“Thank God for Maranhão”: or how Brazilians stopped worrying and loved voting themselves money

By Phillipe Yves-Cardinal, contributor

“When the people find that they can vote themselves money, that will herald the end of the republic.”

This quote of uncertain origin, often misattributed to Benjamin Franklin, is an accurate description of what is currently happening in the Brazilian republic – a country where the democratic process has devolved into favoring candidates who promise to hand out the most money and “free” public services for their citizens.

Nowhere is this seen more clearly than in the northeastern state of Maranhão, Brazil’s version of Mississippi – a state with socioeconomic indicators so dire that would make anyone cry, except for governors of other bottom-ranking states. Currently governed by a communist, the state is the greatest beneficiary of Bolsa Família, Family Grant in Portuguese, a partial basic income program for its poorer citizens, and Maranhão has topped the rankings as one of the most financially dependent states on social programs for years.

Bolsa Família’s eligibility rules are simple: each family gets a fixed amount (R$ 89.00) plus additional money for up to 5 children aged 0-15 (R$ 41.00 each) and 2 teenagers aged 16-17 (R$ 48.00 each), for a total of 7 children. In order to keep the grant, the family has to keep children in school, but their performance is not monitored – there are no minimum grade requirements. In addition to school attendance, regular checks of vaccination status and health (such as weight monitoring, to check for malnutrition in infants) are performed.

The result of all this expenditure on social programs is that there are more Bolsa Família beneficiaries in Maranhão than there are formally hired workers. It would not be unreasonable to point out a correlation between the amount of government aid and the number of formal workers in Maranhão; however, other state policies likely amplify this divide. The Brazilian constitution "guarantees" so many "protections" for formally hired workers, such as paid 30-day vacations, a “thirteenth monthly wage” at the end of the year, and even a separate (and costly) judicial system for work-related litigation that highly favors workers in judicial disputes, that an employee will often cost double their salary in taxes and other expenses for their employer. All these "guarantees" and "protections", no doubt created with the best of intentions and no electoral interests whatsoever, make hiring young, uneducated, and unskilled workers too costly for employers.

Unsurprisingly, the citizens of Maranhão – alongside with most of the northeast and a great deal of the north of Brazil – have preferred left-leaning candidates in the past elections. Data has shown that the more dependent a state is on Bolsa Família, the more likely it is to vote for either the party that originated the program (Partido dos Trabalhadores or Workers’ Party) or its satellite leftist parties. Social welfare programs have become so sacrosanct that no presidential candidate for many years has dared to oppose the program, not even Jair Bolsonaro, the most libertarian-leaning presidential candidate Brazil has ever seen (on paper at least). On the contrary: many candidates want to increase spending on the program in some form or another.

These candidates have kept their promises, and more. The Bolsa Família program has grown dramatically from 3 million families in 2003 to about 13 million in 2019, making a quarter of the population of Brazil a beneficiary of the program. The coronavirus epidemic has seen that number swell to 14.7 million beneficiaries, and as a result the right-leaning Bolsonaro government has seen a surge in popularity. The administration has proposed to expand the program and give it another name. The proposal seems to have fizzled – for now. But the specter of a full-fledged basic income remains.

A question few seem to ask is: what has Bolsa Família, and so many social programs (there are several), accomplished in Maranhão other than making its people dependent on government handouts?

If we compare Maranhão to Santa Catarina, a southeastern Brazilian state with a comparable population (approximately 7 million people) and one of the lowest rates of dependence on Bolsa Família, Santa Catarina outperforms Maranhão in practically any measure: it holds a GDP per capita three times that of Maranhão, triple the average income, double the employment, and a higher life expectancy.

The striking differences do not stop there: even though the number of public schools and teachers in Maranhão and Santa Catarina is roughly the same, children in Santa Catarina spend nearly a third more years in school compared to Maranhão – all this in spite of Bolsa Família’s monitoring of school attendance.

Santa Catarina accomplishes all these feats by spending only a fifth of what it confiscates through taxes; on the other hand, the government of Maranhão spends double the little wealth it can extract from its poor citizens. This strange predicament may be explained not only by the never-ending debt that governments can accrue, to the expense of citizens themselves and their progeny, but also by how the Brazilian republic is politically structured: the tax revenues of the most productive and fiscally responsible states finance the least productive states, perpetuating their parasite-like nature and crushing whatever incentives there are to grow and succeed independently.

The causes of the different outcomes of these two states may lie in the degree of the development of their economies. Maranhão’s is considerably less diversified and less sophisticated than Santa Catarina, with chemical products, vegetable products, and paper goods comprising nearly 80 percent of its exports in 2014, whereas a quarter of Santa Catarina’s exports in that same year came from machine manufacturing. Very few officials and politicians seem eager to discuss the causes of this disparity, favoring the political, redistributive way instead.

