Comments on: The importance of incentives in achieving poverty alleviation: Venezuela vs. Brazil

By: Christian Clausen

Christian Clausen — Tue, 16 Sep 2008 20:13:18 +0000

Since a small group of people simply can’t control a country and all it’s ressources, it’s better off to just give that job to the people who knows what they want, as well as where and when. And the thing that Brazil does right is to let its people choose whether they want to work for it or not, and political loyalty does not benefit the country at all, and it’s pointless to pay a suck up more than a good worker, meaning that the money is also allocated ineffeciently.

By: Zac Query

Zac Query — Tue, 16 Sep 2008 17:53:04 +0000

Lack of incentives has been a major problem in centrally-planned economies throughout history. In those economies, business/factory owners ignore the fundamental economic principle of supply and demand, and instead focus on achieving the goals/quotas set by the centralized committee. Using an example from our textbook, if the committee set a quota for 1,000,000 nails to be produced, then a factory would shift their production to only produce small nails. But if the quota was expressed as 10,000 kg of nails, a factory would produce only large nails. The factory would completely ignore the demand of large nails vs. small nails in the market, and instead focus only on their assigned quotas. After all, their incentive is to please the government, because that’s who writes their checks.
That is one reason why Venezuela will not be able to improve at its current rate for very long. Once developed countries are no longer dependent on oil, Venezuela will surely follow the footsteps of the Soviet Union and Communist China.

By: Armaan Malhotra

Armaan Malhotra — Mon, 15 Sep 2008 22:14:15 +0000

I think the reason that command economies fail at efficiently allocating resources well, is because the people behind them as so concerned with staying in power that they do not stop to think who they should be supporting. I think the attitude is more “maybe if we provide them with services for claiming to support us, they actually will support us” while hoping that these people value these services over their political and economic standpoints. This obviously doesn’t seem to ring true most often, but maybe those in control see the alternative as arming people with the education and resources needed to overthrow them, whereas if they have propaganda and incentives to be loyal to those in power, they may support the control.

Brazil rewards those who actually do something worthy of rewards than those who simply support the government. People are rewarded for school attendance, for seeking pre-natal care, getting children vaccinated and the like. They are rewarded for using the services made available to them, not for having the same political views as the current leader. The reason that this increases peoples lives is because it really is universal support, not just claiming to be it. People are rewarded for using the services that the government has put in place, for using their resources.

By: Rohan Rajiv

Rohan Rajiv — Mon, 15 Sep 2008 19:24:26 +0000

I agree with Christian. Brazilians are following the good old way of education and infrastructure this in turn will help them build a sucessfull economy, unlike venezuela where they are following the corrupt way and this will get them to a certain high point but will eventually lead to their downfall like the USSR. this is an example of how command economies fail in economics

By: Chris Hofer

Chris Hofer — Mon, 15 Sep 2008 18:07:09 +0000

The problem with a command economy, as with communism, is that it has the tendency to look good on paper, however when put into practice it usually fails. A command economy is an economy where supply and price are completely regulated by government as appose to market forces. This form of an economy has several flaws that resultantly leads to failure. As most people have previously stated Venezuela’s command economy fails to generate incentives for workers. Why should someone work as hard as someone else when the pay is equal and regulated? Without competition, or other incentives how does an organization expect to receive maximum effort from its workers? Brazil, like Venezuela, struggles with poverty yet due to the use of the free market system it has grown economically in recent years. Freedom of choice, self-interest, competition and specialization are just a few of the factors that enable the market system to function. Economical efficiency has allowed Brazil to allocate its resources to benefit its people. “Benefit its people” is crucial when attempting to raise the standard of living in a nation. While the Venezuelan government claims to be helping its people, this seemingly corrupt organization appears to only better themselves and their supporters. Greed and political power struggles do nothing but undermine Venezuela’s goals of improving the standard of living in their nation.

By: Helene Gleitz

Helene Gleitz — Sun, 14 Sep 2008 17:09:17 +0000

I have to agree with Aleya, Maren and Marc. Venezuela has failed to create incentives for its workers, while Brazil has grown economically over the past few years. This is another example that illustrates why command economies are inefficient compared to free market economies. Both countries have potential to improve the lives of their citizens, but so far only Brazil has allocated its resources to profit its people. The fact that the Venezuelan government is on the verge of corruption does not help the nation, economists are simply trying to get paid more. In order to help its nation, Chavez must take in consideration what the people need, or want. Brazil’s labor force has incentives to work more, and “there is a real drive to do your work well” as Marc said. I am also very curious to see what will happen to Venezuela and Hugo Chavez and if, in the future, they will switch to a free market instead of a command economy.

