Inflation and corruption are among the driving factors behind the recent unrest in Brazil, according to James Dale Davidson, author of "Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World."
Brazilians have been protesting in the streets in response to an increase in public transportation fares, police violence and government corruption.
"There are a lot of triggers for unhappiness," Davidson told Moneynews contributor David Nelson on Newsmax TV’s “The Steve Malzberg Show.’’
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"There has been a lot of inflation, which is not fully registered in the price indexes and is not unique to Brazil. People feel that they're being highly taxed, they have high inflation and they don’t get the infrastructure and the services they feel they've already paid for," he said.
Davidson noted that the same problem exists in the United States regarding price increases.
"If our inflation were measured in the same way that it was when Jimmy Carter was in the White House, we would have 9 percent inflation at the current moment, which is a big multiple of what we're really acknowledging."
In Brazil, there is a system of blatant corruption, he explained.
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"A lot of corruption problems ... came right to the fore where people were caught," Davidson stated.
"Ministers of government were caught on tape selling favors ... which is a kind of common practice. If you want to become rich in Brazil, you either need to start a big company or a company that becomes big or become mayor of a small town. That has been a very good way to become rich because the mayors are all bribed and they have the power to do lots of things."
A culture of corruption has been at work in Brazil for decades.
"There was a president of Brazil in the 1940s and '50s who said, 'For my friends everything, but for the rest the law,'" Davidson asserted.
"[This] is just the kind of encapsulation of crony capitalism at its best and that's what you see there, that you have to pay off people, you have favors, you bribe politicians and get contracts."
In addition, the divide between rich and poor is extremely wide.
"The poorest 20 percent of Americans are among the top 5 percent of the world in terms of wealth," he proclaimed.
"The poorest 20 percent of Brazilians are on par with the poorest 20 percent of the people in the world. But the richest 10 percent of Brazilians are richer than anybody in the world.
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"People everywhere in the world, especially the middle classes, ... are susceptible to excitement when their living standards collapse. We've seen quite a few people who were middle class or well-to-do who disappeared into the ranks of the great unwashed," he added.
"If you look at the counts of American millionaires, we've lost millions of millionaires in this country in the last four or five years. Not that they necessarily died, but they ceased being millionaires and [in] Brazil lots of millionaires are created. At least they're going in the right direction. Of course, some of them might have been mayors of small towns or ministers of government. That's one of the problems from the point of view of Brazilian taxpayers."
Despite all this, Davidson sees hope for South America's economic colossus.
"Usually history doesn’t move in a straight line and when you have a crisis, you get some sort of response," he remarked.
"The fact that this crisis has happened now when no one expected it is actually an encouraging feature because, basically, this is a giant tax revolt," Davidson said.
"If we had hundreds of thousands of people or millions of people in the streets of the United States calling for lower taxes, I would think before very long you would have lower taxes. The same thing is true in Brazil."
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