“Look.” Lula leaned his stocky frame over the arm of his chair and pushed his face close to mine, locking eyes. “It sometimes bothers my educated friends when I say this. But the number one teacher in my life was a woman who was born and died illiterate: my mother,” he said. “With all due respect to experts and academics, they know very little about the poor. They know a lot about statistics, but that’s different, sabe? To an intellectual, putting fifty dollars in the hands of a poor person is charity; an academic has no idea what a poor person can do with it. But that’s because at university, they don’t teach you how to care for the poor. And it’s because most experts have never experienced what the poor go through every day. They’ve never had to go to work without breakfast. They’ve never lived in a flooded house, or had to wait three hours at a bus stop. To experts, a social problem like inequality is only numbers. But I took that social problem and made it into a political one, a practical one. And then I tried to solve it.”
It was December—summer in Brazil—and Lula and I were sitting in his map-lined private office in Ipiranga, a slightly scruffy middle-class neighborhood of São Paulo. I’d traveled there to ask Brazil’s former president—formally known as Luiz Inácio Lula da Silva, though nobody calls him that—just how he’d done it. How had Lula turned inequality into what he’d just described as a politically manageable problem—and then tackled it with such stunning success?
Finding the answer felt urgent. After all, income inequality has exploded around the world in recent years, becoming a source of intense global anxiety. The gulf between the ultrarich and the rest seems to be growing inexorably just about everywhere. And no one seems to know what to do about it.
One reason for this helplessness is that economic growth—long seen as the key to improving general welfare—is no longer working the way it’s supposed to. Though politicians often blame the current inequality crisis on the Great Recession and its aftershocks, that hypothesis doesn’t hold up. For if you look at many of the countries whose income gaps have grown the widest in the past few years, you’ll make a counterintuitive discovery: the list includes some of the world’s fastest-growing economies, like China’s.
What this means is that merely getting the world’s struggling economies back on track isn’t going to do much to close the yawning income gaps. It might just produce more Chinas. Truly solving our inequality problem is going to take a much more creative and comprehensive approach.
The hunt for that strategy is already well under way, with pundits and increasingly desperate national leaders racking their brains for an answer. Of those proposed so far, the best known is probably that of Thomas Piketty, the superstar French economist who, in his 2014 bestseller, called for the imposition of a global wealth tax.
It’s not hard to see why so many people have fallen for this scheme. It’s appealingly simple, and packs a gratifying soak-the-rich punch. But there are two big problems with Piketty’s plan, as well as other similarly extreme approaches to inequality. First, they’d never work, for both political and technical reasons; the global elite are too good at protecting their interests and avoiding the taxes they’re already supposed to pay.
And second, such controversial strategies are unnecessary.
Over the last dozen years or so, one country—Brazil—has shown that there’s a far better, less radical, and more market-friendly way to fight inequality. This approach has been tested, and it works.
The man sitting across from me on that hot day in Ipiranga was the one who’d made it happen, presiding over one of the most successful, least disruptive social transformations the world has ever seen.
In real life, even more than in fiction, stories generally follow predictable paths. The good-looking woman gets the guy. The better-funded politician with the thicker head of hair wins the race. The rich get richer, and everyone else gets screwed. Improbable and unexpected victories are exceedingly rare.
Yet every once in a while they do occur, and this is one of those cases. So before explaining just how it happened—how Brazil pulled it off—it’s worth considering just what made the happy ending so implausible and, as a consequence, so inspiring.
First there’s the story’s setting. It’s hard to imagine that Brazil today could be a model for anything. The country is a shambles, crashing from one crisis to the next. As things fall apart, Congress has gridlocked and the political establishment is being wrenched apart by high-level corruption scandals. Lula himself has come under suspicion as part of a widespread probe.
Until very recently, moreover, the idea that Brazil might have something to teach the world about inequality would’ve sounded like a joke. For decades, the country didn’t just have a problem with inequality—it was the problem. Latin America’s largest nation was among the most unequal places on earth, a state synonymous with savage social injustice. Sure, it was blessed with a big, youthful population and abundant natural resources (including an eighth of the world’s freshwater and among its largest offshore oil and gas reserves). But when it came to spreading the wealth, Brazil did as bad a job as you could imagine; even tiny, benighted Haiti was more equitable. Throughout the 1980s and 1990s, although Brazil moved from dictatorship to democracy and bold reforms by President Fernando Henrique Cardoso finally brought hyperinflation under control, its miserable masses remained trapped in rural penury or urban favelas while the fortunate few soared over the country’s ungovernable megacities in helicopters. As the new century dawned, about a third of Brazil’s population languished beneath the international poverty line (generally defined as living on less than $2 day), and about 15 percent of the country was indigent (living on less than $1.25 a day).
