A comparative economic study of Brazil and Germany
Table of Contents
Comparison of social progress indicators. 5
The extent of the effect of economic growth on the living standard of the countries. 7
Introduction
The purpose of the essay is to bring about a comparative study between a developing and a developed economy. The developing economy chosen for this essay is Brazil and the chosen developed economy is Germany. The essay will focus on the GDP figures of the two countries in the last 10 years and examine their growth. Further, the essay will talk about the standard of living prevalent in the two countries with the help of Indicators related to social progress. Next, the two countries will be compared based on their economic growths and standard of living. In the end section, the extent of economic growth on the standard of living of the two countries will be investigated.
Discussion
Economic Growth of Brazil
(Source: https://tradingeconomics.com/brazil/gdp)
The current Gross Domestic Product (GDP) of Brazil currently stands at $1839.76 billion as reported from the official data of the World Bank. The GDP value of the country contributes about 1.53% of the world economy. The highest value of GDP was observed in 2011 when the economy was at its peak (Bakari et al. 2019). The economy shrank from its previous condition but still maintained a steady annualised growth. Brazil has been quite a wealthy country in the South American continent, where a large portion of the population belongs to the upper-middle-income group. The country has witnessed the highest rate of urbanization, where 87% of the population lives in urban areas as compared to other nations. Other factors contributing to the growth of the Brazilian economy can be huge investments in the Olympic Games (Temiz Dinç and Gökmen, 2019). The country is the largest exporter of food products like chicken, coffee, sugar, and orange juice in China and India and holds a trade surplus with these countries.
Brazil currently holds the ninth position in terms of its size in the world economy. After falling into recession in the year 2013, the economy has been growing moderately steady. The service sector accounts for 70% of the total GDP of the country (Tabosa and de Carvalho, 2017). The two other sectors contributing substantially to the economic growth of Brazil are Agriculture and Industry. Agriculture represents 5% of the Brazilian economy, but it is one of the largest exporters of agricultural products. Through the process of import substitution, the industrial sector of the country has gained prominence.
Economic Growth of Germany
(Source: https://tradingeconomics.com/germany/gdp)
The GDP of Germany has been $3845.63 billion according to the World bank reports of 2019. The GDP contributes about 3.17% of the world economy. The highest value of GDP has been reported in the year 2018, worth $3949 billion. The value dropped down slightly in 2019 (Wei, 2017). The highest annual growth rate of the economy has been 7.2%, which is quite impressive as compared to other developed nations. The economy is highly developed in terms of the social market economy, holding the fourth largest position in the European continent in terms of nominal and fifth largest in terms of GDP (PPP). The three major factors responsible for the success of the German Economy are the modernization of Easter Germany, high employment rate, and management of budget deficit. Modernization led to the fall of spending activities by $12 billion. The employment rate increase by 9.5% and the budget deficit was managed below 3% of GDP.
Similar to that of Brazil, the German economy is built up through contribution from three major sectors, that is the service sector, industrial sector, and the agricultural sector. The service sector accounts for 70% of the total GDP of the economy, followed by the industrial sector holding 29% of the economy (Albulescu, 2017). The least is contributed by agriculture, amounting to only 0.9% of the total GDP value. The company exports vehicles, machinery, chemical & electrical equipment, pharmaceuticals, basic metals, food products, rubber, and plastics. In Europe, Germany is the largest manufacturing economy and has a sound financial condition as compared to other nations.
Comparison of social progress indicators
GDP Per capita
The GDP per capita of Brazil is $8717 as in 2019. Considering the trend in the last five years, it has been observed that the economy has shown a 1.18% decline from 2015 to 2016. Next, in 2017 the decline has been quite large, that is, 13.9% concerning 2016.
The current GDP per capita of Germany is $46,564 in 2019. The GDP has shown a steady increasing trend of 2.33% and 5.35% in the last five years.
Income Inequality
Income inequality is a persistent issue in Brazil despite its steady economic growth. Recently, the country has observed an overall decline of income inequality (Khudair, 2019). The GINI coefficient of Brazil has slowly decreased from 0.59 to 0.54 in the range of ten years from 2001 to 2009.
On the other hand, income inequality has been rising in Germany at a rapid pace. 1% of the population belongs to the elite class of the society, while 25% of adult have no wealth or negative wealth.
Population living below the poverty line
Though the Brazilian economy has been regarded as an upper-middle-class economy, still more than fifty million Brazilians live below the poverty line, accounting for over 25% of the economy.
In Germany, the condition is pretty much better than Brazil. Over 16.7% of the population lives below the poverty line (Direction, 2018). This national estimate has been reported through surveys of different sub-groups of the population.
Unemployment figures
According to the current estimate, the unemployment rate in Brazil stands at 12.08% in 2019. Comparing the figure with 2018, a slight drop down of unemployment can be observed in the country which is a positive sign.
Unemployment rate is very low in Germany, as the country enjoys its successive growth through its high employment rate (Goetzke and Rave, 2016). The current percentage of unemployment has been 5.2%, which is quite low as compared to Brazil.
