Growing Up Economically

            My father was, and still is, always vehemently preoccupied with being economical.  This was especially true during the years my family spent in a country that, I recently discovered, had one of the most unstable currencies in history:  Brazil.  We were trained to turn the lights off after leaving a room, to soap our bodies without letting the water run in the shower and to always buy the cheapest alternative in the grocery store.  Throughout my childhood I would hear the terms “Inflação”, “Défice Nacional”, and “Desvalorização da Moéda” more emphasized on TV than “Terrorism” is in American news today.  I took all these conditions for granted, and never really understood the economy of Brazil until I came to live, after 14 years in the Third World, a drastically different life in the United States.  Studying Economics in college, even now after almost 6 years, has helped me understand the life we led, and the little fixations my dad still has.
            The study of how people use their scarce resources to satisfy unlimited wants is universally applicable, and its name is Economics.  Microeconomics and Macroeconomics are subdivisions that have to do with the broadness of the perspective, whether it analyses the economic behavior in particular markets, or the performance of entire economies.  The choices we made about what to buy for our house in Brazil, for instance, can be evaluated with microeconomics, while the economic conditions of the country as a whole were a matter for macroeconomics.  A key definition is resources, the factors that are used to produce goods and services that people want.  Those factors are divided into labor, capital, land and entrepreneurial ability.
            Of these four resources, I was most familiar with labor while growing up, because Brazilian culture strongly identifies with the “Trabalhador” – literally, “the worker” – although the word carries the connotation of “underpaid, honest, hard worker”.  Capital, whether physical or human, always seemed to be a resource in constant need of development, or negatively affected by corrupt management, but the country still showed a knack for ingenuity;  its arts and technologies were always quite prolific for a third world country, and my sisters and I still agree that Brazilian “Negritos” are much better than their American equivalent “Oreos”.  Land, of course, is Brazil’s richest resource, considering the seemingly endless expansion of forestation, the many power plants allowed by its great rivers, the fertile spaces where agriculture is prevalent, even its varied sources of precious metals and petroleum; not to mention the popularity of tourist attractions inherent in its beautiful beaches.  The Brazilians also seemed to always have a business-like orientation, certainly of a risk-taking nature, which as far as entrepreneurial ability, gave the country incentive to overcome its problems with disorganization and dishonesty that slowed down its economic progress.
            A few other terms that elaborate on the meaning of Economics are scarcity, which describes a situation where the amount of something demanded by people exceeds the amount available for free.  This definition finally clarifies for me one of the necessities of there being a currency:  when something is not available in unlimited amounts, its distribution must be limited to the people who have earned the right or advantage to having it – those who have made enough money to pay for it.  I also discovered that currency has a somewhat imaginary or at least abstract value, because according to the definition of market, exchanges are made between buyers and sellers through a series of arrangements made under agreeable terms.  This means that coins and paper money only has the value we attribute to it.  This is an important idea in regards to currency in a country like Brazil, because as a kid I could never understand how bills with smaller figures such as the dollar, could purchase more than the thousands of “cruzeiros” that I carried in my pocket on my way to buy bread in the morning.  Later I would understand the processes that actually devalued the Brazilian currency in relation to other currencies in the world.
            Also because of scarcity, whenever someone makes a choice to do something they automatically pass up another opportunity.  The value of the best alternative that was forgone is called the opportunity cost.  This is important when distributing tasks because, as the law of comparative advantage states, those with the lowest opportunity cost of producing a particular good should specialize in producing that good.  A producer has absolute advantage over another when he can produce something using fewer resources than others require.  But when a choice must be made as to what tasks are distributed, whichever producer has the lowest opportunity cost for a certain skill should take over that task and let the less efficient producer take the other.  These ideas give rise to the production possibilities curve, which shows alternative combinations of goods that can be produced when available resources are used fully and efficiently.  When the condition exists where no resources can be allocated without reducing production of one product for another, that condition is efficiency.  Therefore, to shift the productions possibility curve to the right or the left, there must be a change in availability of resources, capital stock, or a change in technology.
            Further themes that we have studied have to do with supply and demand, and the relationship between what producers can sell and consumers can buy.  Certain laws determine how the increase of one will affect the other.  Price change, for instance, determines how much demand there will be for the product because of how many people are willing to pay the new price to get the same product.  This is an inverse relationship because the higher the prices, the less demand there will be.  Supply, on the other hand, functions the opposite way:  the higher the price, the more the producer is willing and able to sell.  Since demand is inversely related to price change and supply is directly related to price change, plotted on the same graph, the two lines go in opposite directions and cross somewhere in the middle.  That point is termed equilibrium:  where the plans of buyers match those of sellers, so quantity demanded equals quantity supplied.  This works in such a way that the aspects of production and consumption keep each other in check, causing a constant fluctuating in and out of equilibrium.  While living in Brazil, I noticed that when people started wanting to buy more of a certain product; for instance, soccer balls during the World Cup, the price would suddenly increase.  I thought this was because companies were simply taking advantage of the people, and perhaps this was true at the lower levels of the market, but I never realized that at a broader level, it was the way economic systems worked everywhere, even in more developed countries.
            On a macroeconomical scale, one of the main terms is Gross Domestic Product:  the market value of all final goods and service produced in the nation during a particular period.  The GDP in Brazil for the year 2002 for example, was R$1.32 trillion (in the Brazilian currency “reais”).  The number indicates a 1.52% growth in comparison to 2001, which indicates that Brazil is in a period of expansion, a relieving statistic for me to hear from my home country.  A way of calculating these levels of production is by examining aggregate expenditure, which adds the spending on all final goods and services produced during the year.  This takes into account consumption, investments, government purchases, and the net exports of the country.
            The “reais” was a currency established by the Minister of Finance, Fernando Enrique Cardoso in 1994, near the end of my stay in Brazil.  He went on to become President of the country, partly because of how successful his plan was in stabilizing the market.  For the previous six years, the country had experienced exorbitant rates of inflation, meaning a sustained increase in average price level.  I remember hearing new currency denominations being issued constantly, from “cruzados” to “cruzados novos” to “cruzeiros” to “cruzeiros reais” and eventually to “reais”, each issue a huge multiple of the previous one, eliminating “three zeroes” so that we didn’t have to deal with large numbers.  But those were exciting times when inflation was finally tamed in 1994, coinciding with Brazil’s victory of the World Cup for the first time in decades.
            It was still a shock, however, to move to the United States and experience completely different economic conditions.  Customs, habits, even personality traits of the culture seemed to be shaped by an abundance of products, variety and efficiency that most people took for granted.  Studying about economics now and seeing the relationship between consumption and production makes me think about whether such a consumer-oriented society as the US has fostered such trends because of their efficiency to supply people with their unlimited wants.  Or have people’s wants slowly been shaped by a level of ease and comfort allowed by efficient standards?  In either case, I feel privileged to have grown up in a place with – let’s say – more moderate economic standards, because it has given me a greater appreciation for the plentiful resources I have now.  So although it is not necessary anymore for my family and I to spend as much energy saving money, conserving resources and figuring out how to live with the bare minimums, I now have the economic ability to participate in a college course and understand why those things were necessary at one point.  Now that I have a more universal understanding of economic conditions in the world, I also realize that there are deeper reasons as to why Brazil is still one of my favorite places to live in.

 

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