But that was the moment Brazil finally started changing, first slowly and then, beginning in 2003, with tremendous speed. By 2011 its economy, thanks to Cardoso’s reforms and Lula’s subsequent encouragement, was growing by a respectable 4 percent a year and unemployment had hit a record low. And for once, the benefits were actually being widely shared. During this same period, close to forty million Brazilians moved from poverty into the middle class. Average household income shot up by 27 percent. And, perhaps most impressive, inequality fell dramatically—at the same time it was growing almost everywhere else.
Just as surprising as the speed of this metamorphosis was the identity of the man most responsible for it.
Before the recent scandals hit, Lula had become such an iconic figure—in 2012 he left office with an 87 percent approval rating, shortly after President Obama had called him “the most popular politician on earth”—that it can be hard to remember just how polarizing he was back in 2002, when the campaign that would carry him into office caught fire. Shaggy and wild-eyed, with a low-slung stevedore’s body, the candidate scared the pants off Brazil’s elites, its corporations, its investors, and many of its foreign partners—especially the United States.
The problem was personal. Whereas Lula’s predecessor, Cardoso, was a centrist and an urbane academic, Lula was about as rough-hewn and unpolished as one could get, something he made no attempt to hide. Indeed, he was a proud child of the country’s destitute northeast. Born in 1945 in the hardscrabble state of Pernambuco, Lula was the seventh of eight children. His family had started out poor and found itself even worse off when, shortly after Lula’s birth, his father slunk away and drank himself to death. That had left the rest of the clan so hard up that the future president was forced to drop out of school after the second grade in order to make money shining shoes. At ten he taught himself to read, and at fourteen Lula somehow worked his way into a factory, where he lost his left pinkie finger to a machine press a few years later. Not long after that, he got involved in Brazil’s powerful labor movement and discovered his calling. Rising rapidly through the ranks of the São Bernardo Metalworkers Union, Lula became the organization’s leader at age thirty. And in 1980—at a time when Brazil was still ruled by a military junta—he helped found the leftist Workers’ Party (known by its Portuguese acronym, PT) in the hopes of giving the downtrodden a louder voice on the national stage.
By the time of the 2002 election, Lula had already run for president—and lost—three times. While he’d never been a Marxist (unlike many of his PT comrades), his earlier campaigns had featured calls to nationalize industry and default on the country’s debt. Such talk, along with his rough roots and his campaign promise to eradicate poverty within a generation, thoroughly spooked Brazil’s moneyed classes and foreign capitalists when he finally started climbing in the polls. As Mac Margolis, a longtime Rio-based correspondent, recalls, Lula’s rise sent many Brazilians—who feared “the hirsute lefty union man would win the presidential election and turn Brazil into an oversize Cuba”—into a lather.
Though Lula himself protested that “Brazil has changed, the Workers’ Party has changed, and I have changed,” few bought it. In the United States, Henry Hyde, the Republican chairman of the House International Relations Committee, denounced him as a “pro-Castro radical.” Goldman Sachs began publishing a “Lulameter” that purported to track the risks to investors should the PT win. Even George Soros reportedly warned that Lula’s election would bring chaos. Nervous foreign banks started cutting off credit. And Brazil’s fragile economy, which was just starting to pick up, went into a dive. The main stock index fell by 30 percent. Investors started dumping their Brazilian holdings, yanking more than $12 billion in capital out of the country within a few months. And the value of the real, Brazil’s currency, fell 40 percent against the dollar, hitting an all-time low toward the end of 2002.
Yet enough Brazilians were sick of the country’s feudal social structure and the pain caused by Cardoso’s necessary but unpopular structural reforms and austerity measures that Lula won anyway. As the unkempt union man prepared to take office and the economy continued to crater, the country braced for the epic confrontation that was sure to come.
But a funny thing happened: the cataclysm never arrived.
Lula did indeed assume office with revolution on his mind. But it turned out to be a very different sort of transformation than his conservative critics feared. Neither his earlier defeats nor the nasty reaction to his eventual victory had weakened Lula’s commitment to social change. But—and this would prove key to the rest of this story—they had profoundly altered how he planned to make that change happen. All the setbacks and the controversy surrounding him had driven Lula to do some serious soul-searching. Between 1993 and 2001, he and José Graziano da Silva, a balding and bearded American-born agronomist who was one of his closest advisers (despite sharing a name, the two are not related), had traveled some ninety thousand kilometers throughout Brazil on listening tours they called caravanas da cidadania (citizenship caravans). And the politician who emerged was far more moderate, conciliatory, and politically canny than most people yet recognized.
Of all the lessons that failure had taught the new president, the most important was that he’d never get far if he tried to govern on behalf of just part of Brazil. If he was going to use his new mandate to really change things, he’d first have to win over his many powerful skeptics. And that meant finding a way to make sure that the transformation benefited everyone.
