Brazil's Bolsa Familia, its cash transfer programme that has brought 25 million Brazilians from poverty to the middle class, has completed 10 years. Its success is attributed to the egalitarian vision of one man - its former President Luiz Inacio Lula da Silva

Brazil’s Bolsa Familia (meaning family allowance), its fully state-funded conditional cash transfer programme, has completed ten successful years. Instrumental in reducing income inequality in a society that was among the most unequal, it has inspired similar programmes in other Latin American countries like Argentina, Chile and Guatemala. Brazil is reportedly also being consulted for similar programmes by African (Ghana, Angola, Mozambique) and Arab countries (Egypt, Turkey).

Even India tried to take a cue from it by considering cash transfer to replace its Public Distribution System (PDS). However, there was understandable opposition from different strands of the ideological spectrum. This was because the infrastructure needed to make it a success was not in place here.

Social welfare programmes are devised for the downtrodden, the ‘have not’s. But who is considered a ‘have not’? ‘Have not’ in terms of what? When does he cease to be a ‘have not’? These considerations need to figure in policymakers’ minds before they try devising a truly need-based programme.

Only recently has it started dawning upon them that poverty does not merely mean hunger, it means deprivation, it means not having a ‘living wage’. They have finally understood that it is a hydra-headed monster. Our elected representatives have come to accept that 'Right to life' embedded in any country’s Constitution needs to include the right to live a dignified life, not one of mere subsistence. A social welfare program aimed at giving a life of dignity would require sound infrastructure to be successful; e-governance is now one of its key components.

A life, to be lived with dignity, needs to include access to not just quality food but also education and healthcare. And this needs to be lifelong. Even in rich countries, some state presence is needed for those who can't make out of pocket payments.

Even in the United States, the country whose foundation is premised on individual liberty, the country with the highest aggregate GDP, an average household spends the most on education, healthcare and childcare. It is clear that state presence in these sectors would surely make the citizens more productive, not less. Capitalism can co-exist with a welfare state.

In this regard, experts frequently quote the model followed by Scandinavian countries as the one to emulate. And the system there is universal. No wonder they are amont the least unequal and their citizens among the most productive.

Of late, Bolsa Familia has made sure that even Brazil is cited as an example. A country where democracy emerged after a long struggle against dictatorship, Brazil got the state’s social commitments inscribed in the 1988 Constitution. This made sure that they would not be held hostage to vote-bank politics, as they are in India. This also made sure that they’ll be seen by citizens as rights, not just as entitlements.

If such codification happens, won’t the citizens be able to focus on realising their full potential? Won’t they decide to be more productive in their own country rather than trying to find greener pastures elsewhere? Won’t they be able to enjoy their inherent and inalienable rights of “preservation of life, liberty and the pursuit of happiness” as the U.S. Declaration of Independence puts it?

Or would they be, as a certain section of society believes, considered "moochers” [To quote Ayn Rand and her disciples like Paul Ryan and Mitt Romney]?

Brazil’s example renders Rand’s philosophy not just anachronistic but also totally irrelevant. Bolsa Familia, part of its wider Fome Zero (zero hunger) effort, was aimed at putting cash into the hands of the common individual, thus boosting her purchasing power.

Here, we need to take into consideration the reality that that unlike India, the poor in Brazil were so not due to lack of availability of food. Even the poorest had access to food.

What the less-privileged lacked was income to purchase the essentials. Bolsa familia provided them just that. It did not involve state intervention in market but its involvement to boost the citizen’s purchasing power, enabling her to become self dependent. It involved hand holding, not spoon feeding.

The programme was initially targeted at families earning a monthly income of not more than one-fourth the minimum wage, Brazilian Real R$120 ($52 approximately), which has been raised to R$140 ($60). The individuals/families were screened using Unified Social Services Register (the cadastro unico) - similar to India’s census authority. However, records had already been made foolproof and had been thoroughly digitised, reducing the scope for leakage and diversion.

