and not the solution to the problem. South Africa has failed to adopt a long term strategy aimed at bettering the nation as a whole, largely on account of short-sighted leadership focused on personal gain. Admittedly, some remarkable policies are in place aimed at reducing extreme poverty, providing education for all, redistributing land and state resources, and facilitating rural development. Therefore South African citizens need to hold their leadership accountable in order for these policies to be successfully implemented. Progress has been achieved since the end of Apartheid, however in many respects, South Africa remains a divided society along both racial and socioeconomic lines. What separates the case of South Africa from Brazil, is that South Africa is still very much recovering from the legacy of Apartheid, whilst Brazil has managed to progress beyond its history of military dictatorship. In this vain, with both states experiencing a similar developmental trajectory defined by extreme socioeconomic inequality, it can be said that South Africa simply needs more time to achieve a truly transformed society. Jobless growth, like Brazil's unequal Miracle Growth period, is a
    • 90 major problem. Inclusive, pro-poor growth must be achieved, facilitated by growth of the private sector, to enhance domestic savings and investment. Infrastructure as well as human development is crucial in this regard. South Africa needs to industrialise to improve the quality of its exports and develop labour intensive production to enhance low skilled employment opportunities. Regulating the intervention of MNCs and private enterprise in South African markets, to ensure equitable growth, should be a priority of government. South Africa's position in international relations has no doubt improved, giving way to endless opportunities for global economic engagement. Unless this engagement is managed in a way that avoids exploitation of South Africa's poor and reinforcing the interests of South Africa's minority of economic elites, extreme socioeconomic inequality will persist. The South African government needs to place the public interest as its central value, conducting transparent economic relations in order to truly realise the values enshrined in the Constitution. Schwartzman suggests the solution to income inequality lies in an "increase public expenditures by raising the minimum wage, extending the social security benefits, investing more on public services, developing industrial policies for the production of goods for popular markets and providing cheap loans for housing construction."252 . The government also needs to facilitate opportunities for private economic initiative meaning improvement in education, streamlining government bureaucracy, creating tax reductions for the poor and granting credit to entrepreneurs and small scale businesses.253 It needs to adopt a more collectivist vision of its society if it is to take socioeconomic inequality seriously. As long as efficiency is seen in purely economic terms, the priorities of government will not be the well being of the people. Today's neoliberal informed globalized world places the prioritisation of economic factors above all. This presents a great challenge for Brazil and South Africa and is the dilemma of global economic integration at large. Global economic integration allows for individualistic achievement to be pursued and rewarded at the expense of the economic well being of the majority.254 It is unlikely that the forces of globalization will relent to the needs of the 99 percent 252 Schwartzman, at p. 29. 253 Ibid. 254 Schwartzman, at p. 30.
    • 91 therefore it is the duty of the state and civil society to ensure that their needs are accounted for and this rigid structure overturned. Bibliography
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