And so the rabble-rouser metamorphosed into the Great Conciliator. Lula banished all talk of debt defaults and wealth redistribution from his lexicon. He tamed his hair and started wearing suits. And he recast himself as what Margolis calls the “CEO-whisperer, amigo to the middle class, [and] champion of a rules-based market democracy.” Though this move to the middle caused a lot of grumbling within the PT—“many members of my party, and people from the trade unions, did not like the idea at all,” Lula recalls—he held firm. On taking office, Lula pledged to preserve Cardoso’s tight fiscal and monetary policies. And shortly after his inauguration in January 2003, he put his money where his mouth was, picking Henrique Meirelles—a well-regarded former BankBoston executive and member of Cardoso’s party, the PSDB—to run Brazil’s central bank. He also named Antonio Palocci, another sober centrist, as finance minister. And Lula then started hacking away at Brazil’s bloated national budget, cutting spending by about $4 billion in his first year and imposing an even stricter budget-surplus target than the International Monetary Fund recommended.
The payoff was immediate. Many of the same antagonists who’d attacked him throughout the previous year’s campaign fell into a swoon. In March 2003 Mohamed El-Erian, then managing director of the bond giant PIMCO, declared that the president’s initial moves—“from policy announcements, to appointments, to implementation”—had been “very good.” The markets agreed; within six months of Lula’s inauguration, the value of Brazil’s bonds had risen by 20 percent. Even Goldman Sachs sheepishly admitted that its earlier warnings had been wrong.
At the same time that Lula was wooing the moneymen, however, he was hard at work on another front, preparing to use his growing political capital to launch a wildly ambitious new social welfare campaign. Rolled out a few months after his election, Fome Zero (Zero Hunger) would feature more than forty different programs run by close to twenty government ministries. But one initiative stood at the campaign’s core: Bolsa Família (Family Grant), a poverty-fighting effort that was groundbreaking in its size, ambition, and design.
Bolsa Família incorporated several innovations that would prove critical to the program’s eventual success—both as policy and as politics.
First, rather than provide the poor with goods or services, as most development programs did at the time, Bolsa Família would attempt something much more audacious: simply hand out money instead. Brazil had actually started experimenting with this approach a few years earlier. In 1995 two cities—Campinas and Brasília—had launched small cash-giveaway programs on a trial basis. These had proved so effective at ameliorating poverty that they were soon copied by more than one hundred other local governments. And President Cardoso had begun testing a similar scheme on the national level in 2001, though the payments were tiny and the execution was flawed. Still, the results were promising enough that Lula, acting on Graziano’s advice, decided to roll all these various programs into a single new streamlined national initiative—and to expand it to a scale far larger than even most experts had imagined possible.
Despite the success of the Campinas and Brasília experiments, Bolsa Família was extremely controversial when Lula first launched it in October 2003. At the time, most experts and international organizations still considered the idea of simply handing money straight to the poor to be dangerously wrongheaded. It just felt wrong, on an intuitive level. It also flew in the face of decades of social science research and what the World Bank had long considered best practice. “Experts did not accept the idea,” Lula recalled. “They preferred to give the poor dietary staples, or to do things for them.” As Lena Lavinas, a welfare economist at the Federal University of Rio de Janeiro, told me, that was because the prevailing wisdom then held that “the poor didn’t know how to allocate resources correctly.” Translation: it was assumed that they’d just blow the money on booze, cigarettes, or shiny baubles. Policymakers, not the people, knew best, so they should be the ones making the decisions.
Yet three insights had convinced Lula and his advisers to reject that notion. First, Brazil’s own experience had shown that large-scale attempts to alleviate poverty by distributing goods, like a massive food program Cardoso launched in the late 1990s, tended to flop in embarrassing and expensive fashion. Providing the poor with physical stuff is extremely complicated, costly, and inefficient. It also requires a large bureaucracy, which creates endless opportunities for corruption—a perennial problem in Brazil.
Second, a few groundbreaking academic studies (which would later be confirmed by a slew of follow-on research) had started to reinforce what Lula, with his disdain for experts, already knew: that the people who best understood what the poor really needed were people like his mother—namely, the poor themselves. The new research also showed that, when given the chance, destitute families generally didn’t squander their money. Most spent it quite rationally—especially when the cash went to mothers, not fathers, as it would under Bolsa Família.
Finally, Lula had realized that the wave of privatizations that had swept Latin America in the eighties and nineties—as governments sold off everything from airlines and energy producers to utility providers—had left hundreds of millions of citizens stranded, too poor to participate in the expanding market economies. Lula and his advisers reckoned that rather than go through the nightmare of renationalizing big businesses, the best and simplest way to reverse the poor’s exclusion was to put a little cash in their pockets.
So that’s what they set out to do.
