Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World (11 page)

The much higher density of roads relative to surface area in the United States finds expression in an extraordinarily high number of motor vehicles per person in the United States—828 per 1,000 people as of 2009—compared to 249 per 1,000 people in Brazil in 2011. That is after the total number of Brazilian vehicles rose by 114 percent in a decade. A further expression of the U.S. legacy commitment to dispersion and mobility is the much higher U.S. oil consumption than that in Brazil—68,699 BBL/day per 1,000 people in the United States in 2007, as compared to 12,484 BBL/day per 1,000 people in Brazil in 2007. Brazilian per capita petroleum consumption, at just 18 percent of the U.S., reflects more than just parsimonious driving habits.

Part of Brazil's energy advantage is a greater endowment of solar power. As mentioned, Americans use more energy to heat their homes than Brazilians do for all purposes. But Brazil's advantages in energy use for mobility are also substantial. This is another crucial reason why Brazil is destined to prosper more than the United States during the coming decades. By and large, the warmer weather that prevails in most of Brazil precludes the need to devote energy to heating.

As a late developer, Brazil's transportation system relies much more than the United States on fixed-path movement over public transportation systems. This is exactly what you would expect from a system designed to reflect a higher cost of fuel. Indeed, the Brazilian model city of Curitiba, a metropolis of about 2.5 million people, has attracted worldwide attention for the remarkable efficiency and popularity of its transit system.

The Curitiba system was designed by the famous Brazilian architect, Jaime Lerner, who served as mayor of Curitiba three times and was twice elected governor of the state of Paraná. His Directo (Speedybus) service has earned worldwide acclaim. The Chinese, who are building new urban areas to house a population larger than the United States, have consulted Lerner for help in designing effective public transportation systems that enable riders to get where they want to go as rapidly as possible in an energy-efficient way.

In the words of public transportation expert Leroy W. Demery, Jr., “in the U.S., Curitiba has become the veritable poster child for ‘bus rapid transit.' ”
39
Demery reports of Curitiba's system: “The total number of passengers per work day was stated at 2,140,000.”
40
Even though the area had 562,000 “registered motor vehicles,” residents were inclined to use the well-organized and efficient Directo (Speedybus) service rather than drive their own cars. In 1991, Curitiba had an astonishing 230 revenue passengers annually per capita. In other words, the average person in Curitiba paid to use the bus 230 days a year rather than drive his car.

Demery attributes a good part of the success of Curitiba's public transit to the different spatial organization of the Brazilian economy: “In Brazil, the ‘well-off' (high-income residents) have historically sought to live as close to the city center as possible, in order to be near the cathedral and other amenities. Employment and retailing have not been dispersed to suburban locations as in the U.S.”
41
The Curitiba system would not work in the United States because we have already invested so much in dispersion that riders of public transit cannot be as efficiently collected from hither and yon and rapidly delivered to their equally scattered destinations.

The spatial reconfiguration of the U.S. economy, precipitated by cheap energy that Rae documents, creates a challenging obstacle to future economic growth. Because Americans put early access to cheap oil to the service of mobility, we create a hostage to fortune when energy prices rise. The dispersal of the U.S. population into suburbs and satellite communities that made economic sense when gasoline cost $0.30 a gallon suggests that a costly and wrenching transition must accompany any attempt to refit the American economy to run on more expensive alternative energy.

Suburban home values were already reeling after 2008 in the wake of the subprime crisis. As suburban real estate values represent a substantial portion of the highly leveraged collateral of the U.S. banking system, they cannot be easily written off. Note, as reported in the
New York Times
, poverty in U.S. suburbs has surged by 53 percent. The Great Contraction accelerated this process as “two thirds of the new suburban poor were added from 2007 to 2010.” As Edward Hill, dean of the Levin College of Urban Affairs at Cleveland State University, says in the article, “The whole political class is just getting the memo that Ozzie and Harriet don't live here anymore.”
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In this respect, it is not a coincidence that total vehicle miles traveled in the United States peaked at 3.03 trillion miles in 2007, along with gasoline usage, just before the Great Correction began. You can expect growing numbers of suburban drivers to be priced off the roads as oil prices rise.

It is not easy for an economy as dispersed as that of the United States, over 3.5 million square miles to adjust when mobility is curtailed by high energy prices. For reasons spelled out previously and addressed elsewhere in this book, a country like Brazil can continue to prosper in the face of energy prices that will prove ruinous to the U.S. economy.

Seen in a longer-term perspective, the changes precipitated by the surge in energy from cheap oil made for an impermanent, crisis-prone prosperity in the United States and other so-called advanced economies. You are now living through the endgame of the rapid growth phase based on cheap oil. Coming chapters spell out reasons to believe that Brazil can continue to prosper in the face of steeply higher energy prices that will prove ruinous to the United States and other advanced economies.

As we look forward into the twenty-first century, the world is divided into important economies of two types:

As we will continue to dissect, the reason that Brazil has a low debt today is that it received its natural blessings in an encrypted package that could not easily be opened and squandered. They couldn't even be easily hypothecated as collateral. During the whole of the twentieth century, the price level in Brazil increased by at least a quadrillionfold. By contrast, the U.S. dollar has only lost 96 percent of its value over the past century. Brazilians long ago learned the lessons that loom painfully ahead for the United States of America.