The monthly benefits ranged from R$20 to R$182, conditional on getting children inoculated and getting them to attend schools. It was mandatory for pregnant and lactating women to seek hospitalisation. A novelty in the scheme was that the amount was transferred to the bank accounts of women in the family - financial inclusion and women empowerment in one step.

These were all steps aimed at bringing about a sense of empowerment rather than sense of entitlement in citizens, enabling them to assume their fundamental responsibilities as they enjoyed their fundamental rights.

Ten years since its introduction, the programme has benefited 50 million Brazilians (13 million households) and brought down the number of extremely poor (those living on less than R$70 or $30) down from 8.8 per cent to 3.6 per cent. In the decade starting 2002, it has helped in reducing poverty by 28 per cent.

The strength of a social welfare programme needs to also be evaluated based on the ability to the citizenry to come out of it, their capability to live without it even when it is available. At the same time, it needs to be available for them when they are in crisis. It is enlightening to find that about 12 per cent of the total beneficiaries (1.7 million people) have been able to give up their benefits.

Inequality, measured by Gini coefficient, has shown considerably reduced. From a high 0.58 plus in 2002, it has reduced to a moderaly-high 0.547 in 2010. Between 2001 and 2008, income of the poorest decile reportedly grew at a rate six times that of the top decile. The minimum wage has increased by more than 200 per cent, something some economists hold as the primary reason for the programme’s success.

Some 25 million people joined the middle class, enabling them to give up many of the benefits, for the first time, making Brazil a middle-class majority nation.

Creation of a “sub-proletariat”

Though former Governor of Distrito Federal (Brasilia) Cristovam Buarque is called father of the programme, it is the charismatic ex-President Luiz Inacio Lula da Silva, who has emerged as its face. Having come from a humble background and having started as a trade unionist, he emerged victorious in 2002 presidential elections; in 2006 presidential elections; and mentored a totally unknown Dilma Rousseff to a thumping victory in 2011.

Perry Anderson, Professor of History and Sociology at University of California, Los Angeles, documents three interpretations of the Lula effect on Brazil - the way his policies were instrumental in bringing transformative change to Brazilian polity, economy and society - which he calls Lulismo.

The first is the traditional right-wing narrative which labels him a “caudillo”.

The second, by political scientist Andre Singer [press secretary to Lula in his first term] attributes his popularity the way his policies benefited the “sub-proletariat”. This category includes not only the very poor and the poor but also the moderately-incomed. This amorphous collective of ‘sub proletariat’ was the section that made sure that Lula’s popularity at the end of his second term was a high 87 per cent.

Singer says this section was primarily moved by two emotions: hope that the state would moderate inequality; and fear that social movements would create disorder. Lula assuaged them on both fronts. His social welfare programmes took care of the first, while Brazil’s agribusiness and commodities boom made sure that the small-scale business or for that matter capitalists and Chicago school thinkers were not antagonised.

He credits Lula with pioneering a ‘new ideological road’, premised on conflict avoidance using which he could strike the perfect balance between labour and capital.

The third interpretation, by Chico de Oliveira, one of the historic founders of Lula’s Workers’ Party (PT) who later left the party, gives the darker side of Lulismo. He finds equitable and inclusive progress still out of reach of Brazilian society.

So if Bolsa Familia empowered the poor, did it antagonise the rich? That the interests of the propertied class were taken into consideration can be understood from certain figures. Between 2002 and 2010, Bovespa, Latin America’s leading stock exchange, outperformed other stock markets, rocketing by 523 per cent. Interest rates paid to deposit holders remained high. Fiscal receipts were 34 per cent of the GDP, higher than in most other developing nations.

Upper echelons - those living on 30 times the minimum wage - got just a quarter of their incomes taxed while those on less than twice the minimum wage got half theirs taxed. Land ownership, urban real estate, agri-businesses all these became increasingly concentrated in a few hands. These prove that though reforms were impactful, unlike Venezuela or Cuba, they were certainly not radical.