As the president and his aides devised it, qualifying for assistance under Bolsa Família would be simple. Any family that could prove it lived in extreme poverty—then defined as less than 50 reais (about $42) per person per month—would be eligible for payments, as would moderately poor families that earned less than 100 reais a head.
But Lula also decided that Bolsa Família wouldn’t just hand out money for nothing. Getting into the program would be easy, but staying in it would take work. Participants would have to meet several conditions, or contrapartidas (counterpart responsibilities): ensure that all their children between six and fifteen years old attended school at least 85 percent of the time; make sure any children under seven got immunized; and guarantee that both moms and their kids got regular medical checkups. (Pregnant women would also be required to get prenatal care and to breast-feed their infants.)
Lula had two very shrewd reasons for imposing such rules. First, while he himself might have managed to claw his way out of poverty by the tips of his nine fingers, he knew that he’d been exceptionally lucky to do so. For most Brazilians, demographics were destiny: if you were born poor, you would die that way too. Indeed, contemporaneous academic research showed that the correlation between what parents earned and what their children eventually would make was higher in Brazil than in almost any other country. The reason for this lack of mobility was that many impoverished Brazilian parents felt compelled to send their kids to work instead of to school, even though doing so deprived them of the tools that could someday help them improve their lives. Lula was determined to break this intergenerational trap by fighting poverty today and tomorrow at the same time. In practical terms, that meant enabling—and requiring—parents to give their children greater advantages, in the forms of education, health care, and nutrition, than they themselves had enjoyed.
But Lula’s motivation in designing Bolsa Família the way he did was only partly about policy. The Great Conciliator, newly devoted to the Middle Path, was also thinking strategically: he knew that attaching strict conditions to his aid program would also make it much easier to sell to the rest of society. And he knew he’d need all the help he could get. Prior to Lula, most social assistance programs in Brazil had taken the form of insurance schemes that disproportionately benefited the middle and upper classes (it’s tough to qualify for a government pension if you don’t work in the formal economy). Bolsa Família was the first time a Brazilian president had really put combating poverty and inequality at the center of his agenda (though earlier politicians had gestured at it). That all but guaranteed a fight.
Sure enough, the pushback started as soon as the program was introduced in October 2003. Not only did Bolsa Família fly in the face of established practice, but some economists also argued that the government should be investing in infrastructure like schools rather than paying people to attend them. Others said that parents shouldn’t be told what to do with or for their children. And conservative pundits warned that the cash transfers would create welfare dependency, known in Portuguese as assistencialismo. (Never mind the fact that the idea for cash transfers was originally hatched by an icon of the right, the American economist Milton Friedman.) As Tereza Campello, the country’s social development minister, recalls, in Bolsa Família’s early days critics would constantly confront her with the tired old Confucian aphorism about how it’s better to teach people how to fish than to feed them seafood. “The opposition said we were going to create an army of lazy people,” Lula told me.
Brazil’s constitution gave the president the ability to launch Bolsa Família on his own executive authority. But the law also stipulated that he’d need congressional approval to renew the program within a year. That meant Lula would have to secure broad-based support if his signature program was going to survive—and the contrapartidas were his key to getting it. “The idea was to show that we are not giving out money for free,” Lula explained to me. “We had to build trust, even among those who were skeptical about this kind of a program.” As Ariel Fiszbein and Norbert Schady, two World Bank economists, have documented, the conditions helped Lula do that by creating the popular impression that Bolsa Família was not some sop to the poor, but rather represented a new sort of social contract with them under which recipients had to do their part. Making beneficiaries show “clear evidence of commitment” to the “positive behaviors” required by the program made those beneficiaries seem more deserving, giving the public the sense that they had earned the cash.
Of course, simply announcing formal conditions wasn’t enough; there also had to be consequences for noncompliance. To that end, Bolsa Família’s architects designed a system of graduated penalties for those who failed to do their part. Rule breakers would get a warning; if they still didn’t comply, their benefits would be suspended, and if the trouble continued, they’d eventually get bounced out of the program altogether.
While such sanctions looked good on paper, Lula soon discovered that getting the public to take them seriously would require still stronger medicine: hard proof that the rules were actually being enforced. In 2004 Lula’s administration became so preoccupied with expanding the program’s reach (the number of recipients would go from 3.8 million families, or almost 16 million individuals, in late 2003 to nearly triple that in 2006) that it stopped paying much attention to whether or not those new recipients were holding up their end of the bargain. When, partway through the year, the government discovered that only 55 percent of Brazil’s public schools were even bothering to report on whether Bolsa Família recipients were meeting their attendance quotas, the administration decided to temporarily suspend its monitoring efforts altogether.