The “scientific” literature on Bolsa Família, in large part funded by public Brazilian universities with pro-government stances, focuses on the most immediate effects of the program – mainly, the dramatic reduction in extreme poverty that has been observed in the nearly two decades since its implementation. Rarely, if ever, these studies touch on productivity or on how economic development might be affected in regions where Bolsa Família is the rule rather than the exception. Instead, researchers prefer the usual Keynesian statements such as “for each R$ 1 spent in welfare there is a R$ 1.78 increase in economic activity”. If this were true, the “stimulus” provided by welfare programs, accompanied by exorbitant public expenditure, would have made Maranhão and other northeastern states rank among the most prosperous in the nation. Curiously, however, for the past decades these same states have stubbornly remained at the bottom of GDP per capita measurements and nearly every socioeconomic ranking you can think of.

If any research findings contradict the prevailing rosy perspective on welfare programs, they are to be understated or outright dismissed. In 2011, an article found that “in regards to social mobility, studies show that [the Bolsa Família Program] has not been effective in changing the beneficiaries' life circumstances, i.e. few are achieving the necessary conditions to exit the program.” To the researchers, however, there simply wasn’t enough time (it appears that 8 years, nearly a decade, is not enough) to see significant changes. On a more positive note, researchers note how beneficiaries are now “more optimistic in regards to their future quality of life”.

Another article, part of a government-issued collection of studies from 2013 covering the first decade of the program, reviewed studies on the “laziness effect”, i.e. welfare recipients will become more unproductive, and/or look for jobs less, depending on the amount of handouts. A portion of the few studies available on the subject actually pointed to this effect: one, where self-employed women reduced their working hours by 7.3 percent; another that showed the more money they received, the more likely it was for women to work less; another that noted men were not looking for jobs as much as before; and yet another that raised the possibility that the program may have caused unemployment in a few places. Similarly to the 2011 study, researchers downplayed the importance of those findings, stating that “these types of effects, when they are found, are small and localized enough in groups,” and that the benefits of the program outweighed those problems. This line of thinking – that the benefits for the poor outweigh any other potential ill effects, whatever they may be – seems to be widespread in the literature.

It may well be that Bolsa Família is a positive program for the poorest in Brazil, especially considering that thus far it has drained less than 1 percent of GDP yearly – if, of course, you choose to overlook the fact that taxation is theft, no matter the nobility of the end goal. Non-coercive alternatives to social programs, such as reducing or eliminating taxes and subsidies on food products, which would make food more accessible to the poor, are rarely discussed, since they undermine the state’s continual plundering of wealth. If we consider for a moment the more statist alternative, we can only guess what the effects of applying the one percent of GDP dedicated to Bolsa Família to, say, investments on infrastructure, would be. Maybe this would lead to even greater prosperity and quality of life for the poor in the long run. There is little way of knowing, as immediatist social programs (undoubtedly due to their effect on election outcomes) have been consistently preferred in lieu of long-term investment.

The biggest problem, in my estimation, is the slippery slope such programs present – once you get the ball rolling, it’s difficult to make it stop. In Brazil it is nearly career-ending for politicians to propose curtailing public spending of any kind, in particular with regard to public officials’ salaries. And as we have seen, such social programs tend to show a tendency to grow and represent an ever-larger chunk of private individuals’ scarce resources. Bolsa Família is simply the tip of the iceberg – public expenditure in Brazil rose from 29.5 percent of GDP in 2008 to 41 percent in 2019, the most of any major economy. Meanwhile, inflation (measured through the more reliable IGP-M price index, rather than the government-issued IPCA) ate away nearly 90% of the currency’s value during the same period (for calculation we used the period from June 2008 to June 2019).

A bit of historical perspective would be useful in gauging the necessity of  a program like Bolsa Família. In only eleven years, from 1990 to 2001 (the year when Bolsa Família’s “alpha version,” Bolsa Escola (School Grant), was implemented), extreme poverty fell by half, GDP per capita rose nearly 10 percent, life expectancy rose 10 percent, child mortality fell by nearly half, the HDI rose from 0.60 to 0.69, and there was even a slight decrease in the Gini coefficient of economic inequality – all of this during a very turbulent time in Brazilian history, which included abrupt changes of government and rampant currency debasement. If Brazil was able to improve its living standards to such an extent during political and monetary turmoil, without nearly as much redirection of capital by central planners (by today’s standards), it becomes less defensible to advocate for the (seemingly) eternal maintenance and expansion of those programs.

All the while, the true enemy of the poor – the Brazilian state, which drains its subjects of over 5 months of their work (and their lives) each year in taxes (and don't forget the effects of inflation), while at the same time practicing alms-giving through programs such as Bolsa Família – remains disguised, a wolf in sheep’s clothing.

Maybe in the far future there will be a Brazilian president who will dare, against all odds, and most especially against the vision of the anointed (in the expression coined by Thomas Sowell) to prioritize wealth creation over wealth plundering and redistribution. I am not holding my breath.