An appreciation of this scheme would not be complete without an understanding of the infrastructure that made it a success. The system that enabled the cash transfers was efficient.Many of the elements needed were already in place.

Power to the people

Article-1 of the Brazilian Constitution says, “All power emanates from the people, who exercise it by means of elected representatives or directly, as provided in this Constitution”. So, it clearly provides for high level of decentralisation and progressive transfer of power to the people.

Explaining this, Vinod Vyasulu from Centre for budget and Policy studies Bangalore (Brazil’s ‘Fome Zero’ strategy: Can India implement cash transfers?, Economic & Political Weekly, June-July 2010) says that the Brazilian federal government’s Unified Social Services Register (Cadastro unico), using which families were screened was already very efficient, even before the implementation of Bolsa Familia. Biometric identification had been introduced; steps for financial inclusion had been taken; empowerment of authorities at the local levels had taken place; facilities needed for inspection to avoid leakage had been insalled.

The money was to be paid through magnetic smart cards to the women in the family; provisions to include them into the formal banking sector had already been devised. The handling of funds was the responsibility of the Caixa Economica Federal, the state savings bank, which also issued the smart card, bearing unique social identification number (NIS).

Brazil had made biometric identification schemes - similar to India's Aadhar - operational much before the programme was conceptualised. Key departments like health and taxation already had efficient Information Technology infrastructure. Hence, a successful e-governance model preceded a successful cash transfer programme.

Keeping in mind Article-1 of the Constitution, the state progressively empowered the people. First delegated by the federal government to the provinces, the programme’s implementation process then got delegated to the municipalities, reaching a point where the centre could directly take it to the households.

Further, guaranteed local agricultural purchase for local consumption proved to be much more effective than India’s centralised Food Corporation of India (FCI) model.

All this could not have been possible without adequate level of decentralisation of powers, consensus ad idem between the centre and provinces and technological capabilities. This apart, Brazil having experienced commodity boom and having discovered natural resources later helped to keep the funds flowing.

Replicable in India?

Can the same be replicated in India? Devising an infrastructure would involve greater decentralisation to the Panchayati Raj institutions.

Power in Brazil had always been decentralised. Even in the years of dictatorship, reasonable autonomy was exercised by the provinces.

On the other hand, in India, despite two decades since the passage of the 73rd and 74th Amendment acts, desirable level of decentralisation has not happened. That the bureaucrats at times consider the local-level elected representatives as competitors rather than collaborators has not helped matters either.

Another assertion made by Vyasulu in his piece is that Bolsa Familia did not replace any existing programme. In India there are myriad programmes scattered - in control of different bodies - whose delivery process needs to be streamlined before cash transfers can take place.

In Brazil, a holistic approach adopted by the state ensured that people lifted out of the critical line did not go back. Fome zero was composed of four parts: Access to food (the cash transfer part); the strengthening of family agriculture from where grains would be locally procured; income generation capabilities; and social organisation, mobilisation and control.

Supply-side infrastructure was in place in Brazil much before the demand-side became fully operational. Most importantly, enhancing purchasing power - while keeping inflation reasonably under control - gave the marginalised a sense of dignity. All this without antagonising the upper class. As Anderson says in his piece,

No less important has been the symbolic message it delivers: that the state cares for the lot of every Brazilian, no matter how wretched or downtrodden, as citizens with social rights in their country.”

So, how do we explain the large-scale protests that took place there in June, which Turkish Prime Minister Recep Tayyip Erdogan clubbed with those in his own country to label a “conspiracy”?

In an interview to The Hindu, Lula himself had this to say:

"Because of this programme, the poor began to study more and eat better. And it was these achievements that made the poor people more demanding with respect to public policy of the State. The demonstrations that happened in Brazil (in June and July) were a result of this achievement. The people want more healthcare and education. A hungry person does not fight; he becomes subservient. But if he learns to eat and someone tries to take his food, he will fight. The Brazilian people have changed their paradigm.

He calls it a fantastic time to discuss democracy in Brazil.