Human Development Index
The current score of Brazil in human development index is 0.761, which makes it stand in a satisfactory position in the area of human development. Out of 189 countries, the Brazilian economy ranks 79.
The score of Germany in the segment of human development index is 0.939, which is higher than Brazil. Germany ranks 4 in the list of 189 country, marking its huge progress in the field of human development.
Inequality-adjusted human development index
The inequality-adjusted human development index of Brazil has been 0.574, which is bit lower than the world expectancy, that is, 0.596 (Lynn et al. 2017). This shows that the country has been progressing greatly in this field.
The inequality-adjusted human development index of Germany has been 0.861, as per the current reports of 2019. This is higher than the national average. The country has progressed widely in this field.
UN’s multidimensional poverty index
The multidimensional poverty index is calculated taking into account 101 developing countries. Above 12,998 thousand people has been classified as vulnerable ones in this context. The intensity of poverty according to this index is moderate, that is, 42.5%.
Germany being an advanced economy, shows promising results in the field of multidimensional poverty index, as compared to Brazil. However, poverty still remains a pressing issue in Germany (Salinas et al. 2019).
Economic growth
Considering the segment economic growth, Germany shows better results than Brazil. Though Brazil observed great heights of GDP figure during 2011-2012, however, its performance dropped down after the economic recession of 2012. The country is still struggling to regain its position since 2012 and has been witnessing moderately steady growth from the past 10 years. According to the data of 2019, the economy shrank by 1.5 as compared to the previous year.
On the contrary, the German economy is witnessing high annualised growth in the recent years. The economy was at its peak in the year 2018, when its GDP value crossed the standard expectation (Pereira et al. 2017). The value has been 3949.5, which is the highest figure in the last 10 years. Though the performance of the economy has dropped slightly in 2019, however, the country is expected to hold its strong position in the upcoming years.
Standard of living
The standard of living in Brazil has been examined through various determinants such as civic engagement, social connection, education, skills, personal security, income, wealth, job-earnings and work-life balance (Cruvinel et al. 2019). The country has been below the OECD average in the fields of income, security, wealth, jobs, earnings and work-life balance. In terms of employment, Brazil has been 7% below the OECD average. In the segment of good education and skills, the country has been significantly below the OECD average. Similarly, in the segment of life expectancy is the country has been 5 years below the average.
Germany performs very well in the segment of living standards of the citizens. About 75% of the households have a paid job, which is quite higher than OECD employment average. In the area of good education and skills, the country tops off the list, having more than 87% of literate population (Stoppok et al. 2018). The life expectancy at birth also exceeds the OECD average. This shows the constant social progress of Germany.
Extent of the effect of economic growth on the living standard of the countries
Considering the case of Brazil, it can be noted that economic growth has affected the living standard of people. This is because the country has witnessed a massive downfall of its economic growth since 2012 recession. Due to this reason, the consumption rate of the population has fallen down and unemployment has surged up (Pfister, 2018). The fall of the economy has led to increased monetary outflow which degraded the public services of the country. As a result, the health hazards of people increased and the life expectancy at birth decreased below the national average.
The situation in Germany is completely opposite to that of Brazil. The economic growth of Germany has been quite favourable in the current scenario due to which the standard of living in the country has been impressive as compared to other nations. The economic growth of the country has aided the public services of the country due to which health hazards have decreased and well-being of the people has improved subsequently.
Brazil does not enjoy inclusive growth up to a greater extent till date and therefore, it is planning for an inclusive growth in the upcoming days. The country is planning to accelerate its productivity. Brazil has already established a successful agricultural sector by building up competitive aerospace firm that has helped the country in harnessing global competitions as well as supply chain models. Along with this, the country is also experiencing deeper integration with the global market.
The economic growth of Germany can be termed as inclusive as the country enjoys several inclusive activities that foster its growth and development in the market. The country has taken steps to improve the location quality by increasing public investments. Along with this, the country also supports entrepreneurial activities of the people, which has enhanced employment in the economy (Kersebohm et al. 2017). Health hazards have slowed down due to Germany’s internal health services. Overall, the economy enjoys benefits from domestic markets at a greater rate as compared to other developed nations.
In Brazil, the economic growth has adversely affected the standard of living of the people. It is recommended that the country should fuel up its economic growth for enhancing the well-being of people. Brazil, being an emerging economy is still far behind Germany in the goals of progress and social development. Economic growth would decrease unemployment within the economy, eradicate poverty up to the maximum possible extent and drive economic prosperity among the people.
Taking the situation of Germany, it can be observed that the country has been growing rapidly in the current days and as a result the standard of living of the country has also been high (Ingrosso, 2017). In all the indicators, that is, life expectancy at birth, education and skill enhancement and other factors, the country has exceeded OECD average. Therefore, it can be stated that economic growth affects either directly or indirectly the standard of living within the economy.
Conclusion
From the above essay, it can be concluded that Germany has been in a better position in terms of economic and social development as compared to Brazil. The recession in 2012 has slowed down the growth of Brazil and it is slowly regaining its position in the current years. On the other hand, Germany has been witnessing tremendous growth in the current years and showing rapid signs of development.
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