Neo-Classical Economic Development of the US and Brazil

Neo-Classical development theory emphasizes that income distribution, outputs, and market prices are determined by forces of supply and demand. The principal aim of Neo-Classical Economics is to deliver efficient allocations of scarce resources. It also assumes that a person’s rationality facilitates them to maximize their utility or profit. The theory also stresses on reaching equilibrium. It elucidates how the interaction between consumers and businesses in a free market should wield an equilibrium supply and quantity. Although differently, both the US and Brazilian economies have embraced this development model.

The US and Brazil governments have strategized to accumulate capital through eliminating trade barriers and facilitating foreign direct investment. When capital is accumulated, distribution from low productivity zones to highly productive regions is enhanced. This move fulfils the utilitarian nature of the neoclassical model of development. It also boosts wealth creation hence increases the per capita GDP. Both the US and Brazil are capitalistic economies, with the US being a developed economy while Brazil an emerging one. Their rise in per capita GDP is a fundamental basis of the Human Development Index that is used to measure living conditions, which according to Neo-Classical theorists; it determines progress and success (Henning, 2008, p.1) .

Reliance on neoclassical development approach has had several negative implications on the economies of both countries. It has led to misleading signs of growth. For example, most statistics indicate higher output and improved living standards; however, they fail to address sustainability of the development (Henning, 2008, p.3) . Brazil and US economies emphasize the significance of free trade while they fail to advocate for the benefit of sustainable development through proper resource use. Increased foreign investment and rapid industrializations has caused serious environmental problems hence unsustainable development.

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