That choice might have made sense bureaucratically; the government was just trying to buy itself time to get its house in order. But it proved a PR disaster. On October 17, just a few days before nationwide municipal elections, Fantástico, a popular Sunday-evening news program, broadcast an investigative report alleging widespread abuse of Lula’s flagship program by undeserving recipients. (Think of Reagan-era complaints about welfare queens driving Cadillacs and you’ll get a sense of the broadcast’s tone.) The rest of Brazil’s media quickly jumped on the story, blasting the government from all sides. The public was incensed; in just one week after Fantástico’s broadcast, the government received several thousand angry complaints.
Sensing the danger, Lula decided to face his critics head-on. “What is the lesson we learned from this moment? Humility,” he told me. “You have to recognize that a very big program will have mistakes. You have to admit them. And then you have to fix them.” To that end, Lula set up a new Ministry of Social Development (known by its Portuguese acronym, MDS) to centralize oversight of Bolsa Família. Departing from Brazil’s long tradition of patronage politics, he staffed the new body with highly trained technocrats (including many members of the opposition PSDB party) rather than partisan hacks. And in January 2005 he personally presided over the public launch of a sweeping new multiagency strategy for improving Bolsa Família’s implementation; among other measures, he established a unified national registry to keep track of everyone who got any form of government assistance, centralized Bolsa Família’s eligibility criteria, implemented formal audits and spot checks, set up citizen oversight committees and complaint hotlines, and required that Bolsa participants get recertified every two years.
By mid-2006, monitoring and enforcement had improved dramatically: in June of that year, the MDS cut some half a million ineligible recipients off its rolls. Brazilians noticed, and were impressed. The surge of criticism of Bolsa Família quickly ebbed, and public support for the program began to climb. Indeed, a 2010 analysis of polling data and the media’s treatment of Bolsa Família by Kathy Lindert and Vanina Vincensini, two World Bank experts, found that by imposing rigorous conditions for assistance, Lula’s government legitimized Bolsa Família with Brazilian voters, generating widespread enthusiasm for it on both ends of the political spectrum.
As useful as Lula’s contrapartidas were in boosting Bolsa Família’s popularity, two other innovations would prove almost as important.
First, for all its ambitions, Bolsa Família was, and remains, cheap—radically so, compared with most other social welfare programs in Brazil and elsewhere. Today, more than a decade after its launch, Bolsa Família reaches about fourteen million families, which translates to about fifty-five million Brazilians—an enormous number. Yet because Lula and his advisers recognized that it only takes a very small sum of money to make a very big difference in a poor family’s life, the individual payments (which vary according to income and family size) are tiny: the average recipient gets just $65 a month, and benefits top out at $200. As a result, “the amount spent on Bolsa Família”—despite its scope—“is nothing,” says Yoshiaki Nakano, director of the School of Economics at the Getúlio Vargas Foundation in São Paulo. That’s an exaggeration, of course, but not a big one. The fact is that one of the world’s most ambitious antipoverty programs currently costs Brazilian taxpayers less than half a percent of the country’s $2.2 trillion GDP—far less than the 12 percent the government spends on pensions, for example (a much more regressive support mechanism). Though precise international comparisons are hard to make, the evidence suggests that Bolsa Família is one of the cheapest antipoverty programs anywhere. Indeed, a 2011 study by the British government found that cash transfer programs like Bolsa Família cost 30 percent less per person than more traditional aid programs, thanks in part to their minimal administrative expenses.
One final aspect of Bolsa Família’s design also helped Lula win broad backing for it: the program was structured in such a way that it would ultimately benefit all Brazilians, not just those at the bottom. As Lula explained when he first introduced Bolsa Família, “When millions can go to the supermarket to buy milk, to buy bread, the economy will work better. The miserable will become consumers.” By giving people money that they could spend however they want, Lula created what Lavinas, the Rio-based welfare economist, calls “a pro-market approach to combating poverty.” Indeed, no less an authority than Jorge Castañeda, a former conservative foreign minister of Mexico turned columnist and self-appointed scourge of the Latin American left, has called Bolsa Família an “innovative welfare program” that is as “neoliberal…as one can get.”
This aspect of Lula’s huge new antipoverty campaign initially bemused his critics on the right, who still suspected him of being a Castro clone in CEO’s clothing. But Bolsa Família’s market-friendly features were just one expression of the happily heterodox path Lula would follow throughout his presidency. As Bernardo Sorj, a sociologist at the University of São Paulo, put it to me one afternoon in Rio, Lula’s genius as a politician—and the secret of his success—was the president’s blithe disregard for traditional pieties. Lula’s biggest gift, Sorj said, is his ability to be “neither left-wing nor right-wing, but a walking metamorphosis, and a completely pragmatic one.” Eschewing ideology, President Lula’s basic approach was “to make everybody happy.”