The United States has been on a multidecade binge of borrowing from China, Japan, OPEC, Brazil, and others so that it could fund one of the worst malinvestments ever—pouring more and more billions into housing. The typical American's home has doubled in size since 1970. But a big house doesn't mean that Americans are any wealthier. The new McMansion has now plunged in value, causing Americans to lose an aggregate of $7 trillion. Our assets have shriveled, but net liabilities have grown. And large numbers of homes sit empty. According to the U.S. Census Bureau, nearly one home in five in Florida sits vacant.
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Our modern financial system is dependent on perpetual growth. As long as the economy grows at a threshold rate, servicing the debt isn't a problem. But if the growth of the economy slows below the threshold rate (which rises as indebtedness rises), much less goes negative, debts go into default, and prosperity recedes.

The problem is that perpetual growth requires perpetually expanding energy and the current “Great Contraction” reflects the financial strains accompanying a peaking of oil output on a global basis circa 2005. The result to be expected is the end to prosperity in the United States and other advanced economies and a new phase of economic history where previously underdeveloped countries, Brazil being a prominent example, will enjoy greater prosperity because of their greater potential to expand energy use, and for other reasons we explore in coming chapters.

While some would claim that it is desirable and possible to decouple the compounding of living standards from energy growth, the evidence suggests otherwise. It appears that a decline in energy supply causes a slowdown or actual decline in economic growth, along with a deflationary contraction in credit. Chapter 4 details this symbiotic relationship of energy density to economic prosperity.

1
Richard Teitelbaum, “Dalio Returns 25% This Year on Diversified Bets Even as Markets Convulse,”
Bloomberg Market Magazine
, September 7, 2011.

2
Thomas Robert Malthus,
An Essay on the Principle of Population
, 6th ed. (London: John Murray, 1826), I. VII.3.

3
James Dale Davidson and Lord William Rees-Mogg,
The Great Reckoning: Protect Yourself in the Coming Depression
(New York: Simon & Schuster, 1993), 63.

4
Dorothy H. Crawford,
Deadly Companions: How Microbes Shaped Our History
(Oxford, UK: Oxford University Press, 2009), 48.

5
Kenneth L. Sokoloff and Stanley L. Engerman, “Institutions, Factor Endowments and Paths of Development in the New World,”
Journal of Economic Perspectives
14, no. 3 (Summer 2000): 2.

6
Ibid.

7
International Monetary Fund, World Economic Outlook Database, September 2011.

8
Sokoloff and Engerman, “Institutions,” 5.

9
Ibid.

10
Sokoloff and Engerman, “Institutions,” 6.

11
Fernando Zanella and Christopher Westley, “The Western Expansion as a Common Pool Problem: The Contrasting Histories of the Brazilian and North American Pioneers,”
American Journal of Economics and Sociology
68, no. 3 (July 2009).

12
O. D. Von Engeln, “Effects of Continental Glaciation on Agriculture. Part I,”
Bulletin of the American Geographical Society
46, no. 4 (1914): 242.

13
Lael Brainard and Leonardo Martinez-Diaz, eds.,
Brazil as an Economic Superpower? Understanding Brazil's Changing Role of the Global Economy
(Washington, DC: Brookings Institution Press, 2000), 64.

14
Nicolas Rashevsky,
Looking at History through Mathematics
(Cambridge, MA: MIT Press, 1968).

15
“Global Hydropower Scenario,”
www.erg.com.np/hydropower_global.php
.

16
Theodore Roosevelt,
Through the Brazilian Wilderness
(New York: Charles Scribner's Sons, 1914).

17
Thomas E. Skidmore,
Brazil: Five Centuries of Change
, 2nd ed. (New York: Oxford University Press, 2010), 36.

18
Steven Solomon,
Water: The Epic Struggle for Wealth, Power, and Civilization
(New York: Harper Perennial, 2010), 266.

19
Cited by Larry Rohter in
Brazil on the Rise: The Story of a Country Transformed
(New York: Palgrave Macmillan, 2010), 150.

20
CIA, “The World Factbook,”
www.cia.gov/library/publications/the-world-factbook
.

21
Harold Hotelling, “The Economics of Exhaustible Resources,”
Journal of Political Economy
39, no. 2 (1931).

22
Herodotus,
Histories
.

23
Jonathan Shaw, “Who Built the Pyramids?”
Harvard Magazine
(July–August 2003).

24
Ibid.

25
Crawford,
Deadly Companions
, 68.

26
Ibid.

27
Brian Fagan, The
Long Summer: How Climate Changed Civilization
(New York: Basic Books, 2004), 187.

28
Richard H. Steckel, “A History of the Standard of Living in the United States,” EH.net, February 1, 2010,
http://eh.net/encyclopedia/article/steckel.standard.living.us
.

29
Ibid.

30
“Time Series Chart of US Government Spending,”
www.usgovernmentspending.com/spending_chart_1990_2010USb_12s1li011mcn_F0t
.

31
Steckel, “Standard of Living.”

32
Douglas W. Rae, “Viacratic America:
Plessy
on Foot v.
Brown
on Wheels,”
Annual Review of Political Science
4 (June 2001): 417–438.