By: Marc Lemann

Marc Lemann — Fri, 12 Sep 2008 12:31:52 +0000

It is very true that Brazilians are compensated for the work they do well, that there is a real drive for doing your job well. This is what Brazil has done, that has made real improvement in peoples lives. The only part of the article that left me a bit puzzled was when the author writes:
“Figures compiled last year…. painted a rosy picture: School attendance was up, while illiteracy was down. Life expectancy was up, but hospital visits were down. Employment was up, and child labor was down.”
It is said in a way that makes it seen one is good and the other is bad… “but hospital visits were down” …as if that were a bad thing?
In Venezuela’s case, I’m very curious to see what Chavez will do to stay in his term much longer. A while ago the Venezuelans voted to decide if he would stay his whole life and he lost, making 2010 the year he has to leave office… Lets see…

By: Jabba Gehring

Jabba Gehring — Tue, 09 Sep 2008 18:30:25 +0000

I agree with Maren and Aleya. Venezuela fails in allocating resources properly because the government does not know where they are needed the most and where they would result in the biggest profit.
This is probably a fierce example, but we talked about it in class: China was still a command economy and Mao wanted the country to industrialize. So he had all the factories produce steel… way more steel than needed.

By: Aleya Thakur-Weigold

Aleya Thakur-Weigold — Tue, 09 Sep 2008 18:03:21 +0000

In my opinion this article once again proves that free market economies are way more efficient than command economies. In order to improve life expectancy the government needs to know what the people need, in a free market economy the economy is controlled by the wants and needs of the people and not by what the government thinks the citizens need. In a free market economy this leads to the right distribution and allocation of resources according to the needs of the people. I do not think it is right that the government should reward loyalty to the political system over productivity and hard work with a better lifetsyle. Both countries Venezuela and Brazil have enough money to make sure that literacy and health is at a standard that can be considered “human”. But I think it is good that both countries are trying to improve the life expectancy and lifestyle for the people.

By: Aleya Thakur-Weigold

Aleya Thakur-Weigold — Tue, 09 Sep 2008 17:44:15 +0000

I think bot countries have potential to improve the life expectancy of their citizens. In my opinion Brazil will have better results because the wants and needs of the people control the market and therefore ensure that the resources are used most efficiently. I think that loyalty to a political party should not be rewarded with higher life expectancy, especially when hard work and productivity have no influence on a persons life. In my opinion this just shows that comand economies do not work and that free markets are the way to go!

By: Alex Telford

Alex Telford — Tue, 09 Sep 2008 10:01:25 +0000

This reminds me of a recent program in Texas in which low income children were given cash incentives for school participation.

According to this article (http://money.aol.com/news/articles/_a/bbdp/education-next-cash-incentives-for/143259) cash incentives of several hundred dollars are give to students when they get a grade of 3 or above in an AP exam, as a result of this grades have improved - significantly so for poor black and Hispanic students. As a result of the program “…there is about a 12 percent relative increase in white students scoring above 1100 on the SAT or above 24 on the ACT, there is a 50 percent relative increase for Hispanics and an 80 percent relative increase for black students. ” and this has lead to an “8 percent increase in the number of students who enroll in a college or university in Texas in APIP schools.”

This kind of incentive program is to my mind one of the best ways to lift a community out of poverty, students are given incentive to work and do well, this gives them an opportunity to attend university and get a well paying job. After receiving decent payment for their new jobs the old students will be able to return money into their old community and afford to send their own children to good schools. This incentive acts as sort of a multiplier effect, in that the original payment lasts for far longer and provides benefits beyond the improved SAT and AP scores. Venezuela should probably consider incentives such as this one if they really want to alleviate poverty, as they provide lasting positive benefits to society as well as increasing the wealth of the recipients.

By: Christian Evertz

Christian Evertz — Mon, 08 Sep 2008 19:31:05 +0000

Both countries, Brazil and Venezuela are rich countries which means that they both have good preconditions in order to fight poverty. In my opinion, the wrong allocation of resource money prevents an improvement in poverty alleviation in Venezuela. Since, the whole system is based on political loyalty, the government only gives money to fellow party members, while the bigger part of the population stays poor. For the Venezuelans, political loyalty is the incentive to get paid more and not good performance at the workplace. As opposed to Venezuela, Brazil uses its resource money to really provide education and health care for all people regardless of their political opinion and to enable a wider range of properly run development programs.This has a positive effect on the living standards of the Brazilians as the illiteracy rate and the unemployment rate went down and the life expectancy went up.

By: MarenRackebrandt

MarenRackebrandt — Sun, 07 Sep 2008 18:52:19 +0000

The problem in Venezuela is I think that the government uses all the resources where they want them to use and where they need it. But they don’t use them where the people would profit from them. I think the government is too fixed on the loyalty from the people. I have a friend who’s from Venezuela and he said that the president is not very popular and is not doing what’s best for the country.
On the other hand Brazil gives the ‘power’ to the people and companys and does not tell them what to do with the resources. Also the people don’t have to worry about what they do, in Venezuela everything would fast be seen as an act against the government.

By: Howard Lin

Howard Lin — Wed, 29 Aug 2007 17:06:38 +0000

It’s interesting how when politics and economics wed, many things improves. (besides economicly) Things such as attendance in school, prenatal care and childhood vaccinations, improved literacy and so fourth. So many things can happen when the economics improves in an country.

By: mina.song

mina.song — Fri, 24 Aug 2007 13:08:48 +0000

May be the problem of this is the scarcity??? :P,, Only people who own the specialized products are able to learn money?? ^^