A close student of Lyndon Johnson, Lula—who even perfected LBJ’s knack for physically discomfiting and seducing his interlocutors at the same time (during our interview, the president repeatedly touched my forearm for emphasis, then started squeezing my bicep, and then, toward the end of our meeting, held my hand for minutes at a stretch)—was also a master triangulator who even managed to win over international antagonists like President George W. Bush. Throughout his tenure, Lula found ways to remain true to his base, which he catered to through progressive social policies, while (especially during his first term) also taking pains to “respect the basic rules of a modern liberal economy,” as Sorj put it. Having first “domesticated” the radicals within his own party, Lula then repeatedly sought to reassure key economic constituents—investors and foreign governments—through conservative macroeconomic policies. He also cozied up to big business by, for example, offering large firms cut-rate loans from Brazil’s state-financed National Development Bank.
The result was a unique brand of what PIMCO’s El-Erian has called “financially principled populism.” Lula made no bones about what he was doing. “I feel no shame when I tell you that under my government, everybody won, from the poorest to the wealthiest,” he told me. Refusing to be bound by party or class, the president consistently sought to achieve the greatest gains for the greatest number. He knew this could be disorienting at times. “Sometimes former comrades would come to me and say, ‘Come on, Lula! You used to be a steelworker! Aren’t you disturbed that bankers are making such high profits?’ ” he recounted. “I would say, ‘No—what would concern me is if they were losing money.’ If there’s one thing I’m not ashamed of, it’s profit. But I want people to know that my philosophy, at heart, is that of a mother. No one is fairer than a mother. Even if she has three hundred kids, she will treat them all equally. That’s what I used to say to the Brazilian people: that I govern for all. And I feel very proud that I maintained good relations with everyone: the biggest farmers and the landless; the greatest bankers and their employees.”
The strategy worked brilliantly. Ruthless pragmatism and a lift-all-boats approach would, within a few years, turn Lula into “an icon for everyone,” Sorj said. “He managed to become a hero at Davos and at the World Social Forum”—a populist alternative to the elite Swiss conference. “And that was no easy feat.”
While Lula’s relentlessly inclusive rhetoric was politically expedient, Brazilians (like everyone else) know that talk is cheap. It was by delivering results that Lula ultimately won his country over. For those results—from an average GDP growth rate of close to 4 percent throughout his tenure to his dramatic success fighting poverty and inequality—were extremely impressive. Though the price tag for Bolsa Família may have been small, its impact proved enormous. Not only would it eventually reach more than a quarter of the overall population (and 85 percent of the poor), but the payments, tiny though they are, have doubled the income of Brazil’s most destitute families. In Bolsa Família’s first three years, it cut extreme poverty by 15 percent, and by 2014 the percentage of Brazilians living in indigence had been slashed from 9 percent to less than 3—a level the World Bank considers equivalent to eradication. At the same time, Bolsa Família helped lift a total of thirty-six million people out of general poverty, producing what Matias Spektor, a political scientist and a columnist for Brazil’s biggest newspaper, Folha de São Paulo, described to me as “the single largest ten-year change to a country’s class structure since Japan after World War II.”
As for inequality, recent studies credit Bolsa Família with having helped reduce the country’s overall income gap by a third and rank the program as the second most important contributor to this change after general economic growth. According to Tereza Campello, the head of the MDS, the income of the poorest 20 percent of Brazilians rose by 6.2 percent between 2002 and 2013, while that of the country’s richest fifth grew by only 2.6 percent. (That stands in sharp contrast to the United States, where, during the same period, the incomes of the richest 10 percent rose by 2.6 percent while those of the poorest 10 percent shrank by 8.6 percent.) Though the Brazilian government has also implemented a number of other important social support programs, including big hikes to the minimum wage, and though a growing economy also helped matters, most experts agree that Bolsa Família deserves a huge amount of credit for the overall improvement in the lives of the country’s poor. Bolsa Família has also proved an important cushion as Brazil’s growth has slowed in recent years. The country’s overall economy may be hurting today, but thanks to the buffer provided by Bolsa Família, the masses are not—or at least not suffering as much as they did during the country’s many past crises.
Bolsa Família has also made great strides toward Lula’s goal of breaking the transmission of poverty between generations: by helping increase vaccination rates to 99 percent of the population, by decreasing malnutrition among children in Brazil’s poorest regions by 16 percent, and by increasing their chances of having a healthy weight-to-age ratio by 26 percent. Infant mortality has dropped by 40 percent in the last decade, with deaths from malnutrition specifically down by 58 percent—one of the sharpest reductions ever seen anywhere. Meanwhile, the number of children forced to work instead of attending school has fallen by 14 percent. Bolsa Família recipients now boast a graduation rate double that of poor Brazilian children outside the program, and the initiative is credited with improving school attendance in the country’s poorest regions by 14 percent. One happy consequence: the national literacy rate has already risen.
The program has also produced some less tangible and less predictable—though just as important—changes in the lives and attitudes of Brazil’s poorest citizens. Research has shown that Bolsa Família has empowered Brazilian women by giving them authority over their families’ bank accounts; for example, female Bolsa Família participants are 10 percent more likely to say they have exclusive authority over contraception in their marriages. And the program seems to have had a dramatic impact on poor Brazilians’ sense of agency. A recent survey of fourteen hundred Bolsa Família beneficiaries in three different cities found that rather than feeling stigmatized by their dependence on the government program, three-quarters of respondents said they were proud to be enrolled and that, by allowing them to properly feed and clothe their families without having to beg, Bolsa Família has helped them “lead more autonomous and dignified lives.”
Brazilians enrolled in the program even express increased faith in their country’s democracy. That might seem an odd outcome for a welfare program, but Spektor explained that Bolsa Família—which, thanks to its strict monitoring and the use of electronic bank cards to transfer funds, has remained remarkably corruption-free*—“broke the political mechanisms that had kept Brazil’s poor poor for such a long time: the system of patronage whereby social policy was made by the local bosses in cahoots with the local government. Bolsa killed these guys because suddenly you had a very small group of people in far-off Brasília—all of them with PhDs from Western universities—giving money directly to the poor.” In our conversation, Lula put things more bluntly: “Part of the reason Bolsa Família was so successful is because the money is paid directly, with no intermediary. It is the beneficiary who goes to the bank with a plastic card to withdraw the money. So this person doesn’t owe any favors to the president, to their governor, to their congressman, or to their mayor.”
Finally, just as Lula promised, Bolsa Família has provided a significant boost to the overall economy. By giving the poor more money to spend, the program has increased domestic consumption, an especially important economic driver in a country like Brazil, which shuns most imports. While most of the money is spent on food, Lula said that “of the people that received benefits under the Bolsa, 80 percent of them bought a television set, 79 percent of them bought a refrigerator, and 50 percent of them bought a washing machine. So what had seemed like a program just for people who were living in eighteenth-century conditions helped meet the needs of modern manufacturers, generating millions of jobs. Everyone won.” That may sound like boasting, but the numbers bear it out: economists calculate that, since its launch, Bolsa Família has increased Brazil’s GDP growth by 1.78 reais for every 1 real disbursed.
This long list of accomplishments has combined to make Bolsa Família incredibly popular in Brazil; polls put its approval rating around 75 percent. Everyone is happy with it, Lavinas told me. “The poor because they are less poor, and the rich because the program is so cheap that they don’t care.” Even the middle class, traditionally the most conservative segment of Brazil’s electorate, has embraced Bolsa Família. As Spektor explained, this group “grew up in a country that was always getting worse. As Brazil democratized [in the mid-1980s], violence went up, inequality went up, inflation went up. We were geared toward thinking things were awful. If you hoped for a future, you wanted to learn English and get the hell out of here. Now, suddenly, I’d rather be here than anywhere else. And that’s thanks to Bolsa.”
Such across-the-board enthusiasm was first demonstrated during Lula’s reelection campaign in 2006. Despite strong economic growth figures and his assiduous outreach to the right as well as the left, Lula faced a fierce headwind going into the race. An embarrassing chain of corruption scandals had erupted in 2005 and 2006, leading to the forced resignation of many of his top advisers. (Unrelated to the current allegations swirling around the state oil company, Petrobras, the largest of these earlier scandals, known as the mensalão, involved revelations that the government had been paying its congressional allies monthly bonuses to buy their support.) The allegations dealt a serious blow to Lula’s poll numbers, and many analysts began predicting that he’d lose in the first round (Brazil holds two-stage elections). Yet when Brazilians finally voted, Lula didn’t just survive the first round; he crushed his opponent, the PSDB’s Geraldo Alckmin, by twenty-two points in the runoff.
The explanation? Despite all their anger and embarrassment over Lula’s apparent indifference to graft (an indifference that would later get him into more trouble), most Brazilians ultimately decided to vote with their wallets. That was especially so among the country’s poorest and least educated citizens, the very group that had profited most from Bolsa Família. According to an election analysis performed by two US academics, Wendy Hunter and Timothy J. Power, 60 percent of those earning less than five times the minimum wage embraced the incumbent that year, and Lula swept the underdeveloped northeast by 85 percent.
That Brazilians whose lives had been transformed by government spending would reward their benefactor might not seem surprising. But despite his roots, Lula’s strong showing among the poor in 2006 actually broke previous voting patterns. Before that year, most impoverished voters had shunned him and the PT, which they saw as an elitist party of intellectuals. In fact, despite Lula’s origins on the left, most of his support during his four previous campaigns had come from the country’s richer provinces. The poor had always seen him, in Spektor’s words, as “a guy with a funny beard, hair all over the place, promising revolution. And because they had been screwed by Brazil’s political system for so long,” those promises “seemed crazy to them.” So they’d rejected Lula—until 2006, that is, when Bolsa Família redrew the electoral map.
This swing wasn’t lost on Brazil’s other politicians, and in the years since, virtually all of them have enthusiastically embraced Lula’s brainchild. President Dilma Rousseff, Lula’s handpicked heir, expanded the program’s reach and upped its benefits several times. She even launched a program called Busca Ativa (Active Search) that sends intrepid social workers fanning out to the country’s most remote corners—sometimes by jungle boat—in search of more needy Brazilians to enroll. And both of her opponents during the 2014 election promised to extend Bolsa Família still further. To do otherwise would have been “political suicide,” says Thiago de Aragão, a political consultant in Brasília.
None of this enthusiasm means that Bolsa Família is perfect. While the program has helped Brazil make historic progress, the country still remains far too inequitable. Under Lula’s maladroit protégée, economic growth has ground to a halt and the country’s debt has soared. And despite Bolsa Família’s massive reach, about twenty-eight million Brazilians still live in poverty. Some experts worry that by focusing so intensely on the needs of Brazilian children the program neglects their impoverished parents (whose benefits drop precipitously when their kids reach seventeen). Feminist scholars like Maxine Molyneux of University College London caution that “by making transfers conditional on ‘good motherhood’ ” initiatives like Bolsa Família reinforce traditional gender roles. Lavinas, among others, points out that while the Brazilian government has done a good job getting children into schools, it’s done far less to actually improve the education they get there—one of many reasons massive numbers of Brazilians took to the streets to protest poor government services in 2013.
Bolsa Família’s positive impact is also significantly undermined by Brazil’s regressive tax system, which relies excessively on consumption tariffs; these fees, which cover virtually every imaginable good and many services, eat up a huge share—as much as 55 percent, by some estimates—of Bolsa Família stipends. Finally, financial analysts attack Bolsa Família for reducing inequality at the expense of overall growth, while some Brazilians still insist the cash transfers only make people more dependent on the dole.
Bolsa Família, in other words, certainly can and should be improved. The country also desperately needs tax, health care, and education reform, as well as much more investment in infrastructure. But a wealth of evidence contradicts at least the last two of the charges listed above. Government statistics show that 75 percent of adult Bolsa Família recipients do work, and those who don’t generally can’t—they live in areas with too few job opportunities. This finding isn’t so surprising when you consider that, as Wendy Hunter points out, Bolsa Família payments are so low that “no one in their right mind would take them instead of having a decent job.”
It should come as no surprise, then, that despite its imperfections the program’s fans have come to wildly outnumber its critics. Nancy Birdsall, the president of the Center for Global Development (a Washington think tank), has called Bolsa Família “as close as you can come to a magic bullet in development.” Other boosters range from the New York Times, which has dubbed Bolsa Família “likely the most important government anti-poverty program the world has ever seen,” to The Economist, which has declared it “a stunning success.”
Perhaps the best testament to the brilliance of Bolsa Família’s design, however—as well as to the defiantly unorthodox, something-for-everyone approach Lula used to formulate and then sell it—is the fact that since the program’s creation more than sixty-three countries have sent experts to Brazil to copy its model. Within just a few years of Bolsa Família’s inception, in fact, the MDS was so swamped by all the foreign requests for advice that it began holding twice-yearly seminars on how to launch similar programs elsewhere. As of this writing, at least forty other countries have taken that step, including most of Latin America as well as Bangladesh, Indonesia, Morocco, South Africa, and Turkey (to name just a few others).
Bolsa Família’s appeal has even stretched to the rich world. In April 2007 Mayor Michael Bloomberg—another politician famous for ignoring orthodoxy and grabbing the best ideas from wherever he could find them—launched Opportunity NYC, the developed world’s first Bolsa Família–style conditional cash transfer program, on a trial basis. Programs like Bolsa Família are more complicated and expensive to run in wealthier countries, for obvious reasons, and New York’s pilot program was predictably criticized by both conservatives (who grumbled about its cost and the fact that it paid people to do what they should do anyway) and liberals (who called it condescending). Yet a review by the University of Michigan’s National Poverty Center found that while it had some flaws, the program did significant good for participating families. Which is why both New York and Memphis recently launched a trial of yet another Bolsa Família–inspired program, called Family Rewards 2.0, that builds on Bloomberg’s first effort, and Lula’s before him—more proof, if it’s needed, of the global appeal of Brazil’s great experiment.
* It’s worth noting that although Lula’s overall reputation has been hurt by the recent corruption probe, no one has questioned the success or integrity of Bolsa Família.